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2010 (11) TMI 205 - AT - Income TaxPenalty u/s 271(1)(c) - Addition on account of disallowance of capital expenditure - Appellant debited Rs. 13,86,500/- to P & L A/c. under the head Administrative & Selling expenses . As seen from Schedule-14, the said expenses included Stamp Duty paid of Rs. 1,73,040 for increasing the share capital - The Apex Court in the case of Punjab State Industrial Corporation v. CIT (1996 -TMI - 5589 - SUPREME Court) and Brooke Bond India Ltd. v. CIT 1997 -TMI - 5590 - SUPREME Court held that expenditure incurred in connection with increasing share capital by a company would not be allowable as revenue expenditure - Since the assessee has made false and wrong claim in the return of income of deduction of the capital expenditure, therefore, the authorities below have rightly levied and confirmed the penalty in the matter - Appeal is dismissed
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act. 2. Disallowance of capital expenditure claimed as revenue expenditure. 3. Reopening of assessment under Section 147 of the Income Tax Act. 4. Furnishing of inaccurate particulars of income. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act: The core issue revolves around the imposition of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee's appeal challenges the penalty levied by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO contended that the particulars furnished by the assessee were factually incorrect and not bona fide, justifying the penalty. The CIT(A) confirmed this view, emphasizing that the assessee's claim was blatantly inadmissible and resulted in furnishing inaccurate particulars of income. 2. Disallowance of Capital Expenditure Claimed as Revenue Expenditure: The dispute arose from the disallowance of Rs. 1,73,040/- claimed by the assessee as revenue expenditure under "Administrative & Selling expenses" for stamp duty paid to the Registrar of Companies. The AO disallowed this expenditure, treating it as capital expenditure. The assessee did not contest this disallowance, which was based on the long-settled legal position that such expenses are not allowable as revenue expenditure, as established by the Supreme Court in Punjab State Industrial Corporation v. CIT and Brooke Bond India Ltd. v. CIT. 3. Reopening of Assessment under Section 147 of the Income Tax Act: The assessment was reopened under Section 147, and the AO issued a notice under Section 148. The assessee requested that the original return be treated as filed in response to the notice. During the reassessment, the assessee accepted the proposed disallowance of the stamp duty expenses. The reassessment confirmed the addition, and no further appeal was filed by the assessee, solidifying the AO's findings. 4. Furnishing of Inaccurate Particulars of Income: The AO and CIT(A) both concluded that the assessee furnished inaccurate particulars of income by claiming the stamp duty expenses as revenue expenditure. The AO noted that the concealment of income could occur through fraudulent suppression of receipts or false claims of expenditure. The CIT(A) further highlighted that the claim was inadmissible and not bona fide, as the legal position on such expenses was well-established. The Delhi High Court's ruling in CIT v. Zoom Communication (P.) Ltd. and CIT v. Escorts Finance Ltd. supported the view that such false claims attract penalty provisions. Conclusion: The tribunal upheld the penalty under Section 271(1)(c), finding that the assessee made a false and bogus claim of expenditure, which was not in accordance with the Income Tax Act. The appeal was dismissed, confirming the penalty imposed for furnishing inaccurate particulars of income. The decision emphasized that merely claiming an expense in the profit & loss account does not absolve the assessee from penalty if the claim is not bona fide and against settled legal principles.
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