DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 14, PUNE vs. M/S. LIFESTYLE LEISURES PRIVATE LIMITED, PUNE

This Revenue’s appeal for assessment year 2015-16 arises against the CIT(A)-7, Pune’s order dated 11.01.2019 passed in case no. PN/CIT(A)-7/Cir-14/10022/2018-19, involving proceedings u/s 271(1)(c) of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused.

Coming to the Revenue’s sole substantive grievance raised in the instant appeal challenging correctness of the CIT(A)’s action deleting section 271(1)(c) penalty of Rs.1,15,08,340/- levied by the Assessing Officer vide order dated 27.04.2018, we note at the outset that the same hardly requires us to delve deeper in the relevant factual matrix. Suffice to say, the impugned penalty pertains to section 14A interest expenditure disallowance (proportionate basis) under Rule 8D(2)(ii) of the Income Tax Rules, 1962. The Revenue’s case all along has been that the assessee had disallowed the impugned quantum sum of Rs.3,38,58,018; on suo moto basis, during the course of scrutiny only and therefore, it’s impugned action of having claimed the said expenditure amounts to furnishing of inaccurate particulars of income attracting section 271(1)(c) of the Act. 3. We note from a perusal of the CIT(A)’s clinching detailed discussion in para 6 page 8 that the assessee had not even derived any exempt income in the relevant previous year. That being the case, various judicial precedents i.e. PCIT vs. Ballarpur Industries Ltd. Income Tax Appeal No.51/2016 dated 13.10.2016 (Bombay), CIT vs. Corrtech Engineering Pvt. Ltd. (2014) 372 ITR 97 (Guj.) and CIT vs. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 (SC) have already held that even such a quantum disallowance in absence of exempt income itself is not sustainable. That being the case, we find no merit in Revenue’s vehement argument seeking to revive the impugned penalty. The CIT(A)’s finding under challenge stand upheld accordingly.