Harish Mehndiratta , Delhi vs Assessee

This appeal by the assessee is directed against the order passed by

the CIT(A) on 11.2.2013 confirming the penalty of Rs.4,65,280/-

imposed by the Assessing Officer (AO) u/s 271(1)(c) of the Income Tax ITA No.3942/Del/2013

Act, 1961 (hereinafter also called 'the Act') in relation to the

assessment year 2009-10.

2. Briefly stated, the facts of the case are that the assessee claimed

deduction for interest expense amounting to Rs.15,50,918/-. The AO

noticed that the said interest was paid in respect of loans taken for

purchase and construction of property at Noida, which did not form part

of the fixed assets of the assessee. The AO made addition for this sum.

Thereafter, penalty was imposed w.r.t. such disallowance of interest,

which came to be upheld in the first appeal.

3. We have heard the rival submissions and perused the relevant

material on record. It is observed that the instant penalty has been

imposed and confirmed with reference to deduction for interest

expenditure claimed by the assessee. The assessee agitated before the

AO during the penalty proceedings that the amount was not liable to be

disallowed. Here is a case in which the assessee claimed deduction for a

particular sum by making a complete disclosure about the transaction.

The Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt.

2 ITA No.3942/Del/2013

Ltd. (2010) 322 ITR 158 (SC) has held that simply for the reason that the

AO did not find the claim of the assessee to be sustainable in law up to a

certain extent, cannot be a case for penalty u/s 271(1)(c), more so, when

particulars furnished by the assessee were not inaccurate. The facts of

the instant case are, mutatis mutandis, similar to those considered and

decided by the Hon'ble Supreme Court in the above judgment.

Respectfully following the precedent, we hold that the authorities below

erred in imposing and confirming the penalty u/s 271(1)(c) of the Act.

We, therefore, order for the deletion of penalty.

4. In the result, the appeal is allowed.

The order pronounced in the open court on 27.04.2015.

Sd/- Sd/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated,27th April, 2015. dk

3 ITA No.3942/Del/2013

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

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