2016 (8) TMI 733

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....led out from the materials on record are as under:- 2.1. Assessee is a company stated to be engaged in business of manufacturing and sale of agricultural Equipments. Assessee filed its return of income for AY 2002-03 on 29/10/2002 showing total loss of Rs. 70,18,213/-. The case of assessee was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 18/03/2005 and the total loss was determined at Rs. 53,48,763/- inter-alia by disallowing the interest of Rs. 10,08,306/- by holding that there was diversion of interest-free advance for other than business purpose. Aggrieved by the order of the Assessing Officer (AO), assessee carried the ma....

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....oninterest bearing capital or in other words, interest free funds at its disposal has not been supported with any facts and figures. These observations of Ld. CIT(A) clearly show that the appellant had not filed accurate particulars of income before the AO in respect of its claim of interest expenditure. Though the appellant had taken plea before the AO that the advances in list-A were towards purchases and for other business purposes, but this plea could not be justified by the appellant as is clearly observed by the Ld. CIT(A). The Ld. CIT(A) has held that the appellant could not rebut AO's conclusion that advances in list-A were neither towards purchases nor had any other business purpose. Further in respect of list-C also, appellant....

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.... case. Considering all these facts, I hold that the AO has correctly levied the penalty of Rs. 1,69,100/- u/s 271(1)(c) of the IT Act and therefore the same is confirmed. Thus, the grounds of appeal of the appellant are reproduced in earlier paragraphs are dismissed." 2.2. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised following ground:- 1. The Ld. CIT(A)-IV, Baroda has erred in law and in facts in confirming the action of Ld. AO in levying penalty of Rs. 1,69,100 u/s 271(1)(c) of the Act on the addition of Rs. 4,73,510 made on account of alleged diversion of interest bearing funds for non business purposes on the ground that the appellant had filed inaccurate particulars of income. The Ld. CIT....

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....able to prove that the explanation is bonafide, the addition made would amount to concealment of particulars, of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability. Further, merely because additions....