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TMI Blog2012 (10) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... g of properties. During the year under consideration, the assessee has secured the loan of Rs.7.71 crores from HDFC Bank which was partly invested in the share of two companies. The Assessing Officer disallowed the interest amounting to Rs.30,77,750/- by invoking the provisions of Section 14A of the IT Act. He also levied the penalty under Section 271(1)(c) thereon amounting to Rs.10,98,757/-. The CIT(A) cancelled the penalty. Hence, this appeal by the Revenue. 3. At the time of hearing before us, it is stated by the learned DR that the assessee has utilized the borrowed money for acquisition of shares. These shares were held as an investment and not as a trading stock, therefore, the investment was either for the purpose of earning capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer for reworking of the disallowance. He stated that there is no dispute that the money was borrowed by the assessee company and interest was paid thereon. Merely because part of the interest was disallowed by invoking the deeming provision of Section 14A, it cannot be said that the assessee either furnished inaccurate particulars or concealed the income. In support of this contention, he relied upon the following decisions:- (i) CIT Vs. Reliance Petro Products Pvt.Ltd. - 322 ITR 158 (SC). (ii) CIT Vs. Nalwa Sons Investment Ltd. (Supreme Court) Special Leave to Appeal (Civil) No.18564/2011 dated 4.5.2012. (iii) CIT Vs. Mahanagar Telephone Nigam Limited (Delhi High Court) - ITA No.626 of 2011 dated 10.10.2011. (iv) Karan Raghav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. The court cannot overlook the fact that only a small percentage of the income-tax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in computation of its income, and its accounts are compulsorily subjected to audit. In the absence of any details from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee-company and how it could also have escaped the attention of the auditors of the company." 6. Thus, after considering the decision in the case of Reliance Petroproducts Pvt.Ltd. (supra), it was stated by the Hon'ble Jurisdictional High Court that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee but if the claim, besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) would come into play. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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