SANJAY R. GUPTA,MUMBAI vs. DCIT CEN CIR 47, MUMBAI

We heard the parties and perused the record. The Assessing Officer disallowed interest on housing loan of Rs.2,58,826/- claimed by the assessee, since the housing loan did not relate to the business activity of by the assessee. Penalty was levied on the above said addition. Before the Assessing Officer, the assessee submitted that the assessee had engaged a Chartered Accountant to file his return of income and the said Chartered Accountant firm omitted to make disallowance of interest expense, even though it related to the loan taken for personal housing purpose. Accordingly, it was pleaded the assessee has not committed any mistake deliberately or intentionally and deduction has been claimed by oversight. The said explanation did not find favour with the Assessing Officer and accordingly he levied penalty of Rs.1,74,240/-, calculated at 200% of the tax sought to be evaded. The Ld. CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.

The Ld. Counsel for the assessee reiterated the submissions made before the Assessing Officer. On the contrary, the Ld. DR submitted that the assessee has failed to substantiate the explanations furnished by the assessee before the Assessing Officer.

We find merit in the contentions made by the Ld. DR. Even though the assessee has claimed that mistake was committed by the Chartered Accountant firm who prepared the return of income, yet no proof or material was furnished to substantiate the said claim. Further, the assessee has also failed to point out the name of the professional firm which has prepared the return of income of the assessee nor any letter from the C.A firm about the mistake committed was filed. Thus, the assessee has failed to substantiate its explanation in terms of Explanation 1 to sec. 271(1)(c) of the Act and accordingly we are of the view that the assessee has failed to discharge the onus placed on him under the above said Explanation. However, we are of the view that the penalty levied at 200% is on the higher side. Accordingly, we modify the order of the Ld. CIT(A) and direct the Assessing Officer to sustain penalty at 100% of the tax sought to be evaded.

In the result, appeal filed by the assessee is partly allowed.