2014 (4) TMI 1178 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - interest free advances - CIT(A) restricting the penalty - Held that - The interest free advances not related to business are amounting to ₹ 1,49,94,194/- and assessee has interest free funds available as capital as well as this year s profits assessed by AO at ₹ 2,48,69,062/-, which is more than the interest free advances, there is no scope for any disallowance but now that chapter is closed and assessee has not filed any appeal against quantum addition, the penalty u/s. 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars of income, in any case, cannot be levied. We delete the penalty confirmed by CIT(A) and levied by AO. This issue of assessee s appeal is allowed. Disallowance of loss on account of prize winning tickets lost by assessee - Held that - Assessee before AO has given complete details and this fact is recorded in its ledger. The assessee has even now before us filed complete detail of loss claimed on lost prize winning tickets at ₹ 7,45,645/-. Here, we are in agreement with the findings of CIT(A) because the assessee filed complete particulars of income in its accounts filed along with the return of income and the AO in its penalty order has no where brought out that how this is a concealment. According to AO, in his penalty order, clearly says that this is a clear cut disallowance based on the facts submitted by assessee. Once this is merely a disallowance of loss, which was claimed by assessee on the basis of evidences and the AO is unable to bring out any reason for levy of penalty u/s. 271(1)(c) in his order, the same has rightly been deleted by CIT(A). - Decided in favour of assessee.

Summary

Issues:
1. Penalty u/s. 271(1)(c) on disallowance of business loss and interest paid.

Analysis:

Issue 1: Disallowance of Interest and Bank Charges:
The case involved cross-appeals by the revenue and assessee regarding the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed interest on bank overdraft and bank charges, totaling to Rs. 32,84,594, as the assessee could not establish that loans and advances given were for business purposes. The CIT(A) upheld the penalty on disallowance of interest, stating that the liability did not relate to the appellant's business. However, the Tribunal found that the interest-free advances not related to business amounted to Rs. 1,49,94,194, and as the AO's addition was not challenged in appeal, the penalty for concealment of income could not be levied. Consequently, the penalty was deleted on this issue.

Issue 2: Disallowance of Business Loss on Prize Winning Tickets:
Regarding the disallowance of business loss of Rs. 7,45,645 on prize-winning tickets, the AO had not established that the claim was false. The CIT(A) found no justification for treating the business loss as furnishing inaccurate particulars of income or concealment of income. The Tribunal concurred with the CIT(A)'s findings, noting that the assessee had filed complete details of the loss claimed, and the AO failed to provide reasons for the penalty under section 271(1)(c). As a result, the penalty on this issue was rightly deleted by the CIT(A) and confirmed by the Tribunal.

In conclusion, the Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, upholding the deletion of the penalty on the disallowance of business loss on prize-winning tickets and interest paid, based on the lack of justification for penalty imposition and the assessee's compliance with disclosure requirements.