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TMI Blog2021 (9) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... if there is conscious and deliberate concealment on the part of the assesses. The mere fact that a claim for expenditure stands disallowed does not by itself lead to the inference that the assessee had in accurate particulars in regard to that item. h) Our client further invite your attention to the following observation made by the by the Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (83 ITR 26). An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. In view of the submissions, our clients request you kindly drop the penalty proceedings initiation u/s 271(1)(c) of the Act." 4. After considering the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the part of the appellant. Asset Motors Pvt. Ltd. f. In view of the above grounds of appeal, the appellant prays that the assessing officer has to be directed to delete the penalty levied under section 271(1)(c) amounting to ₹ 9102/-. B. Levy of penalty under section 271(1)(c) in respect of disallowance of interest expenditure of ₹ 21,02,649/- under section 36(1)(iii) by treating it as not incurred for business purpose:- 1. On the facts and in the circumstances of the case and in Jaw, the Deputy Commissioner of Income tax (appeals) erred in upholding the action of the assessing officer in levying penalty under section 271(1)(c) read with explanation 1 thereto. 2. The Commissioner of Income-tax (Appeals) further erred in the following respects:- a. In not appreciating the fact that the appellant had made full disclosure during the course of assessment proceedings in respect of interest expenditure of ₹ 21,02,649/- eligible for deduction under section 36(1)(iii) of the Income Tax Act 1961. b. In not appreciating the fact that whether interest bearing borrowed amounts were used for granting interest free advances or whether the interest free advances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book and he brought to our notice that the section was amended to provide the benefit of amortization to all assessees. For the purpose, he relied on the case of CIT v. Reliance Petro Products Pvt. Ltd. (supra) and submitted that the assessee had claimed expenditure and the Assessing Officer did not accept the above expenditure that itself will not attract penalty provisions. 8. With regard to interest disallowance of proportionate amount given to sister's concerns, the Ld. AR submitted before AO that : "The appellant explained that it was engaged in the business of dealing in motor vehicles and servicing of vehicles. Its holding company Assets Auto India Private Limited was also engaged in the business of dealing in motor vehicles and servicing of motor vehicles. The appellant had advanced ₹ 2.20 crores to its holding company for expanding the business operation and to strengthen the business activity. It was also submitted that during the year additional amount of ₹ 22 lacs was given and the opening balance was ₹ 1.98 crores. The aforesaid amount was advanced out the free funds viz. the share capital of the company which amounted to ₹ 2.51 crores. As th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o holding company and assessee was having sufficient own funds and advancing to its sister's concern/holding company are only for business expediency and disallowance of such interest is a debatable issue and such disallowance of interest will not fall under penalty provisions. He relied on the case of Reliance Petro Products Pvt. Ltd. (supra) and prayed that penalty may be deleted. 9. On the other hand, the Ld. DR submitted that the quantum of appeal of the assessee is sustained by the Ld. CIT(A) and therefore, the penalty levied by the Assessing Officer is justified and accordingly he submitted that the transactions are not bona fide transactions, therefore, he relied on the orders of the Ld. CIT(A). Considered the rival submissions and perused the material on record. We noticed that the assessee has claimed RoC charges and interest expenditure. The Assessing Officer disallowed the same with the observation that the assessee has not explained and not brought on record any material to his satisfaction. On appeal before the Ld. CIT(A), the Ld. CIT(A) sustained the additions made by the Assessing Officer and the assessee did not prefer any further appeal. Subsequently, the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or ..... 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