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2019 (1) TMI 533 - AT - Income TaxPenalty u/s 271(1)(c) - income from other sources - assessee earned interest income from certain loans & savings bank account - Held that - onus to prove the nexus between income earned and expenditure made there-against, in terms of Section 57, squarely lied on the assessee, which has not been conclusively established. The assessee has paid interest to loans obtained from banks / financial institutions. It is categorical finding of the lower authorities that the loans have been obtained against shares and the same have been invested in Shares & Bonds and this fact could not be rebutted by any cogent material on record. Similarly, the nexus between loan obtained from LIC and loans which earned interest income could not be demonstrated. This being the case, we have no hesitation in confirming the stand of lower authorities. The cross-objection of assessee stands dismissed. For penalty we find that the assessee made a claim which has not been accepted by lower authorities for want of conclusive evidence of proving the nexus between funds borrowed by the assessee and funds advanced by the assessee. However, the same, in our opinion, did not lead to concealment of income or furnishing of inaccurate particulars of income so as to warrant imposition of penalty u/s 271(1)(c). Therefore, by deleting the same, we allow the assessee s appeal.
Issues:
1. Contesting relief provided to the assessee by the Ld. Commissioner of Income-Tax (Appeal)-20. 2. Quantum additions made by the Ld. Income Tax Officer-9(3)(3), Mumbai for Assessment Year 2006-07. 3. Applicability of low tax effect Circular No.03/2018 by CBDT. 4. Disputed interest additions and penalty under section 271(1)(c). Analysis: Issue 1: Relief Provided to the Assessee The appeal by the revenue contested the relief provided to the assessee by the Ld. Commissioner of Income-Tax (Appeal)-20 for Assessment Year 2006-07. The Ld. CIT(A) had deleted certain additions, specifically those related to House Property Income and deemed dividend. The revenue further appealed against these deletions, while the assessee contested the interest addition through cross-objection CO No.117/Mum/2014. Issue 2: Quantum Additions The Ld. Income Tax Officer-9(3)(3), Mumbai made quantum additions to the assessee's income for Assessment Year 2006-07, totaling to Rs. 61,890/- on account of House Property Income, Rs. 6,04,069/- on account of Interest & Bank Charges, and Rs. 37,50,000/- on account of deemed dividend. The Ld. CIT(A) deleted the additions related to House Property Income and deemed dividend, leading to further appeals by the revenue and cross-objection by the assessee. Issue 3: Applicability of Circular No.03/2018 by CBDT The tax effect of the quantum additions was below the prescribed limit of Rs. 20 Lacs, falling under the low tax effect Circular No.03/2018 issued by CBDT. The revenue's appeal was dismissed based on the monetary limits set by the circular for filing appeals before various appellate authorities. Issue 4: Disputed Interest Additions and Penalty The interest additions made by the Ld. AO were contested by the assessee through cross-objections. The onus to prove the nexus between income earned and expenditure made lay on the assessee, which was not conclusively established. The penalty under section 271(1)(c) was imposed on the assessee for furnishing inaccurate particulars of income, but the Tribunal found that it did not warrant imposition of penalty, leading to the allowance of the assessee's appeal. In conclusion, the revenue's appeal was dismissed, the assessee's cross-objection was also dismissed, and the assessee's appeal was allowed.
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