2016 (1) TMI 776

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....in the business of manufacturing and sale of steel bars. Assessee filed its return of income for A.Y. 2002-03 on 29.10.2002 declaring total loss of Rs. 3,32,64,310/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 28.02.2005 and the total loss was determined at Rs. 2,63,60,110/- interalia by making various disallowances including the disallowance of interest to ONGC of Rs. 67,73,007/-. On the addition on account of disallowance of interest of Rs. 67,73,007/-. A.O was of the view that assessee has claimed an expenditure which was not allowable to it and it amounts to furnishing of inaccurate particulars of income. He therefore concluded that Assessee has concealed the particu....

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.... 4.The learned C1T(A) has erred in not appreciating the fact that - (a) the appellant had offered bona fide explanation; and (b) none of the details / information furnished were found to be incorrect / inaccurate with regard to the claim of deduction of interest payable to M/s. Oil and Natural Gas Commission Limited (ONGC) as per the terms of settlement which is the subject matter of levy of penalty u/s. 271 (1 )(c) of the Act. 5. Even on merits, having regard to the facts and circumstances of the case, the learned CIT(A) has erred in sustaining the action of the learned AO in levying penalty on the addition of Rs. 67,73,007/- in respect of interest payable to ONGC as per the terms of settlement. 5.1. ....

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....) and further submitted that Assessee has not filed any inaccurate particulars of income and that even after the disallowance made by the A.O, there was loss to the Assessee and therefore it cannot be said that by claiming expenses which is not allowable will result in lower tax liability. He further submitted that this claim has been allowed in subsequent years i.e. A.Y. 2002-03 and for which he pointed out to the copy of the assessment order placed at page 13 to 18 of the paper book. He further submitted that Assessee has made full disclosure and there was no mens rea on the part of the Assessee and Assessee would not have gained anything by claiming loss in view of the fact that even after the disallowance, the Assessee had losses. He fu....

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....to the same have been disclosed by him. If the case of any assessee falls in any of these three categories, then according to the deeming provision provided in Explanation 1 to Section. 271(l)(c) the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of Section. 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, then in that case penalty shall not be imposed. 10. In the presen....