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TMI Blog2014 (7) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e amounting to Rs. 22,55,829/- was claimed by the assessee under the head "income from other sources". During the course of assessment proceedings, the said claim of the assessee was examined by the A.O. and on such examination, he found that interest expenditure to the extent of Rs. 9.43 lacs claimed by the assessee was pertaining to the loan borrowed by him for purchase of shares of Rs. 51 lacs of M/s Nayana Plastics during the period 5-10-96 to 31-3-99. Since the said investment made in purchase of shares of M/s Nayana Plastics was not reflected in the books of account of the assessee and no income from the said investment was offered to tax, the interest expenditure of Rs. 9.43 lacs was held to be not allowable by the A.O. As regards the balance interest expenditure of Rs. 13.12 lacs, the A.O. found that the said expenditure was also claimed by the assessee as business expenditure of his proprietary concern. The A.O. held that the claim of the assesse for the said expenditure again under the head "income from other sources" thus amounted to claiming double deduction and the same was also disallowed by the A.O. Accordingly, interest expenditure of Rs. 22,55,829/- claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee were not found acceptable by the ld. CIT(A) and he confirmed the penalty imposed by the A.O. u/s 271(1)(c) of the Act in respect of addition of Rs. 22,55,829/- made on account of disallowance of interest for the following reasons given in para 2.3.3 & 2.3.6 of his impugned order:- "2.3.3 As regards the penalty levied on the disallowance of interest expenditure of Rs. 22,55,829/-, the interest expenditure comprises of two components - (i) interest of Rs. 9.43 lakhs and (ii) interest of Rs. 13.12 lakhs. The interest of Rs. 9.43 lakhs has admittedly been paid by the assessee on borrowings which has been utilized exclusively for the purchase of shares of Nayana Plastics. On this, there is no dispute. It is, therefore, clear that the borrowings were made for the purpose of making investments in shares and not for earning income assessable, under the head "Income from Other Sources". The assessee has not explained as to how and under which provision of the Act, the interest of Rs. 9.43 lakhs is allowable as a deduction. The interest expenditure as above has not been incurred for the purposes of the business. The said interest expenditure is also not deductible u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly applicable to the facts of the case. Hence, penalty u/s 271(1)(c) would be leviable in the case of the assessee for furnishing inaccurate particulars of income in respect of the amount of income. In the appellate proceedings, the assessee has furnished certain details to show that the interest expenditure of Rs. 22.55 lakhs claimed under the head "Income from Other Sources" did not include the interest expenditure of Rs. 13.12 lakhs claimed as a deduction against the business income. Assuming that this contention of the assessee is correct, the assessee has still not explained as to how the interest expenditure of Rs. 13.12 lakhs claimed against the interest income of Rs. 789/- under the head "Income from Other Sources" was allowable as a deduction u/s 57 of the I.T. Act, 1961. The assessee has only made a general assertion that the borrowed funds were given to Nayana Plastics as loans but he could not recover the interest on such advances. This assertion of the assessee is clearly only an after thought which has been made for escaping the consequences of the provisions of sec. 271(1)(c). No such assertion was made before the AO, either in the assessment or in the penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of disallowance of interest expenditure was rightly confirmed by the ld. CIT(A) by giving convincing reasons in para 2.3.3 and 2.3.6 of his impugned order. He therefore strongly relied on the said reasons given by the ld. CIT(A) in support of the Revenue's case that the case of the assessee is a fit case to impose penalty u/s 271(1)(c) of the Act. 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that although the disallowance of Rs. 22,55,829/- made by the A.O. on account of interest expenditure is accepted by the assessee apparently for the reason that there was a huge loss resulting into no tax liability even after the said disallowance, all the facts relevant to this issue as borne out from the record are not very clear. First of all, it was agreed by the assessee before the A.O. during the course of assessment proceedings as well as penalty proceedings that the claim of interest expenditure to the extent of Rs. 13.12 lacs was made twice and it was therefore the case of double deduction claimed by the assessee. During the course of appellate proceedings before the ld. CIT(A), the assessee, however, contend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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