2017 (1) TMI 632 - AT - Income Tax

Levy of penalty u/s 271 - disallowance of the interest paid on borrowed funds - Held that - In the present case, the assessee filed the required evidence before the AO in original assessment proceedings wherein the interest amount to the extent of ₹ 57,90,492/- was adjusted to the returned loss in the original assessment and thereafter, while giving effect to order of Tribunal, the AO made the disallowance of the interest paid on borrowed funds. Therefore, it is a clear the AO identified the amount of ₹ 57,90,492/- as interest paid and on such amount the AO disallowed ₹ 1,18,096/-which is a corresponding interest under section 14A treating the same as expenditure incurred on earning dividend of ₹ 42,020/-. CIT(A) did not consider the same as it clearly appearing in the original assessment order. Therefore, both the authorities did not consider the material evidence available on record in right perspective. We find that merely interest has been disallowed does not mean that the assessee has considered the income are filed the inaccurate particulars of income. Also there is no finding that any details furnished by the assessee in its return were found to be incorrect or false. Thus, the order of penalty is liable to be quashed. - Decided in favour of assessee

Summary

Issues involved:
1. Appeal against penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2000-01.

Detailed Analysis:
1. The appellant challenged the penalty imposed by the Commissioner of Income Tax (Appeals) under section 271(1)(c) of the Act. The main issue was whether the penalty was justified considering the circumstances of the case.
2. The original assessment completed by the Assessing Officer disallowed an amount as interest on a loan utilized for acquiring shares under section 14A of the Act. The CIT(A) directed a reduced disallowance, which led to further proceedings and adjustments.
3. The Assessing Officer initiated penalty proceedings under section 271(1)(c) due to the Assessee's alleged failure to adequately defend the case despite multiple opportunities. The penalty was imposed after the Assessee sought adjournments and failed to provide explanations.
4. The Assessee contended that all relevant details were furnished, the disallowance was based on estimation, and relied on legal precedents to argue against the penalty. The CIT(A upheld the penalty citing lack of explanations from the Assessee.
5. The Tribunal analyzed the facts, including the original assessment, adjustments made, and the Assessee's submissions. It referenced a Supreme Court decision emphasizing that a mere unsustainable claim does not amount to furnishing inaccurate particulars.
6. The Tribunal found that the Assessee had provided evidence during the original assessment, and the disallowance was based on specific amounts identified by the AO. It concluded that the penalty was unwarranted as the Assessee's explanations were supported by evidence and were not misleading or inaccurate.
7. Ultimately, the Tribunal allowed the Assessee's appeal, canceling the penalty imposed under section 271(1)(c) of the Act for the assessment year in question.

This detailed analysis covers the various aspects of the legal judgment, focusing on the issues raised by the Assessee against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the relevant assessment year.