TaxTMI 
TaxTMI 
2020 (11) TMI 272
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.... s. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY. 2012-13. 2. When the matter was called for hearing, none appeared for the assessee. It is observed that notice of hearing was properly served on the assessee and the representative of the assessee was put to the notice of hearing. The matter was accordingly proceeded ex parte in the absence of the assessee. 3. The grounds of appeal raised by assessee read as under: "1. The ld CIT(Appeals) erred both in law and on facts in confirming the penalty of Rs. 9, 54, 528/- levied under section 271 (1)(c) of the Income tax Act, 1961 in respect of disallowance of interest expenses when there is neither concealment of particulars nor inaccurate particulars of income for b....
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....ent, it was inter alia noticed by the AO that assessee company had claimed interest expenses of Rs. 65,38,344/- under s.36(1)(iii) of the Act on money borrowed by it. The AO also simultaneously found that the assessee company had also advanced certain funds to its associate, namely, M/s. Laser Exports Pvt. Ltd. free of interest. After analysis of facts, the AO disallowed proportionate interest expenses of Rs. 27,25,150/- attributable to interest free advances on the ground that interest paid on borrowed funds have been diverted towards interest free advances resulting in reduction of taxable income. On this disallowance of interest expenses attributable to interest free advances, the AO also imposed penalty under s.271(1)(c) of the Act on a....
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....ls and information called for as regard to disallowance of interest expenses of Rs. 27,25,150/- and relied upon various case laws. The appellant' s submission is not correct as appellant neither during the quantum proceedings or appellate proceedings has been able to furnish any evidence for the interest free advance to M/s. Laser Exports Pvt. Ltd. The case laws relied by the appellant are not relevant to the facts of the case. Therefore, AO was justified to levy penalty for furnishing of inaccurate particulars of income in respect of disallowance of interest u/s. 36 (1)(iii) of Rs. 27,25,150/-. 3.4. The Honourable Supreme Court in the case of K.P. Madhusudan Vs. CIT (2001) 251 ITR 99, has held as under:- " The Explana....
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....iles Processors, 174 Taxman 571/306 ITR 277 -, has held as under:- " It is of significance to note that the conceptual and contextual - difference between section 271 (1)(c) and section 276C of the Income-tax Act was lost sight of in Dilip N. Shroff' s case (supra) The explanation appended to section 271 (1)(c) of the Income tax Act entirely indicates the elements of strict liability on the assessee for concealment or for giving inaccurate particulars while f i ling return. The judgment in Dilip N. Shroffs case (supra) has not considered the effect and relevance of section 276C of the Income tax Act. Object behind the enactment of section 27}(])(c) read with the explanation indicates that the said section has been enac....
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.... Explanation 1 of section 271 (1)(c) was replaced by the present one. After this amendment, the revenue is not required to prove that assessee is guilty of any fraud or has committed a willful neglect i. e. mens rea is not to be proved by the revenue. As per the present Explanation 1. if the assessee offers an explanation in respect of any facts, material to the computation of total income which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income has been disclosed by him then the amount added are disallowed in computing the total income of such person as a result thereof shall be deemed to represent the income in ....
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....ances must reasonably point to the conclusion that the disputed amount represents income and the assessee has concealed the particulars thereof or furnished inaccurate particulars. The AO in the instant case has disallowed a portion of interest expenditure on proportionate basis on the ground that assessee has lent money without charging interest. It is not the case of the AO that assessee has in fact not incurred any interest expenditure as claimed. A conspectus of the Explanation - 1 to Section 271(1)(c) of the Act makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. While the AO may be justified in making estimated disallowance in quantum procee....