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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A”, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. No. 234/HYD/2017 Assessment Year: 2012-13 The ACIT, Circle-14(1), M/s. Satyanarayana Chava HYDERABAD Vs (HUF), HYDERABAD [PAN: AABHC7111F] (Appellant) (Respondent) For Revenue : Smt. Suman Malik, DR For Assessee : Shri Md. Afzal, AR Date of Hearing : 19-01-2018 Date of Pronouncement : 24-01-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : This is an appeal by Revenue against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad, dated 18-11-2016 on the issue of deleting penalty u/s. 271(1)(c) of the Income Tax Act [Act].
Briefly stated, assessee-HUF filed its return of income declaring loss of Rs. 44,19,991/-. In the course of scrutiny assessment, Assessing Officer (AO) noticed that assessee has offered income distributed from a mutual fund Axis Venture Capital Trust and also claimed certain expenditures against such income. Further, assessee also claimed interest amount of Rs. 70,95,890/- paid to Merlin Holdings Pvt. Ltd., from whom he has borrowed about Rs. 10 Crores and invested in mutual fund as well as in another company Laurus Labs Pvt. Ltd. On being questioned
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in a statement recorded on 25-02-2015, assessee submitted that he could not establish one to one link between the loan taken and its usage, as he has already repaid the loan amount. Consequently, AO disallowed the interest expenditure claim made by assessee to an extent of Rs. 70,95,890/-. Due to above disallowance, the loss claimed has become a positive income and assessee paid the necessary taxes without further appeal. AO initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars. AO levied penalty on the interest disallowance made.
Assessee contended that it has not furnished any inaccurate particulars and all the particulars of income and expenditure were submitted to AO, consequently, the penalty cannot be levied. He also took an alternate contention before the Ld.CIT(A) that assessee has wrongly offered the income of Rs. 31,11,724/- received from a mutual fund which was exempt from taxes. While rejecting the taxability or otherwise of the income from the fund as not an issue for discussion, Ld.CIT(A), however, considered that assessee has bonafidely made a wrong claim and accordingly, deleted the penalty stating that the facts do not warrant imposition of penalty u/s. 271(1)(c). Revenue is aggrieved.
After considering the rival contentions, we do not see any reason to interfere with the order of CIT(A). Making a claim and disallowance thereof does not come within the parameters of either concealment of income or furnishing of inaccurate particulars. The Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Limited [322 ITR 158] (SC), has decided the issue and held as follows:-
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(i) S. 271 (1) (c) applies where the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income”. The present was not a case of concealment of the income. As regards the furnishing of inaccurate particulars, no information given in the Return was found to be incorrect or inaccurate. The words “inaccurate particulars” mean that the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c).
(ii) The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.
4.1. Respectfully following the above, we are of the opinion that it is a claim made by assessee which got disallowed as he could not establish the nexus between the borrowal and earning of income, which in our view does not attract any penalty u/s. 271(1)(c). There is no merit in Revenue grounds, accordingly, the same are dismissed.
In the result, appeal of Revenue is dismissed.
Order pronounced in the open court on 24th January, 2018
Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 24th January, 2018 TNMM
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Copy to : 1. The ACIT, Circle-14(1), Hyderabad.
M/s. Satyanarayana Chava (HUF), Plot No. 303, Road No. 25, Jubilee Hills, Hyderabad.
CIT(Appeals)-6, Hyderabad
Pr.CIT-6, Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.