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2023 (6) TMI 811 - AT - Income TaxPenalty u/s 271(1)(c) - willful concealment v/s mistake on human error - addition made towards expenditure incurred on raising authorized share capital - As argued Appellant has provided all the necessary evidences and the same is supported by various Judicial Pronouncements - HELD THAT - The Delhi High Court in the case of CIT vs. Brahamputra Consosium Ltd. 2011 (8) TMI 8 - DELHI HIGH COURT on similar facts held that the claim of deduction of the fee paid to ROC to increase the authorized share capital though cannot be treated as revenue expenditure, however, penalty cannot be imposed as the assessee had not filed any wrong particulars of income or made a false claim. Similarly in the case of Jefferris India Pvt. Ltd. 2019 (4) TMI 279 - ITAT MUMBAI also held that no penalty can be imposed u/s. 271(1)(c) of the Act on account of disallowance of expenses incurred for increase of authorized share capital since no penalty can be imposed when there was no willful concealment and mistake involved only a human error - Decided against revenue.
Issues Involved:
The issues involved in this judgment are the confirmation of penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income, specifically related to expenditure on raising authorized share capital, capitalization of interest expenditure, and foreign traveling expenses for the assessment years 2009-10 and 2010-11. Assessment Year 2009-10: The Assessing Officer disallowed an expenditure incurred on raising authorized share capital, leading to the initiation of penalty proceedings under section 271(1)(c). The CIT(A) confirmed the penalty, stating that the claim was not allowable under the law and was not withdrawn voluntarily. However, the ITAT, considering judicial precedents, held that penalty cannot be imposed when there was no willful concealment and the mistake was a human error. Therefore, the penalty imposed under section 271(1)(c) was set aside, allowing the assessee's appeal. Assessment Year 2010-11: 1. The Assessing Officer disallowed interest expenditure related to capital work in progress, leading to a penalty under section 271(1)(c). The CIT(A) upheld the penalty, stating that no presumption could be made regarding the utilization of interest-free funds. The ITAT found the issue debatable, emphasizing that the mere disallowance by the Assessing Officer does not automatically lead to the levy of penalty. As the Assessing Officer did not establish concealment or furnishing inaccurate particulars of income, the penalty was directed to be deleted. 2. The Assessing Officer disallowed foreign traveling expenses, and the CIT(A) confirmed the penalty under section 271(1)(c) due to lack of substantiation of the business rationale for the expenses. The ITAT agreed with the CIT(A), noting the general explanation provided by the assessee was insufficient. Therefore, the penalty was upheld for this ground of appeal. Conclusion: The ITAT allowed the assessee's appeal for the assessment year 2009-10 and partly allowed the appeal for the assessment year 2010-11. The penalty imposed under section 271(1)(c) was set aside for the disallowed expenditure on raising authorized share capital and the capitalization of interest expenditure. However, the penalty for foreign traveling expenses was upheld due to the lack of substantiation provided by the assessee.
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