TaxTMI 
TaxTMI 
2019 (2) TMI 896
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....ces of the Appellant's case and in law the Ld CIT(A) erred in confirming the Ld. AO's action in levying penalty of Rs. 9,28,569/- by invoking provisions of section 271(1)(c) of the Income Tax Act 1961 as per the grounds stated in the order or otherwise. 2. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. The appellant prays this Hon'ble Tribunal to delete the addition made by the Assessing Officer, which is confirmed by the ld. Commissioner of Income Tax (Appeals) and/ or grant any other relief as your honors may deem fit." 3. The brief facts of the case are that the assessee is partner in various firms carrying on business of builder & developer. The assessee has shown income from business and from other sources during the year consideration. The addition was made by the AO in quantum assessment on account of issue of disallowance of interest expenditure of Rs. 74,85,834/- but later on the assessee filed rectification application u/s. 154 before the AO and the AO was pleased the pass an order dated 20.02.2014 wherein addition of disallow....
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....sment proceedings submitted , as under:- "1. We have filed our return of income u/s. 139(1) declaring nil income. 2. In response to the notices u/s 143(2) and 142(1), we have attended from time to time and filed the requisite details and discussed the case. The order for the same has been passed on 31.01.2014. In response to the order we had filed rectification letter u/s 154 vide letter dated 06.02.2014 and the order for the same has been passed on 20.02.2014 and thereby initiating penalty proceeding u/s 271(J)(C). 3. In any case the penal provisions are not application to additions made for the reasons given in the subsequent paras (i) As per order dated 31.01.2014, the learned AO had disallowed interest expense amounting to Rs. 74,85,834/- declaring a Gross Total Income of Rs. 42,94,091/-. However the order was later rectified by the assessing officer wherein the disallowance was restricted to Rs. 31,91,743/- resulting in Gross Total Income of Rs.NIL. (ii) Merely because certain additions are made to the income of the assessee, it would not justify the imposition of a penalty. It is not mandatory that penalty must be imposed in every ....
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....O also observed that the investments were made in sister concerns and related parties which are earning tax free income and purpose of the assessee is to avoid paying tax. The AO had correctly held that the assessee has debited huge interest expenses and the said borrowed funds were diverted for non business purposes. The AO levied penalty on the assessee by invoking provisions of Section 271(1)(c) relying upon decision of Hon‟ble Delhi High Court in the case of CIT v. Zoom Communications P. Ltd., reported in 40 DTR 249 (Delhi) and held that the assessee has furnished inaccurate particulars of income while no reasonable and cogent explanation has been offered in this regard by the assessee, vide penalty order dated 30.07.2014 passed by the AO u/s 271(1)(c) of the 1961 Act for AY 2011-12. 5. Aggrieved by the penalty order dated 30.07.2014 passed by the AO u/s 271(1)(c) of the 1961 Act, the assessee filed first appeal with Ld. CIT(A) , which was dismissed by Ld. CIT(A) vide appellate order dated 30.08.2016. 6. Aggrieved by the appellate order dated 30.08.2016 passed by learned CIT(A), the assessee has now come in an appeal before the tribunal and Ld. Counsel for the asses....
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....14,61,031/- and the assessee has also raised unsecured loans of Rs. 23,96,24,234/- . We have also observed that the assessee received interest income on loans advanced of Rs. 41,68,122/- and the assessee paid interest of Rs. 1,16,53,956/- on loans advanced and the same were claimed as deduction u/s 57 of the 1961 Act. Thus, as could be seen there is an excess of interest expenditure incurred to the tune of Rs. 74,85,834/- over & above interest earned by the assessee . The said interest expenses in the income-tax return filed was shown under the head „Income from other Sources‟ . But while claiming set off of the said excess of interest expenditure over interest income, only interest expenditure of Rs. 42,94,091/- was adjusted against interest income to bring income chargeable to tax to „Nil‟ and no attempt was made to carry forward remaining interest expenditure of Rs. 31,91,743/- . The assessee has no doubt filed return of income beyond time stipulated u/s 139(1) and in any case, the said loss was not allowable to be carried forward keeping in view provisions of Section 139(3) of the 1961 Act. On direction from the Bench, the assessee has filed copy of retu....
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....curred over interest income earned by the assessee. The AO also did not allowed the set off of excess interest expenditure over interest income to the tune of Rs. 74,85,834/- in the assessment framed u/s. 143(3) vide orders dated 31.01.2014 but later on the assessee brought to the notice of the AO vide application u/s. 154 of the interest received on loans to partnership firm in which the assessee was partner and the said interest income was shown under the head „Income from Profit and Gain from Business or Profession‟ and hence the AO adjusted interest expenditure to the tune of Rs. 42,94,091/- to bring the taxable income to „Nil‟, vide rectification order passed u/s. 154 of the Act. The assessee never claimed carry forward of losses of Rs. 31,91,743/- . The assessee has also filed an affidavit before tribunal that no losses were attempted to be carried forward to subsequent year and no prejudice is caused to revenue as the income returned was „Nil‟ and income finally assessed was also „Nil‟. We have also observed that while framing assessment , the AO has not brought on record any incriminating material/evidence to prove that the fu....
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....an what was earned on these loans advanced by the assessee. In our considered view , the findings of the AO may be sufficient to make disallowance in quantum on the theory of preponderance of probabilities but it is not sufficient to fasten and saddle the assessee with penalty provisions as are enshrined u/s. 271(1)(c) of the Act as it could not be said based on the factual matrix of the case that the assessee submitted inaccurate particulars of income while filing return of income with Revenue or any attempt was made by the assessee to conceals its income from Revenue to evade taxes. The decision of Hon‟ble Supreme Court in the case of Reliance Petroproducts Private Limited (2010) 322 ITR 158(SC) is relevant . In our considered view, no prejudice was caused to Revenue as in the return of income filed by the assessee with revenue, the assessee never attempted to claim carry forward of losses to the tune of Rs. 31,91,743/- and the Revenue erred in levying penalty on the assessee u/s 271(1)(c) on this ground. Moreover, there is no cogent incriminating material/evidence on record to justify levy of penalty within provisions of Section 271(1)(c) of the 1961 Act. Under these circu....