9911796707
TMI Blog2011 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... s and law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the penalty of Rs. 1,01,14,199 levied by the Assessing Officer under section 271(1)(c) of the Act. 2.1 The learned CIT(A) has erred in ignoring the fact that the assessee furnished inaccurate particulars of the income and concealed taxable income by claiming non-allowable expenses incurred for earning exempt income under section 10(33) of the Income-tax Act. 3. The appellant craves leave to add, to alter, or amendment any grounds of the appeal raised above at the time of hearing." 2. We are initially proceeding with the facts of assessment year 1999-2000. The assessee-company had filed its return on 29-11-1999 declaring total loss of Rs. 4,29,29,740. The return was processed under section 143(1) on 24-2-2000. It filed the revised return, declaring the same loss, which was also processed on 28-3-2001. Thereafter, statutory notices were issued for scrutinizing the return. 2.1 It was found that the assessee is engaged in the business of dealing in shares and securities, investment therein and advancing loans. It was furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) considered the facts of the case and submissions made before him. It has been held that the expenses relating to earning the income, which does not form part of the total income, have to be disallowed. Relying on various case laws, the disallowance made by the Assessing Officer on the proportionate basis has been held. It appears that no further appeal has been filed by the assessee against this order. 3.1 Coming to the levy of the penalty, it has been mentioned that the assessment proceedings and penalty proceedings are different. The findings in assessment proceedings are not conclusive for levy of the penalty. The position of substantive law regarding penalty is that initial burden to rebut the presumption of Explanation 1 is on the assessee. This can be rebutted by showing his bona fides by an explanation. Therefore, mere disallowance or addition is not sufficient for the levy of the penalty. The assessee had made only a claim in regard to deduction of expenses. This claim was not found to be legally acceptable. However, the assessee had disclosed all material facts. Therefore, the claim cannot amount to furnishing of inaccurate particulars of income. Thus, the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing it to the exempt-income. The position in regard to assessments is different, namely, that the question of allowance or disallowance has to be decided on the basis of law existing at the time of making it. Therefore, even if the disallowance has been confirmed in appeal, that by itself does not lead to the charge of concealment of income or furnishing inaccurate particulars of income. Otherwise all the facts regarding incurring of expenditure have been disclosed by the assessee in the return or in the course of assessment proceedings. Therefore, there has been no suppression of facts. In view thereof, we are of the view that the levy of the penalty by the Assessing Officer was not justified on this ground alone and, therefore, the learned CIT(A) was right in deleting the penalty. We will deal with other grounds while deciding the appeal for assessment year 2001-02. 5. Coming to the facts of assessment year 2001-02, the admitted position is that the return was filed on 31-10-2001 declaring loss of Rs. 1,07,34,986. This date falls subsequent to the insertion of section 14A in the Act. While computing the total income, the Assessing Officer disallowed interest of Rs. 1,09,77,252 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were also claimed. Besides interest income of Rs. 14,38,977, the assessee earned dividend income on investment in shares. Such investment amounted to Rs. 1,19,90,011. The dividend income was not liable to be taxed in view of the provisions contained in section 10(34) of the Act. The Assessing Officer was of the view that the net interest of Rs. 95,63,346, demat charges of Rs. 60 and proportionate expenses amounting to Rs. 11,70,941 were not deductible in computing the total income by dint of the provision contained in section 14A, as such expenses related to earning of tax-free income. The explanation of the assessee was twofold - (i) the assessee was primarily holding shares in selected companies of Jindal group with the intention to acquire and retain controlling stake in them, and (ii) the computation of disallowance under section 14A involves considerable debate and two views are always possible. On careful consideration of various cases relied upon by the assessee, it is found that three major propositions arise therefrom - (a) penalty proceedings are quasi-criminal in nature and, therefore, it is for the revenue to establish contumacious conduct on the part of the assessee; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule when it filed the return of income. Therefore, even in absence of any attempt on the part of the assessee, it can be said that questions of disallowance and its quantification are quite disputable and can lead to bona fide difference in opinion between the assessee and the authorities. In such a situation, the levy of penalty will not be justified." 5.2 On the other hand, the learned DR relied on the order of the Assessing Officer. 6. We have considered the facts of the case and rival submissions. We find that the assessee had claimed expenditure, which was incurred in the course of business, a part of which was disallowed by the Assessing Officer on a proportionate basis by allocating it towards the earning of dividend income. The facts are in pari materia with the facts of the case of Nalwa Investments Ltd. (supra), in which the penalty pertained to a subsequent year, being assessment year 2005-06. The provision contained in section 14A was applicable to the assessee. It was inter alia mentioned that allocation of expenses is beset with a lot of problems and the issue was laid to rest by introduction of Rule 8D, in the year 2008. Therefore, even in absence of any attempt on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
