Ideal Energy Projects Limited. Vs DCIT (ITAT Mumbai)
Mumbai ITAT has deleted penalty levied u/s 271(1)(c) holding that mere making of a claim which is ultimately disallowed does not amount to furnishing of inaccurate particulars or concealment of income.
Assessee, engaged in generation of power through a thermal project, had filed return for AY 2012-13 declaring income of ₹6.10 lakh. During reassessment proceedings u/s 147, AO disallowed interest expenditure of ₹18.32 lakh claimed u/s 57 against interest income earned on short-term parking of borrowed funds. AO held that the expenditure was related to business activity, should have been capitalised to WIP & therefore not allowable u/s 57. Consequently, penalty proceedings u/s 271(1)(c) were initiated & AO levied penalty of ₹5.66 lakh for furnishing inaccurate particulars. CIT(A) upheld the penalty ex parte.
Before Tribunal, it was pointed out that in the quantum proceedings, CIT(A) while upholding disallowance u/s 57 had simultaneously allowed the same interest as deduction u/s 36(1)(iii) & directed balance to be capitalised as part of project cost. Thus, the very disallowance forming basis for penalty did not survive in the form alleged by AO.
Tribunal observed that the addition was based purely on a difference of opinion as to the correct section under which deduction was allowable. Relying on the judgment of the Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158), Tribunal held that mere making of an unsustainable claim does not ipso facto amount to furnishing inaccurate particulars. Since there was no allegation that Assessee had furnished false details, penalty u/s 271(1)(c) was not justified. Accordingly, Tribunal set aside the order of CIT(A) & quashed the penalty.
