2016 (9) TMI 544 - AT - Income Tax

Penalty u/s.271(1)(c) - disallowance of business expenses - Held that - As per the nature of the assessee s business, following principle of commercial expediency assessee has incurred expenditure of brokerage as well as professional fees. Assessee being in the business of real estate business, professional fees are required to be incurred. Merely disallowance of such expenses will not amount to concealment of particulars by the assessee. All particulars with respect to incurring of expenditure was on record, genuineness of expenses were also not doubted by the AO. No merit for the penalty so imposed with regard to disallowance of some of the expenditure incurred by the assessee. - Decided in favour of assessee

Summary

Issues:
Penalty imposition under section 271(1)(c) for disallowance of expenditure claimed by the assessee in respect of brokerage and professional expenses.

Analysis:
The case involved an appeal filed by the assessee against the order of CIT(A), Mumbai, for the assessment year 2007-2008 regarding the imposition of a penalty under section 271(1)(c) of the Income Tax Act for the disallowance of certain expenditures claimed. The penalty was imposed by the Assessing Officer (AO) for disallowance of the sum of expenditure claimed by the assessee in respect of brokerage and professional expenses. The assessee argued that the disallowance of some expenditure does not amount to concealment of particulars to attract the penalty under section 271(1)(c).

During the assessment, it was found that the assessee, a firm engaged in finance, investment, and real estate development, had claimed brokerage and professional expenses related to the leasing of a property. The AO disallowed these expenses, stating they were not related to the business and thus not allowable. However, the Tribunal found that the assessee had incurred these expenses as a matter of commercial expediency, considering its real estate business nature. The Tribunal noted that the genuineness of the expenses was not doubted, and all particulars regarding the expenditure were on record. The Tribunal also referred to a similar case decided by the Tribunal previously, where it was held that there was no concealment of income as all particulars were disclosed.

The Tribunal further discussed the legal aspects of penalty imposition under section 271(1)(c), emphasizing that mere disallowance of expenses does not automatically lead to concealment of income. The Tribunal referenced a judgment by the Hon'ble Bombay High Court, which clarified that the assessee must have concealed material particulars or furnished inaccurate particulars to attract the penalty. In this case, it was found that the assessee had disclosed all material particulars, and the disallowed claims were a matter of interpretation rather than concealment. The Tribunal concluded that there was no merit for the penalty imposed on the assessee for the disallowance of the expenditure.

In light of the above analysis, the Tribunal allowed the appeal of the assessee, setting aside the penalty imposed under section 271(1)(c) for the disallowance of certain expenditures. The judgment was pronounced in open court on 03/08/2016.