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TMI Blog2011 (7) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... 3B(e) has to be considered as bona fide. Penalty cannot be levied only on the ground that the assessee did not dispute the addition in appeal, order set aside and penalty levied is deleted - Decided in favor of assessee. - IT APPEAL NO. 3356 (MUM.) OF 2009 - - - Dated:- 29-7-2011 - R.V. EASWAR, RAJENDRA SINGH, JJ. Kanchan Kaushal, Dhanesh Bafna and Jignesh Desai for the Appellant. M.R. Kusal for the Respondent. ORDER Rajendra Singh, Accountant Member. This appeal by the assessee is directed against the order dated 25.2.2009 of CIT(A) for Assessment Year 2001-02. The only dispute raised by the assessee in this appeal is regarding levy of penalty for concealment of income under section 271(1)(c) of the Income tax Act. 2. Briefly stated, facts of the case are that the for the relevant year, the assessee had filed return of income on 30.10.2001 showing income of Rs .42,96,10,800. The assessment was completed on 30.1.2004 under section 143(3) of the Income tax Act at total income of Rs .43,20,86,709. Subsequently, assessment was reopened under section 147 of the Act on 16.3.2005 on the basis of audit report in the Form No.3CD in which it was pointed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled particulars of income under provisions of Explanation-1 to section 271(1)(c). It was observed by him that the assessee did not declare income either in the original return or in the revised returns despite there being a specific report of the auditors. Therefore, had the Assessing Officer not issued notice under section 148, income would have escaped assessment. He also referred to the judgment of Hon'ble Supreme Court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 in which it was held that the penalty under section 271(1)(c) is only a civil liability and mens rea was not required to be proved by the revenue. CIT(A) accordingly confirmed the penalty levied by the Assessing Officer aggrieved by which the assessee is in appeal before Tribunal. 3. Before us, the ld. AR for the assessee submitted that mo mistake, in fact, had been committed by the assessee in not making disallowance of interest received on loans obtained from Hong Kong and Shanghai Banking Corporation (HSBC) and ICICI Bank Ltd. which are scheduled banks, on the basis of audit report. The auditors had mentioned that claim was disallowable under section 43B(d) but the clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowing the claim under the said provisions has to be considered as bona fide and no penalty for concealment in such cases can be levied. There was no dispute about the allowability of the claim if not this year, in the subsequent year. It was further argued that merely because no appeal had been filed by the assessee against the order of assessment, penalty could not be levied because penalty proceedings were different from assessment proceedings. It was accordingly urged that the penalty levied should be deleted. 3.1 Ld. DR on the other hand, strongly supported the orders of authorities below and placed reliance on the findings given in these orders. He also placed reliance on the judgment of Hon'ble High Court Delhi in CIT v. Zoom Communication (P.) Ltd. [2010] 191 Taxman 179 in which it was held that if the assessee makes claim which is not only incorrect but also without any basis, the explanation furnished by the assessee for making such a claim could not be considered bona fide and penalty has to be levied. 4. We have perused the records and considered the rival contentions carefully. The dispute is regarding levy of penalty for concealment of income under section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation and is also not able to prove that the explanation is bona fide, the addition made would amount to concealment of particulars of income. 4.2 We have, therefore, to analyse the facts and circumstances of the case carefully to give a finding whether on the facts of the case, explanation of the assessee for not making disallowance of interest can be considered as bona fide. There is no dispute that the auditors in the audit note had clearly mentioned that interest was disallowable under section 43B(d) but it is also not in dispute that despite the audit note, in the original assessment completed after scrutiny under section 143(3), the Assessing Officer did not make disallowance of interest. Clause (d) of section 43B relates to disallowance of interest from Public Financial Institutions, State Financial Corporation or State Industrial Investment Corporation. The assessee had taken loans from HSBC and ICICI Bank which are not State Financial Corporation or State Industrial Investment Corporation. Public financial Institution has been defined in the Explanation 4(a) to section 43B to have the same meaning as assigned in section 4A of the Companies Act. Under section 4A of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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