9911796707
TMI Blog2011 (4) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... was time-barred. 3. The assessee reserves the right to add/alter/delete/modify any grounds of appeal at the time of hearing." 2. The only issue involved in the appeal is sustaining the penalty of Rs. 8,07,284 under section 271(1)(c) of IT Act, 1961. 3. The assessee company was incorporated on 20th Sept., 2005. The assessee company filed the return of income along with the audited accounts declaring a loss of Rs. 23,98,353. Admittedly, there were no business activities carried out during the year. The business was not set up during the year. A factory building was under construction at Bawal Industrial Area in Haryana. The construction of the factory was incomplete at the end of the financial year. The accounts of the assessee were audite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There was no mala fide on assessee's part as far as the claim of expenses was concerned. It was an inadvertent error on account of being the first year of the company and he placed reliance on the following case law : (i) Ratilal Ashabhai (HUF) v. ITO [1999] 68 ITD 187 (Ahd.) (ii) ITO v. Rajkot Rice & General Mills Ltd. (Chd.) (iii) ITO v. Veena Estates (P.) Ltd. [2002] 81 ITD 401 (Mum.) (iv) CIT v. Bacardi Martini India Ltd. [2007] 288 ITR 585 (Delhi.) (v) CIT v. International Audio Visual [2007] 288 ITR 570 (Delhi) (vi) K.C. Builders v. Asstt. CIT [2004] 265 ITR 562 (SC) (vii) Dy. CIT v. Rural Electrical Co-Operative Society Ltd. [2005] 279 ITR 319 (MP); (viii) CIT v. Union Electric Corpn. [2006] 281 ITR 266 (Guj.). (ix) CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also highly debatable legally, therefore, the penalty should not be levied. 5. On the other hand, learned Departmental Representative relied on the orders of the authorities below. 6. After hearing both the sides, we find that the assessee company was incorporated on 20th Sept., 2005 and this was the first financial year 2005-06 relevant to assessment year under consideration. The factory building of assessee was under consideration (sic-construction), therefore, no commercial business was commenced during the year. The accounts were audited by the chartered accountant which were filed along with the return of income. The assessee's claim that it was a bona fide mistake which has been done on account of inadvertent clerical error appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observation that the assessee did not carry out any business transactions which at best was AO's finding about an activity of business not being functional in the relevant previous year. Not carrying on business activity in a particular period cannot be equated with closure of business as it takes an unsustainably narrow view of the scope of cessation of a business. Unless the business is abandoned or closed and even if business is at a dormant stage waiting for proper market conditions to develop, the expenditure incurred in the course of such a business is to be allowed as deduction. For this reason also, the disallowance made by the AO was not justified, and the CIT(A) rightly deleted the same." The assessee has surrendered the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
