9911796707
TMI Blog2016 (9) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(1) r.w.s. 147 of the Act on 18.9.2006. The ld.AO has made following additions to the income of the assessee, on which penalty has been initiated. i) Disallowance of interest paid to the depositors Rs. 5,41,838/- ii) Disallowance of brokerage Rs. 1,42,890/- iii) Disallowance of interest on company deposit Rs. 1,42,876/- The AO has imposed penalty of Rs. 83,000/-. 4. It is pertinent to observe here that the disallowance of brokerage amounting to Rs. 1,42,890/- was deleted by the Tribunal, and therefore, the ld.CIT(A) has not confirmed penalty on this addition. The AO has determined the taxable income at Rs. 3,97,475/-. Out of that addition, Rs. 1,42,890/- has been deleted. The ld.CIT(A) has noticed this fact elaborately in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on one hand the appellant had shown Interest income of Rs. 68,554/-, but against the said interest income he had claimed the interest paid of Rs. 5,41,838/-. Since, the appellant had failed to establish the nexus and in absence..of: any cogent material to establish the reason of interest paid and in absence of any nexus of the utilization of borrowed funds, the first appellate authority was correct in holding that the expenditure of interest the purpose of earning interest. Thus, as per the Hon'ble ITAT, Ahmedabad, there is no justification to allow such claim. From these observations of the Ld.CIT(A) as well as the Hon'ble ITAT, it is established that the claim of the appellant with regard to interest expenditure of Rs. 5,41,838/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. In view of these facts, the penalty levied by the AO u/s 271(l)(c) of the IT Act is confirmed on net disallowance of interest of Rs. 5,06,635/- (i.e. Rs. 5,41,838/- - Rs. 35,203/-). In other words the penalty levied u/s 271(l)(c) of the IT Act on remaining amount of Rs. 35,203/- is hereby deleted in view of above decision of Hon'ble ITAT, 'D' Bench, Ahmedabad, ........ ........ "4.4. Since, the Hon'ble ITAT has deleted the above addition of Rs. 1,42,890/- on merits and therefore, no penalty can be levied on such addition. With regard to the disallowance of interest payment of Rs. 1,42,876/-, the Hon'ble ITAT, Ahmedabad has confirmed the addition on the same principle on which the addition of Rs. 5,41,838/- has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. This reasoning of the Tribunal would indicate that interest bearing funds were used by the assessee for making investment in the company. In other words, he would earn interest income. It is a different matter that in this year, the income was to the extent of Rs. 35,203/-. Had there been more interest income, then, the total claim of interest expenditure would have been set off. So, the question is whether the claim of the assessee was not tenable at all or it was not allowed because sufficient interest income was not there for a set off. Even if a part of the interest expenditure is being set off against alleged interest income, it would falsify the reasoning of the AO. The assessee, as such exclusively not claimed the interest expend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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