2016 (8) TMI 1227

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....assessee has raised the following grounds : "1 That in the facts and circumstances of the case Ld Commissioner of Income Tax (Appeals) is not justified in upholding the levy of penalty of Rs. 9,43,28,025/- under section 271(1)(c) of the Income Tax Act, 1961. The penalty so imposed and upheld is absolutely illegal and not sustainable in the eyes of law. 2. That no penalty could have been imposed as no income whatsoever had accured to the appellant as the same was in the construction phase and as such much less is the question of any concealment of income or filing of inaccurate particulars in respect of the same. 3. That the order of the Ld Commissioner of Income Tax (Appeals) is bad in law and facts." 3. The br....

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....oceedings before the Assessing Officer, the assessee pleaded that its appeal was pending before the I.T.A.T., Chandigarh and further it had no malafide intention. The Assessing Officer held that the assessee had not offered a satisfactory explanation, nor substantiated its contentions and, therefore, levied penalty on the addition made. 6. The matter was carried in appeal before the learned CIT (Appeals), where the assessee made detailed submissions reproduced at para 4 of the CIT (Appeals) order. The gist of the submissions was that the assessee had deposited its specific purpose funds in short term deposits to meet its urgent work requirements, and therefore interest earned thereon had been set off against pre-operative expenses being ....

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....2010) 327 ITR 570 (Del) and held that the assessee was aware of the law applicable but preferred making a claim which tantamounted to furnishing inaccurate particulars of income. Thus, the learned CIT (Appeals) at para 5.3.5 of his order, upheld the levy of penalty by holding as follows: "5.3.5 Thus, considering the above facts coupled with the fact that the accounts are audited, the appellant has the help of professionals, the income earned is on surplus funds which is and was squarely covered with the judgment of the Hon'ble Supreme Court in the case of M/s Tuticorin Alkali Chemicals available to the assessee on the date of filing of return chose not the offer the same for tax is clearly an act of furnishing inaccurate partic....

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....ion of the apex court in Tuticorn Alkali Chemicals & Fertilizers Ltd. Vs. CIT, 227 ITR 172 (SC) and therefore the claim of the assessee was wholly untenable in law. The assessee therefore was liable to penalty as per the decision of the Delhi High Court in Zoom Communication Private Limited (2010) 327 ITR 570 (Del). Ld.DR further relied upon the order of the Ld.CIT(A). 12. We have heard the rival contentions and perused the orders of the authorities below. 13. In the present case, we find that penalty under section 271(1)(c) of the Act has been levied for the addition made on account of interest income earned on deposits made from funds available during preoperative period of the assessee. 14. Undisputedly development of Hydro elec....

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....el), has held that where funds have been infused for the specific purpose of setting up the project, the same were inextricably linked to the setting up of the business of the assessee and the interest earned thereon before commencement of business was to be treated as capital receipt and not income from other sources. Undisputedly, the funds in the present case were given for setting up projects and on account of delay in starting the projects, the funds were invested in short term deposits. The assessee was of the belief that the funds were inextricably linked to the setting up of business of the assessee and therefore the interest earned thereon was a capital receipt. The claim of the assessee was denied for the reason that since no busi....