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2019 (2) TMI 54 - ITAT DELHIPenalty u/s 271(1)(c) - long-term capital loss addition - Held that:- There is no dispute on the fact that this item has not been added back to the profit in case of the business under the computation of income, which resulted in understatement of income in the return of income filed. In view of Explanation-1 below the section 271(1)(c) the penalty is leviable where the assessee offers an Explanation which is not able to substantiate or fails to prove that such Explanation is bonafide and all the facts relating to the same and material to the computation of his total income have been disclosed by him. In the instant case, assessee has furnished explanation thus we have to examine, whether the explanation furnished is bonafide and the assessee has disclosed all material facts to the computation of his total income. We note that all the facts in respect of long-term capital loss of ₹ 66,94,673/-was available before the Assessing Officer in the profit and loss account and schedule of selling and administrative expenses. Only mistake was made on the part of the accountant who prepared the computation of the income. Material facts about the long-term capital loss was fully disclosed in the profit and loss account. On being pointed out this mistake, the assessee has admitted and even did not file any further appeal on the addition. This shows bonafide on the part of the assessee and we do not find any deliberate attempt on the part of the assessee for not offering the income in the return of income, particularly when said item has already been disclosed in the profit and loss account. In view of above facts and circumstances and the Explanation-1 to section 271(1)(c) we do not find any merit in sustaining the penalty by the CIT(A) and accordingly, we delete the same. Disallowance of entertainment expenses the assessee explained that expenses were incurred on arranging parties and get together in relation to design consultancy business of the assessee. The contention of the AO is that the assessee failed to substantiate her claim and according to him that expenses were of personal nature. The claim has not been found acceptable by the Assessing Officer. We note that in the case of Reliance Petro products Private Limited (2010 (3) TMI 80 - SUPREME COURT) has held that merely because assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under section 27(1)(c). Thus, respectfully, following the above decision of the Hon’ble Supreme Court, the penalty in respect of the rejection of the claim of entertainment expenses cannot be levied. - Decided in favour of assessee.
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