No disallowance u/s 14A, where assessee have sufficient own funds for making investment Posted In Income Tax Case Laws | Judiciary | No Comments » <!-- google_ad_client = "ca-pub-4758308089404121"; /* 336x280, Tax Guru created 1/1/09 */ google_ad_slot = "2487820938"; google_ad_width = 336; google_ad_height = 280; google_ad_region="test"; //-->We could notice from the record that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of Rs. 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it has not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the Revenue which earned it the interest on bonds of dividend income. With regard to disallowance of 1% of administrative expenses averred to have incurred on account of the earning of interest, there is nothing on record to indicate that there has been in fact any actual expenditure incurred by the assessee for earning tax free income of Rs. 14 crores. It is also to be noted that out of the total amount of exempt income of Rs. 14 crores, the assessee could point out that 12 crores(rounded off) was earned by Sujen project which was under construction for which no expenditure had been claimed and for the remaining income of Rs.7.88 crores which consist of dividend and tax free interest, no part of expenditure appears to have been made towards the investment activity as emerging from the material. According to the respondent, the total investment from the huge surplus is comparatively small and investment made was effortless, without any burden of administrative expenses. There is no finding given by the A.O regarding any direct nexus between interest bearing borrowed funds and investment. Hence, in our considered opinion, no disallowance u/s. 14A can be made out of interest expenditure in the facts of the present case. In the result, the appeal of the assessee is dismissed. CIT Vs. Torrent Power Ltd. ( Gujarat High Court), TAX APPEAL NO. 603 of 2013, Date of Order: 04.02.2014 - See more at: No disallowance u/s 14A, where assessee have sufficient own funds for making investment
Penalty u/s 271(1)(c) should not be levied on the amount which was voluntarily surrendered by the assessee during survey Posted In Income Tax | Judiciary | No Comments » <!-- google_ad_client = "ca-pub-4758308089404121"; /* 336x280, Tax Guru created 1/1/09 */ google_ad_slot = "2487820938"; google_ad_width = 336; google_ad_height = 280; google_ad_region="test"; //-->The facts in brief borne out from the record are that the assessee is a partnership firm engaged in the business of manufacturing and trading of bristles and brushes. Return of income was filed on 31.10.2006 showing Nil income and the same was processed under section 143(1) of the Act. A survey was conducted on 23.10.2007 at the premises of the assessee where from books of account and loose papers were impounded. During the course of survey, it was found that assessee has a large list of creditors, from whom purchase of raw bristles were made. During the course of survey, statement of Shri. Pawan Sood, partner of the assessee firm was recorded wherein he surrendered certain amounts which included the amounts standing as credits in three sundry creditors. Thereafter assessee filed a revised return on 19.12.2007 including the amount of Rs.45,75,945/- surrendered in respect of sundry creditors as part of total income and paid tax thereon. Thereafter assessment was completed under section 143(3) of the Act. The Assessing Officer initiated penalty on the surrendered amount in respect of sundry creditors. In response to show cause, it was contended before the Assessing Officer that the assessee has made a voluntary surrender during the course of survey proceedings in order to buy peace and filed the return accordingly and paid tax. Therefore, there is no positive detection by the Department either before or at the time of surrender or subsequently. Therefore, penalty under section 271(1)(c) of the Act should not be levied on the surrendered amount. The Assessing Officer was not convinced with the explanations of the assessee and he levied the penalty having observed that the assessee has filed appeal against the additions made by the Assessing Officer in the assessment proceedings, therefore, it punctured the theory of agreed surrender. Held by ITAT- It is evident from the record that surrender was made during the course of survey by the assessee and furnished the return of income declaring additional income and paid the tax thereon. Nothing has been brought out on record by the Assessing Officer that the surrender was made when the assessee was cornered by the Assessing Officer. Though the Assessing Officer has mentioned in the order that the additions, on which penalty was levied, were challenged before the ld. CIT(A), but the facts are otherwise. The assessee has made voluntary surrender on account of sundry creditors and returned the additional income in the return of income filed and paid tax thereon. We have also carefully examined the judgment referred to by the parties and we find that it is a case of voluntary surrender by the assessee during the course of survey. Therefore, penalty under section 271(1)(c) of the Act cannot be levied. We have carefully perused the order of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the issue judiciously in the light of various judicial pronouncements referred to before him. Since no infirmity has been pointed out in the order of the ld. CIT(A), we confirm the same. ITO Vs. M/s Indian & Overseas Trading Co. ( ITAT Lucknow), ITA No.195/LKW/2011 – Assessment Year: 2006-07, , Date of pronouncement: : 25.08.2014 - See more at: Penalty u/s 271(1)(c) should not be levied on the amount which was voluntarily surrendered by the assessee during survey
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