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TMI Blog2020 (1) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... of income Disallowance u/s 36(1)(v) on account of delayed payment of ESI and PF - HELD THAT:- The assessee in the present case has filed his revised return of income dated 18-04-2011 claiming the deduction of the aforesaid amount whereas the judgment of CIT vs. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] . Thus it is evident that, the assessee was not aware of the judgment relied by the learned CIT (A) while imposing the penalty on account of concealment of income. We also note that the judgment of Hon ble Delhi High Court in the case of AIMIL Ltd [ 2009 (12) TMI 38 - DELHI HIGH COURT] was in favour of the assessee which was rendered dated 23-12-2009 i.e. before filing the return of income by the assessee. Accordingly, we find that the assessee has claimed the deduction under the bona fides believe. Hence, we hold that the assessee cannot be visited with the penalty in the given facts and circumstances on account of concealment of income. Disallowance of interest expenses being capital in nature - HELD THAT:- There is no allegation that the impugned interest expense was incurred in connection with the extension of the existing business of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 (here-in-after referred to as "the Act") dt.15/03/2013 relevant to the Assessment Year 2010-2011. The assessee has raised the following grounds of appeal. 1. The C. I. T. (Appeals) erred in law and on facts in confirming the penalty u/s.271(l)(c) of the I.T. Act, 1961 without appreciating the facts and law properly on the following additions: (i) Disallowance of ₹ 91,726/- being payment of consolidated tax u/s.43B (ii) Disallowance of ₹ 2,97,572/- u/s.36(l)(v) being delayed payment of ESI and PF (iii) Disallowance of ₹ 1,530/- u/s.36(l)(iii) being interest paid on purchase of capital goods. (iv) Disallowance of ₹ 14,500/- u/s.37 being penalty paid to Sales Tax and Excise Department. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. 2. The interconnected issue raised by the assessee in all the grounds of appeal is that the learned CIT (A) erred in confirming the penalty levied by the AO under section 271(1)(c) of the Act on addition of ₹ 4,05,328/-. 3. The facts in brief are that the assessee in the present case is a priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bona fides believe after placing reliance on the judgment of Hon'ble Delhi High Court in the case of AIMIL ltd reported in 188 taxman 265. Therefore, the assessee should not be visited with the penalty. c. Regarding the disallowance of interest expenses of ₹ 1530.00 being capital in nature i. The assessee under the bona fides believe claimed the interest expenses incurred on the money borrowed for the acquisition of capital asset as revenue expenditure. As such, all the details of the interest expenses were duly disclosed in the financial statements. Therefore there cannot be any penalty on account of concealment of income. d. Regarding the disallowance of ₹ 14,500.00 on account of penalty payment to Sales tax and Excise department i. The assessee claimed that it has incurred the impugned expenses in the course of the business which were wrongly classified as penalty under the accounting head. Therefore it claimed that the demand raised by the sales tax and excise department for the amount of tax has been treated as penalty inadvertently. Accordingly the assessee claimed that there cannot be any penalty on such amount on account of concealment of income. 5. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment to Sales tax and Excise department i. The assessee before the ld. CIT-A submitted that it has incurred the impugned expenses in the course of the business which were wrongly classified as penalty under the accounting head. The assessee further submitted that the contrary view taken by the AO for making the addition does attract the penalty. ii. However, the learned CIT (A) disregarded the contention of the assessee by observing that the penalties claimed by the assessee are not allowable deduction. Thus the assessee by claiming the deduction has furnished inaccurate particular of income/concealed particular of income. Accordingly the learned CIT (A) upheld the order of the AO. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 7. The learned AR before us reiterated the submissions as made before the authorities below whereas the learned DR before us vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record. Now, we proceed to adjudicate each addition/items with respect to which the penalty was levied. a. Regarding the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch asset was not put to use. The relevant provision as applicable for the year under consideration reads as under: Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- (i) ******* (ia) ******** [(ib) ******* (ii) ******* (iii) the amount of the interest 25 paid in respect of capital 25 borrowed for the purposes of the business 25 or profession : Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.] ii. From the order of the authorities below, we note that there is no allegation that the impugned interest expense was incurred in connection with the extension of the existing business of the assessee. Therefore, the mere claim of interest expenses as revenue in nature cannot be equated w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to furnish the inaccurate/ conceal the particulars of income. So there cannot be any penalty in the present facts and circumstances. In holding so we draw support from the order of ITAT Pune Bench in the case of Kanbay Software India Pvt. Ltd. 122 TTJ 721 wherein it was held as under: "Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. All that the assessee can do is to explain the circumstances in which he has acted in a particular manner and set out the related facts. The explanation for bona fides, at the cost of repetition, needs to be considered in a fair and objective manner and in the light of human probabilities. As long as the explanation given by the assessee is in the light of the human probabilities, there are no factual errors or inconsistencies, and it is supported by reasonable supporting evidences regarding factual elements embedded therein, if any, the bona fides should be taken as proved. The assessee's explanation regarding bona fides of the claim does not suffer from any apparent consisten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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