TaxTMI 
TaxTMI 
2025 (7) TMI 1047
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....ed that he had promoted two companies, namely M/s Lad's Technologies Pvt. Ltd. in 2009 and M/s Connect Films Media Pvt. Ltd. in 2008. These companies were not generating sufficient revenue to meet their day-to-day operations; therefore, he extended financial support in the form of advances to sustain their operations. It was agreed that these advances would be converted into share capital. However, as the companies failed to generate business, the advances given became irrecoverable. The Boards of Directors of M/s Lad's Technologies Pvt. Ltd. and M/s Connect Films Media Pvt. Ltd. decided to write off the liabilities arising from the amounts lent by the assessee, recognizing them as income of Rs.3 crores and Rs.2.5 crores, respectively. Consequently, the assessee also wrote off the investment amount of Rs.5,55,20,973/-, which had been given as advances to these companies, and claimed it as an expenditure in his profit and loss account. 4. However, the AO disallowed the assessee's claim, holding that the advances made were not for the purpose of carrying out any business of the assessee and did not constitute a trade advance. The AO also noted that the assessee is not engaged ....
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.... explain why the penalty should not be levied. Since the assessee did not provide any reply or documents, it was clear to the AO that the assessee had no valid explanation. Therefore, the AO concluded that the assessee furnished inaccurate particulars of income and proceeded to levy penalty under section 271(1)(c) of the Act. According to the AO, the assessee wrongly claimed to have written off advances given to two companies, M/s Lad Technologies Pvt. Ltd. and M/s Connect Films Media Pvt. Ltd., as business losses. According to the AO, these advances were not trade advances or loans from a money-lending business and did not qualify as business losses. Therefore, claiming them as business expenditure was wrong. The AO further held that even though those companies had declared the advances as income, it did not give the assessee a right to claim the same as an expense and reduce his taxable income by Rs.5,55,20,973/- only. 7.2 Further, regarding interest income, the AO found that the assessee declared only Rs.22,07,803/- as interest earned but claimed Rs.40,66,247/- as interest expense. On being asked for clarification, the assessee only stated that the borrowed funds were used to....
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....imilarly, the assessee claimed that an expenditure against interest income under section 57 of the Act was accepted in part to the extent of interest income by the Revenue. Thus, this is not a case of furnishing inaccurate particulars of income but rather a situation where certain claims made in the return were not accepted by the revenue authorities. Therefore, given the facts and circumstances, no penalty under section 271(1)(c) of the Act can be levied. To support his argument, the assessee relied on several case laws, including the ratio laid down by the Hon'ble Supreme Court in CIT vs. Reliance Petroproducts Pvt. Ltd., reported in 322 ITR 158. 10. The learned CIT(A) after considering the facts in totality deleted the levy of penalty by observing as under: 7.12. I have examined the facts of the case and have gone through the case laws cited by the assessee. The assessee submitted that Rs. 3,00,00,000/- was written back as its income by M/s Lad's Technologies Private Limited and similarly Rs. 2,50,00,000/- was written back as its income by M/s Connect Films Media Private Limited. Upon receipt of letters from these companies that they will be unable to repay back thes....
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....e assessee has asked for adjournment of hearing although having the knowledge that penalty will get time barred by 30.04.2023. The AO thus held that the assessee has not offered any explanation and thus levied penalty u/s 271(1)(c). However, the AO has not brought anything on record to show that the act of the assessee in filing his return of income has been done with malafide intention or willful and deliberate furnishing of inaccurate particulars of income. The facts have been disclosed by the assessee and there was nothing which would point towards that the figures were manipulated or wrong. In view of the above, I am of the opinion that the action of the assessee is bonafide as he has disclosed the transactions fully in his Profit and Loss account. The ratio of the decision held by the jurisdictional High Court in this case of CIT Vs Manjunatha Cotton and Ginning Factory(supra) is squarely applicable in the case of the assessee. 7.12.2. In CIT v. Madhushree Gupta [2013] 33 taxmann.com286/216 Taxman 65 (Delhi) (Mag.) it has been held that - Mere making of claim, which was not sustainable, in law, would not ipso facto, amount to furnishing inaccurate particulars regardin....
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....T Vs Zoom Communication Private Limited (supra), in the present case of the assessee, the claim of the assessee has nowhere been proved as false during the assessment proceedings as well as appellate proceedings. The amounts disclosed were not found to be false and the assessee has on its part claimed it as allowable which were held as not allowable by the appellate authorities. In the light of this observation, I am of the view that the explanation of the assessee is bonafide and in the absence of any findings that will show that the assessee has acted with malafide intention, the ratio delivered in the case of CIT Vs Zoom Communication Private Limited (supra) will be squarely applicable in the case of the assessee. 7.12.5. In CIT Vs Reliance Petroproducts (P) Ltd. [2010] 189 Taxman 322 (SC), the Hon'ble SC has held that penalty under section 271(1)(c) would by itself not be attracted merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue. The relevant extracts of relevant paras of the order are reproduced here as under:- "A glance of provision of section 271(1)(c ) would suggest that in order to be covered,....
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.... (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. [Para 10]" 7.12.6. In the landmark judgment delivered here in ....
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....assessment order how this amount has been arrived at. This amount thus seems to be an estimated figure calculated by the AO. In the light of the above, I am of the opinion that there has not been any furnishing of inaccurate particulars of income. The assessee has disclosed his expenses as well as income under interest head. The amounts disclosed have not been proved as false or bogus. Further, the AO has not brought out anything on record that would prove that the intention of the assessee was malafide. Furthermore, in many judicial pronouncements of various courts, it had been held that penalty is not leviable when addition/disallowance is made on estimation basis. 7.14. In the below mentioned judgments it has been held that Penalty u/s 271(1)(c) cannot be imposed on additions made on estimate basis. * CIT vs Smt K Meenakshi Kutty in 258 ITR 494 (Mad.) * CIT(A) vs Valmik bhai H Patel in 280 ITR 487 (Guj.) * CIT(A) vs Rajbans Singh in 276 ITR 351 (All.) * CIT vs Lallubhai Jogibhai Patel in 261 ITR 216 (Guj.) * CIT vs Shivnarayan Jamnalal &Co. in 232 ITR 311 (HP) * Navjivan Oil Mills vs CIT in 252 ITR 417 (Guj.) ....
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....e is not supported by facts and thus not sustainable. Accordingly, Ground of appeal 2 is hereby dismissed. 8.3. Considering the facts and circumstances of the case and the detailed findings and discussions as above in paras 7.2. to 7.15 and respectfully following the judgments of the Hon'ble SC and Hon'ble High Courts, I am of the considered view that the explanation furnished by the assessee is bonafide and in the absence of any findings that will show that the assessee has acted with malafide intention, the explanation offered by the assessee does not suffer from any infirmities. Further, I am of the view that the assessee has claimed expenditures which were considered by the authorities as not allowable. Thus, this case falls in the category where two views are possible. Furthermore no information given in the return was found to be incorrect or inaccurate. Thus, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars as held in the judgment of the Apex Court in CIT Vs Reliance Petroproducts (P) Ltd. [2010] 189 Taxman 322(supra). Thus, penalty levied u/s 271(1)(c) is held not sustainable and liable to be deleted. Accordingly, the AO is he....
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....ment of concealment or deliberate misstatement. In this case, the assessee disclosed all relevant facts regarding the advances given to the two companies, M/s Lad's Technologies Pvt. Ltd. and M/s Connect Films Media Pvt. Ltd., which were later written off due to their failure to generate business. The assessee disclosed these transactions openly in his profit and loss account. It is not the case of the Revenue that the assessee concealed the advances or gave any false information about them. The dispute is only regarding the allowability of the write-off as a business expenditure, which has been disallowed as a capital loss. This is a legal interpretation of the nature of the transaction and not a case of furnishing inaccurate particulars of income. 14.1 Similarly, in respect of the interest income and expenditure under section 57 of the Act, the assessee disclosed the interest earned and claimed the related expenditure. While the AO disallowed part of the interest expenditure for want of proper linkage, it is evident that the assessee made a full disclosure of both income and expenditure. There is no finding of concealment or deliberate misstatement of facts by the assessee. Fu....