TaxTMI 
TaxTMI 
2026 (9) TMI 1073
X X X X Extracts X X X X
X X X X Extracts X X X X
....st expenditure so disallowed of Rs. 19 lacs to tantamount to concealment of income for imposing penalty u/s 271(1)(c) of the Act. Penalty amounting to Rs. 5,87,100/- was imposed on the assessee, equivalent to 100% of the tax sought to be evaded by the assessee on account of the alleged concealment of income as noted by the AO. The Ld. CIT(A) in turn confirmed the levy of penalty. 3. Aggrieved by the same, the assessee has come up in appeal before me raising the following grounds of appeal:- 1. That the Ld. CIT(A) has erred by upholding the validity of penalty notice dated 03/10/2017, which fails to specify the offence committed by the assessee i.e. whether the assessee had concealed his particulars of income or had furnished inaccurate particulars of income. Such notice is defective/ bad in law as it did not specify limb of section 271(1)(c) for which the penalty proceedings had been initiated. Assessment order dated 03/10/2017 also fails to specify the limb and assessee is not put to notice about the offence committed by him u/s 271(1)(c) 2. Reliance That the AO erred by breaching the principle established by the Hon'ble Supreme Court in CIT v. Petroproduc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er making the advance, dispute arose between two parties and assessee abandoned the proposal and asked for the refund of the advance from the seller. Funds advanced by the assessee were from its 'normal working capital finance', raised by way of Bank overdraft facility on which assessee incurred Rs. 1955613/- as 'Bank Interest' during the AY 2015-16. No separate or specific borrowing was made for the purpose of making such advance. As the advance was made purely for the business purposes and no any enduring advantage accrued to assessee, deduction of entire amount of Interest Expenses' including Rs. 1900000/- was claimed as 'Revenue Expense' in the 'Computation of Income', while filing the ITR for AY 2015-16. AO while making assessment u/s 143(3), treated the 'Interest' of Rs. 1900000/- as 'Capital Expenditure' and disallowed the same by adding back to income. The appellant argues that a mere disallowance of an expense in the quantum assessment proceedings cannot automatically lead to the imposition of a penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income. The finding in the assessment pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he purchase of an immovable property, that the assessee, by utilizing overdraft facility of bank, had incurred interest expenses of Rs. 19,55,613/- and claimed as revenue expenses since no capital asset had been acquired by the assessee and the interest expenses had been incurred for the purpose of business of the assessee. He contended that the Revenue Authorities had treated the expenses as capital stating that the interest expenses were incurred for acquiring capital asset, and merely because the asset could not be acquired by the assessee it did not change the character of the expenditure. 7. Ld. Counsel for the assessee pointed out that the Hon'ble Calcutta High Court in the case of Binani Cement Ltd. Vs. Commissioner of Income Tax [2015] 60 taxmann.com 384 (Calcutta) dated March 23, 2015 had dealt with similar issue. Copy of the order was placed before me. Referring to the contents of the same, he pointed out that in the facts of the case before the Hon'ble High court the assessee had incurred expenditure for construction / acquisition of a new facility, however, the said construction was abandoned at work in progress stage only. The Hon'ble Calcutta High Court, he pointed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e case of CIT v. Indian Mica Supply Co. (P) Ltd. [1970] 77 ITR 20 (SC) wherein the Supreme Court in considering a claim for deduction on arrear lease rents, ascertained subsequently consequent to a compromise arrived in the suit and paid in the relevant assessment year held, inter alia, as under: "The Tribunal, in the present case, had clearly found that it was only as a result of the compromise that the respondent became entitled to remain in possession of the demised land. Its liability also became ascertained only at that point of time. It cannot be disputed that the respondent incurring the expenditure had acted in the interest of and for the purpose of its business. The expenditure was not laid out for any purpose other than that of carrying on the business. The deduction was properly admissible under s. 10(2)(xv) of the Act and the matter being self-evident the High Court was fully justified in declining to accede to the prayer made under s. 66(2) of the IT Act, 1922." 13. Sec. 10(2)(xv) of the old Act corresponds to s. 37(1) of the present Act. Our above conclusion is fortified by the view expressed by the Supreme Court in the said decision. For the aforesa....