2012 (12) TMI 519 - AT - Income Tax

Penalty u/s 271(1)(c)- Expenditure by hotel industry on renovation is a capital or revenue expenditure - Assessee claiming renovation expenditure as revenue expenditure Assessee file belated return declaring loss - Held that - As the assessee is not entitled to carry forward loss in these circumstances, there cannot be any intention to disclose more loss. In case of a hotel whether an expenditure on the renovation of hotel premises i.e. restaurant, bar & lounge, corridor, rooms, staircase, entrance lobby etc. is a capital or revenue is a highly debatable issue. In case where two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. Therefore, merely because the renovation expenditure was claimed by the assessee as a revenue expenditure but treated as capital expenditure by the Revenue would not be sufficient to hold that the assessee either furnished inaccurate particulars or concealed the income follow the decision of SC in Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80) & Delhi High Court in Zoom Communication Pvt. .Ltd (2010 (5) TMI 34). Decision in favour of assessee.

Summary

Issues:
1. Penalty under Section 271(1)(c) for inaccurate particulars and concealment of income.

Analysis:

Issue 1: Penalty under Section 271(1)(c) for inaccurate particulars and concealment of income

The appellant contested the penalty under Section 271(1)(c) imposed by the Assessing Officer for two disallowances: deferred revenue expenditure and disallowance of business loss. The appellant argued that the expenditure on renovation of hotel premises was revenue expenditure, not capital, and that the loss was incurred during the period when the hotel was managed by ITDC, not by the appellant. The appellant highlighted that necessary details were with ITDC, not with them, and that the late filing of the return led to the inability to carry forward the loss. The appellant cited legal precedents to support their argument that penalty cannot be imposed unless inaccurate or false details are furnished. The Department, however, contended that the appellant provided inaccurate particulars. The Tribunal analyzed the facts and arguments presented.

The Tribunal referred to the decision in the case of Reliance Petroproducts Pvt.Ltd. and Zoom Communication P.Ltd. The Tribunal noted that a claim incorrect in law does not necessarily constitute inaccurate particulars unless it is mala fide. The Tribunal emphasized that the claim must be bona fide to avoid penalty under Section 271(1)(c). After evaluating the circumstances, the Tribunal found no evidence of mala fide intent on the part of the appellant. The Tribunal observed that the appellant had a reasonable cause for not producing vouchers and that the treatment of renovation expenditure as capital or revenue was debatable. The Tribunal also considered the late filing of the return and the withdrawal of the appeal before ITAT due to academic value. Based on the totality of facts and legal principles, the Tribunal concluded that the appellant's actions were not mala fide, inaccurate, or intended to conceal income. Consequently, the penalty under Section 271(1)(c) was canceled, following the legal precedents cited.

In conclusion, the Tribunal allowed the appeal of the assessee, pronouncing the decision on 20th July 2012.