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TMI Blog2022 (6) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... International Ltd [ 2016 (7) TMI 1647 - GUJARAT HIGH COURT] .when substantial additions on merits have been deleted, nothing survives in favour of Revenue for levy of penalty under Section 271(1)(c). Disallowance u/s 14A r.w.r. 8D - Disallowance made originally by the Assessing Officer at Rs. 17,99,34,022/- was related to the interest to the extent of Rs. 11,04,23,814/- as worked out under Rule 8D(2)(ii). The Tribunal deleted entirely the disallowance on account of interest made as per Rule 8D(2)(ii) and also deleted a further disallowance of Rs. 1,56,62,640/- made under Rule 8D(2)(i). As regards the balance disallowance made under Section 14A as per Rule 8D(2)(iii) on account of common administrative expenses, the Tribunal directed the Assessing Officer to re-compute the said disallowance by taking into consideration only those investments which had actually yielded exempt income to the assessee in the year under consideration. As submitted by the learned Counsel for the assessee at the time of hearing before us and not disputed by the learned DR, the disallowance under Section 14A r.w. Rule 8D(2)(iii), as recomputed as per the direction of the Tribunal, would be less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining/confirming certain additions/disallowances made by the Assessing Officer. After the disposal of the quantum appeal by the learned CIT(A), a fresh notice under Section 274 r.w.s. 271(1)(c) was issued by the Assessing Officer on 15.02.2016; in response to which, a detailed written submission was filed by the assessee vide letter dated 11.03.2016 offering its explanation in respect of each and every addition/disallowance sustained/confirmed by the learned CIT(A) in order to support and substantiate its case that there was no concealment of particulars of its income on the part of the assessee nor the furnishing of inaccurate particulars of such income warranting levy of penalty under Section 271(1)(c) of the Act. The Assessing Officer did not find the explanation offered by the assessee to be acceptable and proceeded to impose penalty of Rs. 7,56,18,332/- under Section 271(1)(c) of the Act being 100% of the tax sought to be evaded by the assessee in respect of the following 5 additions/disallowances:- (1) Transfer Pricing adjustment: The Transfer pricing officer-1 made an addition of Rs. 4,51,82,460/- on international transactions of the assessee vide his order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on premium. Details were called for which were submitted by the assessee. The A.O. carefully considered the same however, found not to be acceptable. Accordingly, after detailed discussion in the assessment order added the same to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the Act were also Initiated on this issue. The Ld. CIT(A) also confirmed the addition made by the A.O. on this issue. (5) Disallowance u/s. 14A: During the course of assessment proceedings, on perusal of computation of income, the A.O. observed that the assessee has shown dividend income and other exempt income. However, the assessee has disallowed only Rs. 1,56,62,640/- u/s. 14A in the computation of income. The assessee was requested to explain the same. In response, the assessee filed its reply which was duly considered by the A.O. and after detailed discussion in the assessment order, Rs. 17,99,34,022/- was added u/s. 14A r.w. Rule 8D. Penalty proceedings u/s. 271(1)(c) of the Act were also initiated on this issue. The Ld. CIT(A) also confirmed the addition made by the A.O. on this issue. From the above facts, it is clear that the assessee had furnished concealment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Petroproducts Pvt. Limited, 322 ITR 158. 3.6. On perusal of relevant material on record along with the decision of Hon'ble Ahmedabad ITAT in appellant's own case, as referred supra, it is found that AO has made TP adjustment for Rs. 4,51,82,460 which was reduced to Rs. 3,05,70,000 by CIT (Appeals). Both appellant and Department have filed appeals against such order and relevant discussion is made by Hon'ble ITAT at para - 45 to 53 of the order wherein after relying upon the decision of Micro Ink Limited 157 ITD 132 has deleted entire addition. As addition made by AO in assessment order is now deleted by Hon'ble Ahmedabad ITAT, consequential levy of penalty on such addition is not justified. 3.7. Similarly, Hon'ble Ahmedabad ITAT has discussed the issue of disallowance of prior period expenses of Rs. 32,63,470/- at para - 54 and 55 and 76 and 77 wherein Assessee's appeal is allowed entirely and Departmental appeal was dismissed. As addition made by AO in assessment order is now deleted by Hon'ble Ahmedabad ITAT, consequential levy of penalty on such addition is not justified. 3.8. It is also found that AO has made addition of mark-to-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant has submitted computation of administrative expenses at para 6.2 of its written submission and contended that disallowance so computed will be less than suo moto disallowance. Considering these facts it is found that disallowance under Section 14A is a legal disallowance. The various Courts have interpreted the method of disallowance under Section 14A in different manner and mere non-acceptance of legal claim does mean that appellant has furnished inaccurate particulars of income. The Hon'ble Supreme Court in the case of Gruh Finance Limited 100 taxrnonn.com 104 has dismissed the SLP filed by Department and held as under: Section 14A, read with section 271(1)(c) of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income (Penalty) - Tribunal deleted penalty under section 271(1)(c) in respect of disallowance made under section 14A because there was no evidence in respect of furnishing inaccurate particulars of income -High Court upheld order passed by Tribunal -Whether, on facts, SLP filed against decision of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee] 3.11. The ratio of decision of Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lse and it was only that the explanation of the assessee was not found acceptable. As held by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 (SC), a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of his income attracting the penal provision of Section 271(1)(c) of the Act. Moreover, as held by Hon'ble Gujarat High Court in the case of Director of Income-Tax Vs. Skanska Cementation International Ltd. (Tax Appeal No. 2132 of 2010), when substantial additions on merits have been deleted, nothing survives in favour of Revenue for levy of penalty under Section 271(1)(c) of the Act. Keeping in view the ratio of these decisions of Hon'ble Apex Court and Hon'ble jurisdictional High Court, we find no infirmity in the impugned order of the learned CIT(A) cancelling the penalty imposed by the Assessing Officer in respect of disallowance of business loss claimed as bad debts which is partly sustained in the quantum proceedings. 8. Insofar as the disallowance under Section 14A of the Act is concerned, it is observed that the said disallowance made or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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