2013 (2) TMI 891 - AT - Income Tax

Summary

Issues involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act, 1961 relating to assessment year 2007-08.

Penalty u/s 271(1)(c) - Disallowance of interest on diversion of interest bearing fund to sister concern:

The Assessing Officer made additions for disallowance of interest under section 36(1)(iii) of the Act on interest-free advances and restricted deduction under section 80IC. A penalty of &8377; 4,65,544 was levied u/s 271(1)(c) on these additions. The CIT (Appeals) deleted the penalty on interest disallowance under section 36(1)(iii) but upheld it on deduction disallowance under section 80IC. The Revenue appealed against the deletion of penalty on interest disallowance related to diversion of funds to a sister concern. Despite the absence of the assessee, the Tribunal found that complete particulars of income and expenditure were provided, and the Revenue failed to prove inaccurate particulars. The Tribunal agreed with the assessee that mere disallowance of interest does not justify penalty u/s 271(1)(c). Consequently, the appeal of the Revenue was dismissed.

Judges' Names: Shri T.R. Sood, Accountant Member and Ms. Sushma Chowla, Judicial Member

Decision: The appeal of the Revenue against the penalty u/s 271(1)(c) was dismissed by the Tribunal on the grounds that the assessee had provided complete particulars of income and expenditure, and the disallowance of interest did not warrant the imposition of the penalty.