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TMI Blog2017 (2) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of manufacturing of oxygen gas, trading of spares and letting out of surplus space filed its return declaring income of Rs. 3,26,78,516/-. Assessment was completed under Section 143(3) determining taxable income at Rs. 4,74,33,576/-. While completing the assessment, the assessing officer disallowed Rs. 1,44,43,959/- under Section 14A of the Act and an amount of Rs. 3,11,102/- was added on account of short term capital gains. The assessee preferred appeal before the Ld. CIT (Appeals) in respect of the disallowance made under Section 14A with reference to Rule 8D and accepted the addition made towards short term capital gain. The Ld. CIT (Appeals) partly sustained the disallowance under 14A of the Act. 3. The assessing officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made towards short term capital gains. Both the assessee as well as the revenue are in appeal before us. 5. When the matter was posted for hearing on 09.11.16, the authorized representative by letter dated 07.11.16 requested for adjournment stating that due to personal difficulty and since he is travelling out of Mumbai, appeals be adjourned. This is not a reasonable cause for granting adjournment and therefore, we proceed to hear the Ld. DR and dispose of the appeals on merits. 6. The Ld. DR vehemently submits that the Ld. CIT (Appeals) is not justified in deleting the penalty in respect of the disallowance made under Section 14A read with Rule 8D(ii) and further supported the orders of the Ld. CIT (Appeals) in sustaining the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of interest and other expenses as per the provisions of Rule 8D (ii) and (iii) which have worked out to Rs. 92,23,260/- and Rs. 51,58,434/- respectively totaling to Rs.I.44 crores in all. The AO has levied penalty on the addition on account of disallowance u/s.14A by holding that the appellant was liable to furnish the particulars of income in accordance with the provision of sec.14 A r.w. Rule 8D i.e. by making disallowance u/s.14 A by invoking rule 8 D as envisaged by the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Pvt. Ltd. 43 DTR 177. Since the assessee has not declared correct amount of expenditure incurred in earning of exempt income, therefore it has not furnished correct particulars of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also accepted u/s.143(3) of I T Act in A.Y 2007-08 when no disallowance was made on account of proportionate interest, therefore it can safely be presumed that the disallowance made by the AO under Rule 8 D [ii] on account of proportionate interest does not attract penalty proceedings u/s.271(1)(c) because the appellant's contention was also a bonafide contention that its investment have come out of own funds and not from borrowed funds, therefore; penalty levied on disallowance u/s.Rule 8 D (ii) of Rs. 92,25,260/- is directed to be deleted. As regards the penalty levied on the addition on account of disallowance under Rule 8D(iii), I agree with the contention of the AO that in A.Y 2008-09 i.e. the current year, once it was certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the disallowance made under Section 14A of the Act. Disallowance came to be made by invoking the provisions of Rule 8D. Here the assessee proved that it has own funds much more than investments and therefore there is no question of disallowance under 8D 2(ii). Coming to administrative expenses disallowed under Rule 8D 2(iii) we find that during the assessment proceedings, the assessee itself given the computation u/s 14A for disallowance of estimated expenditure under Rule 8D 2(iii). This expenditure came to be disallowed by the operation of law but not on account of the reason that the assessee furnished inaccurate particulars or concealment of income. Hence no penalty is attracted for such disallowance. 9. Coming to the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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