ACIT, New Delhi V. M/s. Jindal Equipment Leasing & Consultancy Services Ltd., New Delhi

ITA 3809/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4229 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Keywords: Earning of tax free income; Difference of opinion; Revised return
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NOS.3808-3809/DEL/2010 ASSESSMENT YEARS : 1999-00 & 20001-02 A.C.I.T., VS. M/S JINDAL EQUIPMENT LEASING CIRCLE 4(1), & CONSULTANCY SERVICES LTD., NEW DELHI NAJAFGARH ROAD, NEW DELHI PAN NO.AAACJ 0091P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. MONGA, SR. DR RESPONDENT BY : SHRI K. SAMPATH, ADVOCATE ORDER PER K.G. BANSAL, AM: BOTH THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE CON SOLIDATED ORDER PASSED BY THE CIT(A)-VII, NEW DELHI, ON 27.09.2007 , IN WHICH PENALTIES LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCO ME-TAX ACT, 1961, (THE ACT), HAVE BEEN DELETED. IDENTICAL GROUNDS HAVE BEEN TAKEN IN THESE A PPEALS. THE PENALTY AMOUNTS TO `1,01,14,199/- FOR ASSESSMENT YEAR 1999-00 AND `45,44,158/- FOR ASSESSMENT YEAR 2001-02. THE APPEALS WERE ARGUED IN A CONSOLIDATED MANNER BY THE LEARNED DR AND LEARNED COUNSEL FOR THE ASSESSEE. THEREF ORE, A CONSOLIDATED ORDER IS PASSED. 1.1 FOR THE SAKE OF READY REFERENCE, THE GROUNDS TAKEN IN TH E APPEAL FOR ASSESSMENT YEAR 1999-00 ARE REPRODUCED BELOW:- 1.) THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS & CONTRARY TO FACTS AND LAW. 2 2.) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALTY OF `1,01,14,199/- LEVIED BY THE ASSESSING OFFICER U/S 271(1 )(C) OF THE ACT. 2.1) THE LEARNED CIT(A) HAS ERRED IN IGNORING THE FACT TH AT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF THE INCOME AN D CONCEALED TAXABLE INCOME BY CLAIMING NON-ALLOWABLE EXPENSES INCURRED FOR EARNING EXEMPT INCOME U/S 10(33) OF THE INCOME-TAX ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMENDM ENT ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF HEA RING. 2. WE ARE INITIALLY PROCEEDING WITH THE FACTS OF ASSESSM ENT YEAR 1999-00. THE ASSESSEE-COMPANY HAD FILED ITS RETURN ON 29.11.1999 DECL ARING TOTAL LOSS OF `4,29,29,740/-. THE RETURN WAS PROCESSED U/S 143(1) ON 24.02.2000. IT FILED THE REVISED RETURN, DECLARING THE SAME LOSS, WHICH WAS ALSO P ROCESSED ON 28.03.2001. THEREAFTER, STATUTORY NOTICES WERE ISSUED FOR SCRUTINIZING THE RETURN. 2.1 IT WAS FOUND THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF DEALING IN SHARES AND SECURITIES, INVESTMENT THEREIN AND ADVANCING LOANS. IT WAS FURTHER FOUND THAT THE ASSESSEE COMPANY HAS RECEIVED DIVIDEND INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME BY DINT OF THE PROVISION CONTAINED IN SECT ION 10(33) OF THE ACT. THE ASSESSEE HAD PAID INTEREST ON BORROWED CAPITAL EMPLOYED FO R INVESTMENT IN SHARES ON WHICH DIVIDEND INCOME HAS BEEN RECEIVED. THE ASSESSEE WAS REQUIRED TO FURNISH THE WORKING OF SUCH INTEREST. HOWEVER, THE SAME WAS NOT FILED. THEREFORE, AN AMOUNT OF `74,87,662/- WAS WORKED OUT AS RELATABLE TO THE INTEREST EXPENDITURE INCURRED FOR EARNING THE DIVIDEND ON A PROPORTIONATE BAS IS. IT MAY BE MENTIONED THAT THE ASSESSEE HAD PAID TOTAL INTEREST OF `4,20,44,960 /- IN THIS YEAR. THE CAPITAL EMPLOYED IN ACQUISITION OF SHARES AMOUNTED TO `41,52,39 ,133/- AND THE TOTAL CAPITAL EMPLOYED AMOUNTED TO `63,51,43,163/-. APART F ROM THIS, ADMINISTRATIVE 3 EXPENSES WERE ALSO ALLOCATED TO THE DIVIDEND INCOME AT `4,10 ,049/-. THUS, THE TOTAL LOSS WAS COMPUTED AT `1,40,32,028/-. PENALTY P ROCEEDINGS WERE ALSO INITIATED U/S 271(1)(C) OF THE ACT. THESE PROCEEDINGS WER E DISPOSED OFF ON 09.11.2009 BY LEVYING MINIMUM PENALTY OF `1,01,14,199 /-. WHILE DOING SO, RELIANCE WAS PLACED ON THE PROVISIONS CONTAINED IN EXPLA NATION 1 OF SECTION 271(1)(C) AND IT WAS HELD THAT THE EXPLANATION TENDERED BY THE ASSESS EE IS NOT BONA FIDE, WHICH HAS ALSO NOT BEEN SUBSTANTIATED. THUS, THE CLAI M WAS AN ATTEMPT TO EVADE TAX. 3. THE MATTER WAS AGITATED BEFORE THE LEARNED CIT(A) IN QUA NTUM APPEAL. IT WAS INTER ALIA SUBMITTED THAT THE EXPENDITURE HAS BEEN IN CURRED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE OF INVESTING AND DEALING IN SHARES AND SECURITIES. THE BUSINESS IS AN INDIVISIBLE BUSINESS AND FOR COMPUTATIO N OF ITS INCOME ALL EXPENSES HAVE TO BE ALLOWED. THEREFORE, THE PRINCIPLE OF APPORTION MENT OF INTEREST OR EXPENDITURE IS NOT APPLICABLE. IT WAS FURTHER SUBMITTED THAT IT WOULD BE INCORRECT TO SAY THE DIVIDEND INCOME IS TAX-FREE. THE STATUTE HAS MERELY CHANGED THE METHODOLOGY OF THE TAXATION OF THE DIVIDEND INCOME WITH A VIEW TO DEVELOP CAPITAL MARKETS. THE ASSESSEE HAS ALSO BEEN EARNING INCOME BY WAY O F CAPITAL GAINS ON TRANSFER OF SHARES. COMING TO THE PROVISIONS CONTAINED U/S 14A, IT WAS SUBMITTED THAT THE WORDS IN RELATION TO INCOME EMPLOYED THEREIN, SIGNIFY DIRECT OR PROXIMATE RELATIONSHIP BETWEEN THE EXPENDITURE AND THE INCOME. THESE WOR DS CANNOT BE EQUATED WITH THE WORDS ATTRIBUTABLE TO. THE LEARNED CIT (A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. IT HAS BEEN HELD THAT THE EXPENSES RELATING TO EARNING THE INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME, HAVE TO BE DISALLOWED. RELYING ON VARIOUS CASE LAWS, THE DIS ALLOWANCE MADE BY THE 4 ASSESSING OFFICER ON THE PROPORTIONATE BASIS HAS BEEN HELD . IT APPEARS THAT NO FURTHER APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THIS ORDER. 3.1 COMING TO THE LEVY OF THE PENALTY, IT HAS BEEN MENTION ED THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DIFFERENT. THE FIND INGS IN ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE FOR LEVY OF THE PENALTY. T HE POSITION OF SUBSTANTIVE LAW REGARDING PENALTY IS THAT INITIAL BURDEN TO REBUT T HE PRESUMPTION OF EXPLANATION 1 IS ON THE ASSESSEE. THIS CAN BE REBUTTED BY SHOWING HIS B ONA FIDES BY AN EXPLANATION. THEREFORE, MERE DISALLOWANCE OR ADDITION IS NOT SUFFICIENT FOR THE LEVY OF THE PENALTY. THE ASSESSEE HAD MADE ONLY A CLAIM IN REGA RD TO DEDUCTION OF EXPENSES. THIS CLAIM WAS NOT FOUND TO BE LEGALLY ACCEPT ABLE. HOWEVER, THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS. THEREFORE, THE CLAIM CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THU S, THE LEVY FOR BOTH THE YEARS WAS DELETED. 4. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LEARNED CIT(A). THE FACTS REGARDING INSERTION OF SECTION 14A IN THE ACT AN D FILING THE RETURN OF INCOME ALSO CAME UP FOR DISCUSSION. 4.1 HAVING CONSIDERED THE RIVAL ARGUMENTS, IT IS FOUND THAT SECTION 14A HAD BEEN INSERTED IN THE ACT BY THE FINANCE ACT, 2001, RETROSPECTI VELY W.E.F. 01.04.1962. THE RETURN OF INCOME FOR THIS YEAR HAD BEEN FILED ON 29.11.19 99, I.E. PRIOR TO THE RETROSPECTIVE INSERTION OF THIS SECTION. THE PROVISION, AS ORIGINALLY INSERTED BY THE FINANCE ACT, 2001, READS AS UNDER:- FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER TH IS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INC URRED BY 5 THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PAR T OF THE TOTAL INCOME UNDER THIS ACT. 4.2 FROM THE HISTORY OF THE PROVISION, IT IS CLEAR THA T AT THE TIME OF FILING THE RETURN, THIS PROVISION DID NOT EXIST ON THE STATUTE BOOK, ALTH OUGH, IT WAS LATER ON INSERTED RETROSPECTIVELY W.E.F. 01.04.1962. THUS, AT THE TIME OF FILING OF THE RETURN THE ASSESSEE COULD NOT HAVE BEEN EXPECTED TO MAKE ANY DISALLOWAN CE IN TERMS OF THE PROVISION. EVEN THE REVISED RETURN WAS FILED PRIOR TO I NSERTION OF THIS PROVISION AS SEEN ON THE BASIS OF FACTS ON RECORD THAT THE REVISED RETUR N WAS PROCESSED ON 28.03.2001. THEREFORE, THE ASSESSEE COULD NOT HAVE TAKEN TH E PROVISION INTO ACCOUNT WHILE FILING EVEN THE REVISED RETURN. PRIOR TO TH E INSERTION, THERE WAS A GENUINE DIFFERENCE OF OPINION AS TO WHETHER EXPENDITURE RELAT ED TO EXEMPT-INCOME COULD BE DISALLOWED IF THE SAME HAS BEEN INCURRED FOR THE P URPOSE OF THE BUSINESS OF THE ASSESSEE. THE GENERAL TREND OF THE DECISIONS HAD BEEN THAT IF ANY EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE O F BUSINESS, A PART THEREOF COULD BE DISALLOWED BY ALLOCATING THE SAME TOWARDS EARNI NG OF THE EXEMPT-INCOME. IT IS AN ACCEPTED PRINCIPLE OF LAW THAT CONCEALMENT OF I NCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME OCCURS WHEN THE RETURN IS FILED. IN THIS CASE, THE RETURN HAS BEEN FILED IN TIME AS PER SECTION 139(1) OF THE ACT. ON THE DATE OF FILING THE RETURN, NO FAULT CAN BE ATTRIBUTED FOR THE ASSESSEE FO R NOT DISALLOWING ANY PART OF THE EXPENDITURE INCURRED IN THE COURSE OF BUSINESS BY ALLO CATING IT TO THE EXEMPT- INCOME. THE POSITION IN REGARD TO ASSESSMENTS IS DIFFEREN T, NAMELY, THAT THE QUESTION OF ALLOWANCE OR DISALLOWANCE HAS TO BE DECIDED ON THE B ASIS OF LAW EXISTING AT THE TIME OF MAKING IT. THEREFORE, EVEN IF THE DISALLOWANCE HA S BEEN CONFIRMED IN APPEAL, THAT BY ITSELF DOES NOT LEAD TO THE CHARGE OF CO NCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. OTHERWIS E ALL THE FACTS REGARDING INCURRING OF EXPENDITURE HAVE BEEN DISCLOSED BY THE ASSESSEE I N THE RETURN OR IN THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THERE HAS BEEN N O SUPPRESSION OF 6 FACTS. IN VIEW THEREOF, WE ARE OF THE VIEW THAT THE LEVY OF THE PENALTY BY THE ASSESSING OFFICER WAS NOT JUSTIFIED ON THIS GROUND ALO NE AND, THEREFORE, THE LEARNED CIT(A) WAS RIGHT IN DELETING THE PENALTY. WE WILL DEAL WITH OTHER GROUNDS WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2001-02. 5. COMING TO THE FACTS OF ASSESSMENT YEAR 2001-02, THE A DMITTED POSITION IS THAT THE RETURN WAS FILED ON 31.10.2001 DECLARING LOSS OF `1,07,34,986/-. THIS DATE FALLS SUBSEQUENT TO THE INSERTION OF SECTION 14A IN THE ACT. WHILE COMPUTING THE TOTAL INCOME, THE ASSESSING OFFICER DISALLOWED INTEREST OF `1,09 ,77,252/- AND OTHER EXPENSES AT `5,12,401/-, ON A PROPORTIONATE BASIS. THE TOTAL INCOME WAS COMPUTED AT `7,54,667/-. THIS AMOUNT WAS SET OFF AGA INST THE BROUGHT FORWARD LOSS TO THE EXTENT IT COULD BE ABSORBED IN THE INCOME OF T HIS YEAR. THUS, THE TOTAL INCOME WAS FINALLY DETERMINED AT NIL. AS MENTIONED EARLIER , THE PENALTY WAS LEVIED ON THE GROUND THAT THE ASSESSEES EXPLANATION IS NOT BONA -FIDE AND IT HAS FAILED TO SUBSTANTIATE THE EXPLANATION. THE LEARNED CIT(A) HAS DEL ETED THE PENALTY BY MENTIONING THAT THE ASSESSEE HAD RAISED ONLY A LEGAL CLAIM REGARDING DEDUCTION OF EXPENSES AND ALL MATERIAL FACTS HAD BEEN DISCLOSED. 5.1 BEFORE US, THE LEARNED COUNSEL RELIED ON THE DECISION OF F BENCH OF DELHI TRIBUNAL IN THE CASE OF NALWA INVESTMENTS LIMITED, IN I .T.A. NO.3805/D/2010 FOR ASSESSMENT YEAR 2005-06, DATED 29.10.2010, A COPY OF WH ICH HAS BEEN PLACED BEFORE US. IN THIS CASE INTEREST EXPENDITURE OF `95,00,000 /- AND OTHER EXPENSES OF `11,70,941/- HAD BEEN DISALLOWED BY TAKING RECOURSE TO THE AFORESAID PROVISION AND BY RELATING THESE EXPENSES TO THE EARNING OF DIVIDEND INCOME. PENALTY WAS ALSO LEVIED U/S 271(1)(C) OF THE ACT BY INVOKING THE PROVISI ON CONTAINED IN EXPLANATION 1 TO SECTION 271(1)(C). THE PENALTY WAS DELETED BY THE LEARNED C IT(A) BY HOLDING THAT THE DISALLOWANCE IS CONTENTIOUS IN NATURE. VARIOUS ARGUMEN TS WERE MADE BEFORE THE 7 TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELI ANCE ON THE DECISION IN THE CASE OF CIT VS. LATE SHRI G.D. NAIDU AND OTHERS (198 7) 165 ITR 63 (MADRAS); CIT VS. CALCUTTA CREDIT CORPORATION (1987) 166 ITR 2 9 (CALCUTTA); CIT VS. AJAIB SINGH AND COMPANY (2002) 253 ITR 630 (P&H) CIT VS. HARSHVARDHAN CHEMICALS & MINERALS LTD. (2003) 259 ITR 212 (RAJASTHAN) AND T. ASHOK PAI VS. CIT, 292 ITR 11 (SUPREME COURT). THE TRIBUNAL ALSO CONSIDERED THE DECISIO N OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD., (2010) 191 TAXMAN 179 AND THAT OF THE APEX COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158. FINALLY, THE APPEAL OF THE REVENUE W AS DISMISSED BY RECORDING THE FOLLOWING FINDINGS:- 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED PAYMENT OF BANK INTEREST AND CHARGES AMOUNTING TO ` 1,10,02,323/-. CERTAIN OTHER EXPENSES WERE ALSO CLAIMED. BESIDES INTEREST I NCOME OF ` 14,38,977/-, THE ASSESSEE EARNED DIVIDEND INCOME ON INVESTME NT IN SHARES. SUCH INVESTMENT AMOUNTED TO ` 1,19,90,011/-. THE DIVIDEND INCOME WAS NOT LIABLE TO BE TAXED IN VIEW OF THE PROVISIONS CO NTAINED IN SECTION 10(34) OF THE ACT. THE AO WAS OF THE VIEW THAT THE N ET INTEREST OF ` 95,63,346/- , DEMAT CHARGES OF ` 60/- AND PROPORTIONATE EXPENSES AMOUNTING TO ` 11,70941/- WERE NOT DEDUCTIBLE IN COMPUTING THE TOTAL INCOME BY DINT OF THE PROVISION CONTAINED IN SECTION 14A, AS SUCH EXPENSES RELATED TO EARNING OF TAX-FREE INCOME. THE EXPLANATION OF THE ASSESSEE WAS TWO- FOLD (I) THE ASSESSEE WAS PRIMARILY HOLDING SHAR ES IN SELECTED COMPANIES OF JINDAL GROUP WITH THE INTENTION TO AC QUIRE AND RETAIN CONTROLLING STAKE IN THEM, AND (II) THE COMPUTATI ON OF DISALLOWANCE U/S 14A INVOLVES CONSIDERABLE DEBATE AND TWO VIEWS ARE ALWAYS POSSIBLE. ON CAREFUL CONSIDERATION OF VARIOUS CASES RELIED UPON BY THE ASSESSEE, IT IS FOUND THAT THREE MAJOR PROPOSITIONS ARISE THEREFROM (A) PENALTY PROCEEDINGS ARE QUASI-CRIMINAL IN NATURE AND, TH EREFORE, IT IS FOR THE REVENUE TO ESTABLISH CONTUMACIOUS CONDUCT ON THE P ART OF THE ASSESSEE; (B) IF ALL FACTS IN RESPECT OF A CLAIM HAVE BE EN FURNISHED FULLY AND CORRECTLY AND NO FALSITY IS FOUND THEREIN, THEN, THE CLAIM MADE ON THE BASIS OF SUCH FACTS DOES NOT LEAD TO INFERENCE OF CONCEALMENT OF INCOME AND (C) THE PENALTY IS NOT LEVIABLE WHEN THERE I S HONEST DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AUTHORITIES IN RESPECT OF ADMISSIBILITY OF A CLAIM. 8 5.1 IN SO FAR AS PROPOSITION AT (A) ABOVE IS CON CERNED, THE SAME STANDS DISPLACED BY THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSOR S (2008) 306 ITR 277. IT HAS BEEN HELD IN THIS CASE THAT THE PENA LTY IS LEVIED FOR COMPENSATING THE REVENUE ON ACCOUNT OF A WRONG CL AIM MADE BY THE ASSESSEE AND IT IS CIVIL IN NATURE. COMING TO THE PROPOSITION AT (B) ABOVE, CLAIM OF INTEREST AND EXPENDITURE FINDS A MENTI ON IN THE PROFIT AND LOSS ACCOUNT. AS SUCH NO FURTHER FACTS HAVE BEEN FU RNISHED. NO COMPUTATION OF DISALLOWANCE WAS MADE U/S 14A AS NO DISALLO WANCE WAS MADE IN THE RETURN OF INCOME. HOWEVER, THE ACCOUNTS HAVE BEEN AUDITED AND THE RETURN WAS ACCOMPANIED BY THE TAX AUDIT REPORT. THE LATTER DID NOT SUGGEST ANY DISALLOWANCE U/S 14A. THEREFORE, IT CAN BE INFERRED THAT ALL EXPENSES WERE CLAIMED IN FULL AS THE AUDITORS DID N OT SUGGEST DISALLOWANCE OF ANY PART OF THE EXPENDITURE RELATING IT TO THE DIVIDEND INCOME. THUS, IT CAN BE CONCLUDED THAT THE CLAIM WAS MADE ON THE BAS IS OF TAX AUDIT REPORT. THERE IS NO ALLEGATION BY THE AO THAT THERE WAS ANY COLLUSION BETWEEN THE AUDITOR AND THE ASSESSEE TO ENHANCE THE LOSS IN THE RETURN OF INCOME BY IGNORING THE PROVISION CONTAINED IN SECTION 14A. THEREFORE, IT CAN BE SAID THAT THE ASSESSEE HAS FURNISHED AN EXPLANAT ION WHICH IS BONA FIDE. IN REGARD TO PROPOSITION AT (C) ABOVE, THE FINDIN G OF THE LD. CIT(A) IS THAT THE DISALLOWANCE IS DISPUTABLE. THE SECTION, A S IT EXISTED AT THE TIME OF FILING THE RETURN, DOES CONTAIN A PROVISION FOR DISALLOWANCE OF EXPENDITURE WHICH IS RELATED TO NON-TAXABLE INCOME. THEREFORE, IT IS EXPECTED OF ANY ASSESSEE TO ATTEMPT AT SEGREGATING EXPENDITURE WHICH IS RELATED TO SUCH A CLAIM. NO ATTEMPT HAS BEEN MADE IN THIS BEHALF. HOWEVER, IT IS ALSO A FACT THAT SUCH SEGREGAT ION IS BESET WITH LOT OF PROBLEMS AS THE ISSUE HAS FINALLY BEEN LAID TO R EST BY INTRODUCTION OF RULE 8D IN THE INCOME-TAX RULES IN THE YEAR 2008. THE ASSESSEE DID NOT HAVE BENEFIT OF THIS RULE WHEN IT FILED THE RETURN OF INCOME. THEREFORE, EVEN IN ABSENCE OF ANY ATTEMPT ON THE PART OF THE ASSESSEE, IT CAN BE SAID THAT QUESTIONS OF DISALLOWANCE AND ITS QUANTIFIC ATION ARE QUITE DISPUTABLE AND CAN LEAD TO BONA FIDE DIFFERENCE IN OPINION BETWEEN THE ASSESSEE AND THE AUTHORITIES. IN SUCH A SITUATION , THE LEVY OF PENALTY WILL NOT BE JUSTIFIED. 5.2 ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBM ISSIONS. WE FIND THAT THE ASSESSEE HAD CLAIMED EXPENDITURE, WHICH WAS INCURR ED IN THE COURSE OF BUSINESS, A PART OF WHICH WAS DISALLOWED BY THE ASSESSI NG OFFICER ON A 9 PROPORTIONATE BASIS BY ALLOCATING IT TOWARDS THE EARNI NG OF DIVIDEND INCOME. THE FACTS ARE IN PARI-MATERIA WITH THE FACTS OF THE CASE OF NALWA INVESTMENTS LIMITED (SUPRA), IN WHICH THE PENALTY PERTAINED TO A SUBSEQUENT Y EAR, BEING ASSESSMENT YEAR 2005-06. THE PROVISION CONTAINED IN SECTION 14A W AS APPLICABLE TO THE ASSESSEE. IT WAS INTER ALIA MENTIONED THAT ALLOCATION OF EXPENSES IS BESET WITH A LOT OF PROBLEMS AND THE ISSUE WAS LAID TO REST BY INTRODUCT ION OF RULE 8D, IN THE YEAR 2008. THEREFORE, EVEN IN ABSENCE OF ANY ATTEMPT ON THE PAR T OF THE ASSESSEE TO SEGREGATE THE EXPENDITURE, IT CAN BE SAID THAT THE QUESTIONS OF DISALLOWANCE AND ITS QUANTIFICATION ARE CONTENTIOUS, WHICH LEADS TO THE INFER ENCE THAT THE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AUTHORITIES IS BONAFIDE. RESPECTFULLY FOLLOWING THIS DECISION, IT IS HELD THAT THE LEARNED CIT (A) WAS RIGHT IN DELETING THE PENALTY. 7. IN RESULT, BOTH THE APPEALS ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 21.04.2011. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTA NT MEMBER NS DT. 21.04.2011. COPY FORWARDED TO:- 1. THE ACIT, CIRCLE 4(1), NEW DELHI. 2. M/S JINDAL EQUIPMENT LEASING & CONSULTANCY SERVICES LTD ., 37, NAJAFGARH ROAD, NEW DELHI. 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).