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TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1710
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....ts and circumstances of the case and the legal position in as much as no such penalty was exigible in the facts & circumstances of the case. 2. That the order dated 15-03-2018 passed u/s 250(6) of the Income-tax Act, 1961 by the Commissioner of Income Tax (Appeals)-8, Mumbai is against law and facts on the file as he was not justified to uphold the action of the Ld Assessing Officer in levying a penalty of Rs. 4,16,98,978/- without clearly specifying the limb of section 271(1)(c) of the Act under which penalty proceedings had been initiated. 3. The assessee company in this case is engaged in the business of running motor lorries and motor taxies. In the course of assessment proceedings, the Assessing Officer ('A.O.' for short) noted that the entire amount of interest has been claimed as loss to be carry forward to set off subsequently. The A.O. noted that the assessee has earned no income from business. In response, the assessee explained that the assessee has already set up the business. It was submitted that there is a distinction between the set up and carrying of business during a particular period. It was submitted that for allowability of expenditure, what is necessary is ....
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....order, there is a disallowance of interest of Rs. 12,26,80,137/- u/s. 36(1)(iiii) of the Act which was made on account of the fact that the said interest expenditure was not incurred wholly and exclusively for the purpose of business of the assessee. The A.O. observed that the penalty proceedings u/s. 271(1)(c) of the Act were initiated on the above said disallowance for filing of inaccurate particulars of income leading to concealment of income. Hence, the show cause notice was issued to the assessee why penalty should not be levied in respect of the aforesaid disallowances. The assessee responded that there was no concealment or furnishing of inaccurate particulars of income. It was submitted that the issue of genuineness of the expenditure on interest is not in dispute. That it was only by applying a legal fiction that a part of the interest expenditure has been disallowed. That there was no deliberate and malafide misconduct on the part of the assessee. Hence, it was submitted that no penalty is leviable in its case. The assessee has relied on various case laws including the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa [1972] 83 ITR ....
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....ritten submissions of the assessee. In the initial part of the extract, the assessee had agitated about the aspect that in the notice of the penalty, it was not specified as to whether it was the case of furnishing of inaccurate particulars of income or concealment of income. Various case laws were relied upon for the proposition that in absence of the A.O.'s specifically identifying the charge, the penalty levied is not sustainable. Thereafter, in the same extracts, the assessee had contended that on merits also the penalty was not liable to be levied. In these circumstances, the said extract as noted by the ld. Commissioner of Income Tax (Appeals) reads as under: In this connection, it is also further respectfully submitted that that no penalty should be leviable on these counts, as, neither, the appellant had concealed the particulars of its income, nor, an inaccurate furnishing of the particulars of income was there. During the relevant assessment year under consideration, the appellant claimed deduction of interest expenditure amounting Rs. 12,26,80,137/- in the return of Income debited in the 'Statement of Profit or Loss' for the year ended 31.03.2014. However, th....
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....atters. Penalty is not to be because it is lawful to do so. Nor, it is to be imposed for honest bonafide acts of omissions or commission. It is to be imposed for willful and &deliberate or grossly negligent or fraudulent acts, resulting, in commission of defaults punishable under the Act. Merely making a claim, which is held as not sustainable under law, should not lead to penalty under section 271(1)(c) of the Act, when the appellant had furnished full details in return itself, and, the claim is debatable. This similar standpoint has been upheld by the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax v. Shervani Hospitalities Ltd. reported in [(2013) 261 CTR 449 (Del)] wherein the following observations have been made: "Disallowance of claim for deduction was made. Issue raised by the assessee was debatable and capable of two views. Assessee had an arguable case or had taken a bonafide plea. Assessee had given its explanation and categorically and clearly stated the true and full facts in the return itself. It did not try to camouflage or cover up the expenses claimed. Every addition or disallowance made does not justify and mandate levy of penalty for....
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.... appraisal is natural and normal. Threat of penalty cannot become a gag and/or haunt an assessee for making a claim which may be erroneous or wrong, when it is made during the course of the assessment proceedings. Normally, penalty proceedings in such cases should not be initiated unless there are valid or /good grounds to show that factual were provided in the computation. Law does ''not bar or prohibit a person from making a claim, when he knows the matter is going to be examined by the Assessing Officer. There is no merit in the present appeal and the same has to be dismissed." Hon'ble High Court of Delhi in the case ofCIT vs. DCM Ltd. [359 ITR 101 (Delhi)] * "Where Imposition of penalty under section 271(1)(c) was set aside by Tribunal on findings of fact that merely because assessee raised a claim which was eventually disallowed did not mean that ingredients of clause (c) of Section 271(1) were satisfied so as to justify imposition of penalty, no substantial question of law arose from said finding of Tribunal". Hon'ble High Court of Bombay in the case of Larsen and Turbo Ltd. V. Commissioner of Income Tax-2 272 CTR 336 (Bombay) Thus, mere disallowance of ....
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....ee can furnish the particulars of his income." On the basis of the above it is clear that when an Assessee has furnished all the material in the return which was not found to be incorrect, it is up to the authorities Q accept the claim in the return or not, but, the same cannot be considered as Concealment or furnishing of inaccurate particulars. Keeping in view the facts and circumstances of the case as explained above, it is contemplated that where there is no finding that, any details supplied by the assessee in its return, were, found to be incorrect or erroneous or false, there is no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Considering the above judicial pronouncements and factual position in the case of thfi appellant, it is, thus, submitted that, the appellant had, neither, concealed income, nor, furnished any inaccurate particulars of income, which, could attract levy of penalty, and, therefore, penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 through an order dated 24.08.2....
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....y on technical basis challenging the legitimate of the notice issued on penalty. Hence, the ld. CIT(A) held that the assessee has contested this appeal on technical ground only. That written submissions only raise technical ground of defective penalty notice. He again reiterated that there is not a word about the merits. This speaks volume on the application of mind by the ld. CIT(A) on the facts and submissions by the assessee before him. He noted that all the decisions relied upon by the assessee, decisions have been rendered while relying upon the decision of the "Hon'ble Bombay High Court" in the case of Manjunatha Cotton & Ginning Factory (supra). He observed that after perusing the ratio of the judgment rendered in Manjunatha Cotton & Ginning Factory (supra), he found that the assessee's appeal was allowed by Hon'ble High Court after considering multiple factors and not solely on the basis of defect in notice u/s. 274 at all. Thereafter, the ld. CIT(A) referred that he had come across several decisions in which it has been held that minor defect in the notice issued cannot be the basis of deletion of penalty levied or declaring the penalty proceedings as null and void. Th....
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.... merits. The ld. Counsel of the assessee submitted that on merits also the issue is squarely covered in favour of the assessee. In this regard, he submitted that merely wrong claim cannot lead to the levy of penalty. Furthermore, he claimed that the assessee had set up the business and was making investments in shares and securities, but the transport business was not carried out. In these circumstances, the assessee has claimed interest expenditure. Hence, it was submitted that the assessee's explanation cannot be held to be malafide. 17. Furthermore, the ld. Counsel of the assessee submitted that throughout the assessment order, penalty order and the order of the ld. CIT(A) it had been mentioned that the assessee has borrowed huge funds and made investments in shares and securities on which no interest has been earned. In this regard, the A.O. himself has held that the amount was liable to disallowed u/s. 14A. Hence, he submitted that then where is the question of assessee not doing any business. The ld. Counsel of the assessee submitted that in the assessment order, penalty has not at all been levied with reference to this disallowance u/s.14A. The ld. Counsel of the assessee s....
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....red to the following case laws: 1) SBI DFHI Ltd. vs. Asst. CIT [2016] 71 taxmann.com 178 (Mum-Trib); 2) Ms. Laudres Austin vs. ITO (in ITA No. 1683/Mum/2009 vide order dated 28.09.2017); 3) MAK Data (P) Ltd. vs. CIT [2013] 38 taxmann.com 448 (SC); 4) CIT vs. Smt. Kaushalya [1995] 216 ITR 660 (Bom); 5) M/s. Airen Metals Pvt. Ltd. vs. Asst. CIT (in ITA No. 820/JP/2016 vide order dated 29.09.2017); 6) CIT vs. Zoom Communication Pvt. Ltd. (in ITA No. 07/2010 vide order dated 24.05.2010); and 7) CIT vs. ECS Ltd. [2011] 336 ITR 162 (Del) 19. Upon careful consideration, we note that it will be apposite to refer to the merits of the penalty in this case. To recapitulate as mentioned in earlier part of this order, the addition was made by the A.O. by disallowing interest expenditure of an amount of Rs. 12,26,80,137/- u/s. 36(1)(iii) of the Act. This was done on the ground that no income has been earned by the assessee, so the expenditure cannot be held to be incurred exclusively for the purpose of business of the assessee. The A.O. then contradicted himself that the assessee was not doing any business by holding that the assessee has made huge investments. That in this view o....