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TMI Blog2017 (12) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts were maintained and Audited by the assessee. Only Notional interest was calculated and was disallowed from actual interest expenditure paid to bank. Disallowance was merely on account on account of difference of opinion and has nothing to do with concealment of income or furnishing of inaccurate particulars. It is clear that mere disallowance in the assessment proceedings could not be the sole basis for levying penalty u/s.271(1)(c). - Decided in favour of assessee. - I.T.A. No.2075/Ahd/2014 - - - Dated:- 19-12-2017 - SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER For The Appellant : Shri S. K. Shah, AR For The Respondent : Shri Jayant Jhaveri, Sr. D.R ORDER PER MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal for confirming of penalty u/s.271(1)(c) of the I.T. Act, 1961 by the assessee against the order of the Commissioner of Income Tax(Appeals)-I, Baroda, vide Appeal No. CAB-I/023/2013-14 dated 24/04/2017 for the Assessment Year (AY) 2005-06, on the following Grounds: 1.0 The order passed by the learned CIT(A) confirming the levy of penalty u/s 271(1)(c) for ₹ 1,40,000/- is bad in law and li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under: During the assessment proceedings, it was seen the assessee had given loans/advances of ₹ 31 lacs to M/s Bil Metal Works Pvt. ltd in which the directors are common. From schedule 'R' to profit and loss account it was seen that the assessee has incurred huge interest expenditure of ₹ 76,576 lacs on term loan and ₹ 160,70 lacs for working thus, the assessee had acquired funds for the purpose of its day to day running of business and also for long term expenditure. It was very difficult for the assessee itself to establish that its own fund of ₹ 6 crore was not utilized and was blocked as advance to M/s. B. Metal Works, in any case had no advances given or had the advances that were blocked recovered or had the assessee charged some interest on the advances under consideration, the burden of interest which the assessee has borne would not have been required to be borne. The AO relied upon the decision of the Hon'ble Allahabad High court in the case of H. R. Sugar Factory Ltd (187 ITR 363) wherein the Hon'ble High Court had confirmed the action of Assessing officer disallowing of interest u/s.36(1)(iii) stating that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and merely because the accounts were audited does not establish that the expenses incurred were wholly and exclusively for business. 2.4 In reply, the assessee submits as follows: Rs.378764/- being notional interest at 12% on advantage given to bill Metal Works Pvt Ltd is added the total income. Kindly note that the receivable amount of ₹ 31.91 lacs is receivable for the financial year 2000-2001 is on account of the share of loss incurred as a partner in Bilmetal works partnership firm which was merged with Bilmetal Industrial Limited in the year 2000-01 as per the provision of section 47 x (iii) of the Income Tax Act 1961 and on account of Merger as per Audit report, Para: 3(a).the company had shown the ₹ 31.91 lacs receivable from M/s Bilmetal works Private Limited. Kindly note that as per the Audited Balance Sheet as on 31/03/2005, the company is having its own share capital fund of ₹ 600 lacs less Profit loss account Debit Balance of ₹ 66.30 lacs, thus net owned fund was of ₹ 533,70 lacs. The company had not given any amount to Bil Metal works Pvt ltd the amount was recoverable on account of share of loss incurred as a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record by the assessee in its defence against charge of furnishing inaccurate particulars of its income and thus concealment fall considerably short of the attributes mandated in this regard by the said explanation. Therefore, I hold that the amount of ₹ 378754/- which was disallowed out of the claim of interest expenditure for the purposes of section 271(l)(c) represents the income in respect of which the assessee has furnished inaccurate particulars of its income and it has thus concealed the income within the meaning of Explanation 1 of section 271(l)(c) of the Act. 2.7 The penalty leviable in the case is worked out as under: Concealed income/inaccurate particulars Rs.378754/- on which penalty is leviable Tax on the concealed income Rs.138595/- Penalty leviable @ 100% on the concealed income Rs.138595/- Penalty leviable @ 300% on the concealed income Rs.415785/- 2.8 Considered the facts and circumstances of the case Dy. CIT levied the penalty of ₹ 1,40,000/- u/s.271(1)(c) of the Act. 3. Against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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