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TMI Blog2022 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of even date 29.04.2016. 2. The only common issue in these four appeals, is as regards to the common order of CIT(A) for both the assessment years confirming the levy of penalty u/s.271(1)(c) of the Act in regard to interest income claimed by assessee, on the pre-commencement of business period, as capital receipt as against assessed by AO as revenue receipt. According to AO, the assessee has concealed the particulars of income and also furnished inaccurate particulars of income. 3. The facts and circumstances in both the years are exactly identical, the grounds raised by assessee in both the years are also identically worded and grounds raised by Revenue in both the years are also identically worded except the quantum. The Revenue had challenged restriction of penalty u/s.271(1)(c) of the Act, to the extent of 100% as against levied by AO at 200%. The assessee had challenged the order of CIT(A) restricting the same at 100%. 4. Since the facts and circumstances are identical, we will take the facts from assessment year 2011-12, which is the lead year. 5. Despite service of notice, none is present from assessee's side and it seems that the company is under liquidation and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness purposes but utilizes that money to earn interest, however, temporarily, the interest so generated will be his income. This income can be utilized by the assessee whichever way he likes. He may or may not discharge his liability to pay interest with this income. Merely because it was utilized to repay the interest on the loan taken by the assessee, it did not cease to be his income. When the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law, and not in accordance with accountancy practice. Accounting practice cannot override section 56 or any other provision of the Income tax Act." 7. In view of the Hon. Supreme court decisions referred above, I am of the view that the Interest income earned by the assessee on the Margin Money kept in Deposits against the letter of credit for supply of equipment, scrap sales etc. is a Revenue Receipt. It is accordingly charged to tax as income from other sources u/s 56 of the Income tax Act. 6.1 Aggrieved, assessee preferred appeal before the CIT(A) and the CIT(A) also confirmed the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition made by the Assessing Officer. In this context and also considering the facts in totality, it is a fit case for levy of penalty u/s. 271(1)(c) for furnishing inaccurate particulars of Income. Also it is pertinent to note that penalty u/s. 271(1)(c) is a civil liability and it is a remedy for loss of Revenue, as held by the Hon'ble Apex Court in the case of Union of India vs. Dharmendra Textiles Processors (2008) 306 ITR 277 (SC). The addition made in the assessment order is Rs.21,79,69,805/- and the tax effect on the same works out to Rs.7,24,04,1 19/- including Surcharge and Education Cess which was sought to be evaded by the assessee by furnishing inaccurate particulars about the taxable income. As per the provisions of Sec.271(1)(c), the penalty leviable shall not be less than, but shall not exceed three times, the tax sought to be evaded by reason of the furnishing of inaccurate particulars of income. In this case, the tax sought to be evaded is Rs.7,24,04,119/-. As such, the penalty that can be leviable is a minimum of Rs.7,24,04,119/- and a maximum of Rs.21,72,12,357/-, The assessee has intentionally furnished inaccurate particulars of its income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble ITAT for Assessment Year 2011-12 & 2012-13 has been admitted with a substantial question of law. The assessee seeks deletion of penalty levied in view of its claim that penalties cannot be 1evied when the issue on which the tax and penalty are demanded is a subject matter of an admitted appeal before the Hon'ble High Court. 10. The Contentions and factual averments made by the assessee are considered. In fact, the Assessing Office had already considered the same contentions of the assessee and has countered the same with a reasoned and speaking order. The Assessing Officer has specifically countered the objections of the assessee with his observations as under: The assessee company has quoted various decisions of the Hon'ble Supreme Court in support of its claim. In this regard, it is pertinent to mention here that the assessee company has made similar submissions before the Ld CIT (A) during the appellate proceedings, The Ld CIT(A) has elaborately discussed the relevant case laws in his order and after duly considering the submissions f the assessee-company only, the Ld.CIT(A) has dismissed the appeals of the assessee-company. The assessee-company being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India Vs Dharmendra Textile Processors (Supreme Court) 306 ITR 277 Gukjag Industries Ltd. Vs CTO (SC) 317 ITR 1 Failure to disclose interest received u/s 244A - Penalty upheld - Assessee having exercised his statutory right of entitlement of interest u/s 244A ought to have shown the same as income in his return and the question of lack of intention and defence of oversight does not arise. Thirupathy Kumar Khemka Vs CIT (mad) ITR 122 Mentioning of the words - "penalty proceedings initiated separately "in assessment order is sufficient for invoking penal action M.Sajjanraj Nahar & Ors. Vs CIT (Mad) 283 ITR 230 Nainu Mal Het Chand Vs CIT (All) 294 ITR 185 It is not necessary that before feeling satisfied regarding the necessity of initiating proceedings for imposition of penalty and before issuing the consequential notice, the ITO should issue another notice to the assessee and hold a preliminary equity regarding the necessity of initiating proceedings. D.M. Manasvi Vs CIT (Supreme Court)86 ITR 557 12. On account of cumulative reasons as above, it is seen that penalty deserves to be levied in the case of the assessee to punish and reprimand the assessee from makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras in TCA No.824 & 825 of 2016 & CMP No.18831 of 2016, dated 01.02.2017 and the Hon'ble High Court has admitted the following substantial question of law :- i) Whether the Tribunal was right in law in holding that interest which accrued on funds deployed with the bank as margin money is to be taxed as income from other sources and not as a capital receipt liable to be set off against pre-operative expenses? ii) Whether, on the facts and in the circumstances off the case, the Tribunal was right in law in not following the decision of the coordinate Bench in assessee's own case on identical facts for the AY 2005-06 in ITA No. 1938/Mds/09 dated 11h March, 2010, in which the same decisions as cited in the impugned order were also considered? iii) Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that in any event as the deposits were made out of the borrowed funds, the interest payable on borrowings should be considered as expenses incurred for the purpose of earning interest income and hence the interest payable should be allowed as a deduction from the interest income under provisions of Sec.57(iii)? 8.1 From the above, it is clear ..... 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