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TMI Blog2012 (8) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... t the interest expenditure pertains to the borrowed funds, which was utilised for investment in the shares - mere disallowance of claim of expenditure would not lead to attract penalty provisions u/s 271(1)(c) of the act - appeal filed by the assessee is allowed. - IT APPEAL NO. 463 (MUM.) OF 2010 - - - Dated:- 28-3-2012 - VIJAY PAL RAO, RAJENDRA, JJ. Sanjay R. Parikh for the Appellant. V.V. Shastri for the Respondent. ORDER Vijay Pal Rao, Judicial Member This appeal by the assessee is directed against the order dated 20.11.2009 of the CIT(A) arising from the penalty order passed u/s 271(1)(c) of the Act for the AY 2004-05. 2. The assessee has raised the following grounds in this appeal: 1. The learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) confirmed the levy of penalty and dismissed the appeal of the assessee vide impugned order. 4. Before us, the ld AR of the assessee has submitted that during the year the assessee claimed the fixed general and administrative expenses of Rs. 4,93,135/- under the head 'profit and gains of business. Since the assessee has share trading profit of Rs. 3,371/- only, the net result was business loss at Rs. 4,81,839/-. The ld AR has submitted that because of volatile market condition and to avoid loss due to uncertain market situation, the assessee stopped the trading activity temporarily. The expenses incurred by the assessee are of fixed in nature and not directly related to the volume of business or income or loss of business. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head 'income from other sources, then the said expenditure was claimed by the assessee as per Sec. 57 of the IT Act. He has further submitted that there is no dispute about the money borrowed and interest expenditure but the claim of the assessee was disallowed by the Assessing Officer on the ground that this expenditure has not been incurred in relation to the income which is assessable as income from other sources. The ld AR, thus submitted that when the assessee has explained all the details as well as the claim of the assessee as genuine, then merely because the addition has been sustained, it does not amount to concealment of income to levy of penalty u/s 271(1)(c) of the Act. In support of his contention, he has relied upon the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the minor. But the Assessing Officer brought out the fact that the interest expenditure is not related to the interest income of the minor. Therefore, the claim of the assessee was found not genuine and wrong. He has further submitted that even the borrowed funds were invested in the shares and the interest on the same cannot be allowed as the same is barred under the provisions of sec. 14A. Therefore, the claim of interest expenditure is absolutely wrong and the explanation furnished by the assessee is not bonafide. He has relied upon the decision of the Hon'ble Delhi High Court in the case of CIT v. Zoom Communication (P.) Ltd. [2010] 327 ITR 510/191 Taxman 179 and submitted that when the claim which is not only incorrect i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g portfolio. However, the Assessing Officer has not disallowed the expenditure by applying the provisions of sec. 14A, which in our view would be an appropriate course of action when the assessee is having trading activity as well as sale and purchase in investment portfolio and for long term capital gains of Rs. 6.23 crores and short term capital of Rs. 1.30 crores. The details of expenditure was also explained and brought on record by the assessee during the assessment proceedings. Therefore, it is not the case of any misrepresentation for concealment of particulars of income; but the claim of the assessee was not allowed by the Assessing Officer being excessive in comparing to the business activity. When the claim of the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as explained the fact during the penalty proceedings, which are neither found bogus nor false, then the explanation of the assessee has to be considered on the parameters of bonafide. The assessee has disclosed all these fact before the Assessing Officer that the interest expenditure pertains to the borrowed funds, which was utilised for investment in the shares. Therefore, when this fact has not disputed by the Assessing Officer, the claim of expenditure; though may not be allowable in view of the provisions of section 14A; but the same cannot be held to be bogus or false. The actual payment of interest is not disputed; however, the same is not allowable because the divined income is not taxable. Therefore, when the assessee came out with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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