AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1036
X X X X Extracts X X X X
X X X X Extracts X X X X
....allowance of Rs. 7, 05, 965/- under section 36 (1) (iii) of the act. 2. The revenue has raised the following grounds of appeal:- "1. Whether, on the facts and in circumstances of the case, the ld CIT(A) has erred in deleting the penalty imposed on disallowance of Rs. 5346460/- u/s 14A read with Rule 8D(2)(ii) and 8D(2)(iii), even through the disallowance on the same ground was confirmed by him in his earlier order. 2. Whether on the facts and circumstances of the case, the ld CIT(A) has erred in deleting the penalty imposed on disallowance of Rs. 575441/- u/s 36(1)(iii) of the Act on account of capitalization of interest on borrowing for accruing assets. 3. Whether, on the facts and in circumstances of the case, the ld CIT(A) has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payment for the new machinery and building during the year for import. The assessee claimed those expenditure as revenue expenditure however the Ld. AO and the Ld. CIT - A confirmed the above sum as capital expenditure and disallowed it holding that since the disallowance on account of interest on funds borrowed for acquisition of capital asset has already been upheld as capital expenditure, the treatment needs to be given similarly to the service charges also. 4. Consequent to that the Ld. AO initiated the penalty proceedings under section 271 (1) (c) of the act holding that assessee has furnished inaccurate particulars of its income on all the above issues. The assessee replied on 17/2/2015 after several reminder notices reiterating its ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in appeal before us. 7. The Ld. authorized representative vehemently supported the order of the Ld. AO and submitted that when the addition has been confirmed by the 1st appellate authority which are not contested by the assessee before the higher appellate authorities, it is apparent that assessee has furnished inaccurate particulars of income. He therefore submitted that the penalty has rightly been levied by the Ld. AO and wrongly deleted by the Ld. CIT - A. With respect to the disallowance of expenditure under section 14 A of the income tax act he submitted that the impugned assessment year is assessment year 2009 - 10 wherein rule 8D is mandatory and Ld. AO has applied the above rule which has also been confirmed by the 1st appellate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch is exempt and therefore there is no application of section 14 A of the income tax act. The Ld. CIT appeal has confirmed the disallowance but deleted the penalty on the disallowance relying on the decision of the Hon'ble Supreme Court in case of CIT versus Reliance Petro Products Ltd 322 ITR 158 (SC) as well as his order deleting the penalty on identical facts and circumstances in case of sister concern of the assessee. The Ld. departmental representative could not find any infirmity in the order of the Ld. CIT - A in deleting the penalty under section 271 (1) (c) of the income tax act in case of the assessee on disallowance of expenditure under section 14 A of the income tax act where the assessee has not earned any exempt income during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assets have been to use have been capitalized or not. The assessee submitted details that assets have been purchased from the term loan and internal accruals. The assessee further stated that accruals, reserves, and surplus of the assessee have been utilized of the purchase of machinery. The Ld. AO disbelieved the explanation of the assessee and stated that assessee has not substantiated how the internal accruals been utilized for the purposes of the payment made in case of the assets. Therefore, he disallowed Rs. 5.75 lakhs as interest charges and further working out LC charges payment of Rs. 7.05 Lacs. On reading of the reasons for making a disallowance it is apparent that there is a difference of opinion between the AO as well as the ass....