Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

September 2025

Claim of capitalized interest, supported by evidence, which interest has been disallowed while computing capital gains, cannot be subject matter of levy of penalty under section 270A, in view of the ratio of decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. [189 Taxmann 322 (SC)]

By Jagdish T Punjabi, Chartered Accountant Devendra Jain & Aditya Bhatt, Advocates
Reading Time 3 mins

40. Urmila Rajendra Mundra vs. ITO

ITA No. 577/Jp./2025

A.Y.: 2022-23 Date of Order: 1.8.2025

Section: 270A

Claim of capitalized interest, supported by evidence, which interest has been disallowed while computing capital gains, cannot be subject matter of levy of penalty under section 270A, in view of the ratio of decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. [189 Taxmann 322 (SC)]

FACTS

The assessee claimed deduction of interest, which was capitalised, while computing capital gains arising on sale of immovable property. While assessing total income, the Assessing Officer (AO) disallowed the interest which was capitalised by the assessee, though the same was backed by documentary evidence. The assessee did not prefer an appeal against this disallowance.

Subsequently, the AO initiated proceedings for levy of penalty under section 270A for under-reporting of income in consequence of misreporting thereof. In response, the assessee submitted that the claim of interest was supported by copies of bank statements and since there was not much tax outflow due to brought forward loss

Read More
Download PDF

You May Also Like

Where the Assessing Officer in the assessment proceedings did not make any enquiry as to whether the equipment received by the assessee free of cost from its holding / subsidiary companies was received on returnable basis or otherwise, the assessment order was erroneous and prejudicial to the interest of the revenue. If, in the set aside proceedings, the assessee satisfies the AO by substantiating based on the documents that the equipments were received on returnable basis then the AO will decide the issue on hand in the light of the order of the Tribunal in the case of Sony India Software Center Private Limited [170 taxmann.com 309 (Bang.-Trib.)]

Best judgment assessment made by the AO under section 144 cannot be substituted by the judgment of CIT exercising revisionary powers under section 263.