2018 (12) TMI 1056

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....in confirming the penalty levied u/s 271(1)(c) of the Act, by the AO of Rs. 5,97,203/- on account of treating claim of foreign exchange loss as Assessee by: Shri Milin Bakhai (AR) Revenue by: Shri Chaitanya Anjaria (DR) capital loss and disallowing certain expenses u/s 40(a)(ia) of the Act. On facts and circumstances of case and in law the penalty levied u/s 271(1)(c) of the Act ought to be deleted. 2. The appellant craves leave to add, alter, amend/or rescind any grounds of appeal during the course of the hearing." 3. The brief facts of the case are that the assessee filed its return of income for the A.Y. 2008-09 on 29.09.2008 declaring income to the tune of Rs. 5,34,63,900/-. Thereafter, the assessment u/s 143(3) of the Act was complete....

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....to the tune of Rs. 3,65,841/-. On account of addition of loss foreign exchange and disallowance of claim u/s 40(a)(ia) of the Act to the extent of Rs. 3,65,841/-, the CIT(A) has confirmed the order of the AO. The Ld. Representative of the assessee has argued that the disallowance of the claim of the assessee on account of foreign fluctuation loss and on account of disallowance u/s 40(a)(ia) of the Act nowhere attract the penalty in view of the law settled in ACIT Vs. Seaways Shipping Ltd. (ITA. No. 80/H/2011 dated 17.06.2011) Hyderabad ITAT has held that "- "In this case, penalty is levied for disallowance of expenditure u/s 40(a)(ia) of the Act. on deduction of TDS by the assessee was resulted in disallowance of expenditure u/s 40(a)(ia)....

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....The first appellate authority, in our considered opinion, has rightly relied upon the judgment of the Hon'ble Punjab & Harayana High Court in the case of CIT Vs. Ajain Singh & Co. (2002) 253 ITR 630, wherein it is held that mere disallowance of expenditure will not per se amount to furnishing of inaccurate particulars of income. At para 4 page 3 of his order, the first appellate authority rightly held as follows: Once the explanation of the assessee is not considered false and explanation has been given the penalty can only be levied if the explanation is not bona fide and full details for the computation of income has not been given by the appellant. It may be noted that Rajasthan High Court decision in (2001) 251 ITR 373 has enunciated ....