Sec. 271(1)(c) & 274 of Income-tax Act, 1961—Penalty—Penalty under s. 271(1)(c) is not sustainable when the assessee has not been specifically made aware of the charges levelled against it as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part

Facts: Assessment was completed under s. 143(3) at an income of Rs. 69,27,614 after adjusting brought forward losses. At the time of completing the assessment, the following additions were made on account of donations, difference in investment, difference in financial transactions, on account of disallowance of interest, disallowance under s. 43(5). On appeal by the assessee, CIT(A) deleted all the additions except that on account of interest disallowance. The reason for addition of this amount was that the assessee company had shown interest income of Rs. 1,54,16,856 on ICD amount of Rs. 22,25,00,000 given to M/s Merlin Resources (P) Ltd. It was seen that the assessee had charged 7 per cent interest on the opening balance and 6 per cent on the amount given during the year. However, the assessee had taken advances from M/s Silver Line Technologies Ltd. @ 15 per cent per annum. The AO required the assessee to explain why the advance taken @ 15 per cent was given to another company @ 6 per cent The AO proceeded to restrict the interest expenditure claimed to 5 per cent from 15 per cent as claimed by the assessee. The assessee's quantum appeal before the Tribunal was also dismissed. Subsequently penalty of Rs. 18,79,644 was imposed under s. 271(1)(c) on this interest disallowance. The assessee's appeal against the imposition of penalty before CIT(A) was also dismissed. Now the assessee is before this Tribunal challenging the confirmation of penalty.

Held, that when the assessee has not been specifically made aware of the charges levelled against it as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty under s. 271(1)(c) is not sustainable. The order of the learned first appellate authority was set aside and it was directed to AO to delete the penalty. - GLOBAL EMERGING MARKETS INDIA LTD. V/s ITO - [2020] 26 ITCD Online 127 (ITAT-DELHI)