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TMI Blog2014 (6) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... e of opinion with regard to the nature of expenditure would not amount to furnishing of inaccurate particulars of income, when fact remains that the assessee has disclosed full particulars of expenditure incurred not only in its books of account but also in the return of income filed as well as during the assessment proceedings. The assessee cannot be accused of furnishing inaccurate particulars of income – Relying upon CIT vs. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - every expenditure/deduction claimed by the assessee in the return of income when disallowed would automatically not lead to the conclusion that the assessee has either concealed its income or furnished inaccurate particulars of income - imposition of penalty u/s 271(1)(c) of the Act is not called for - This is due to the fact that there is always a difference of opinion with regard to an expenditure being revenue or capital - When the incurring of expenditure has not been disputed, the assessee cannot be accused of concealment or furnishing inaccurate particulars of income merely for the reason that the expenditure claimed is held to be of a capital nature – thus, the penalty is set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , payment to erstwhile workers in the shape of ex-gratia and gratuity to get them vacated the quarters and litigation with local authorities/ Stage Government for getting approvals, etc. The AO was of the view that in order to claim the expenditure incurred as business expenditure the assessee invented the idea of having some sort of business. Hence it was claiming that it is engaged in the business of trading in cloth. Though the assessee tried to impress upon the AO that it was actually carrying on cloth trading business, the AO, nevertheless, disbelieving all explanations of the assessee opined that the expenditure incurred by the assessee cannot be allowed as revenue expenditure as the assessee was not having any business in cloth trading and the expenditure incurred does not relate to any trading business of the assessee. Accordingly, the AO proceeded to complete assessment by disallowing the expenditure claimed which not only resulted in disallowance of loss claimed but the determination of income from business at Rs. 8,11,000 which was assessed on protective basis. The assessee, being aggrieved of the assessment order, preferred an appeal before the CIT(A). 5. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiary value in the matter. We are fully convinced with the findings arrived at by the lower authorities that the transaction of sale or purchase of cloth is only a bogus transaction. Since the assessee falls to briny any evidence on record with regard to the existence of the parties and on the face of adverse findings made by the assessing officer about the nonexistence of parties, the other arguments made by the learned counsel for the assessee with regard to the parties having PAN Numbers, sales-tax assessments and the payments were made by the account payee cheques, etc., have no relevance. The fact pointed out by the assessee that necessary permission for closing down the mill was obtained in April, 2003, is not very material to the present issue, because the legal proceedings in such matters always take substantial time. Therefore, the permission granted by Hon'ble High Court in April, 2003 has to be understood as a subsequent event confirming the closure of business which had already taken place several years back. Since, we held that the transaction of purchase or sale of cloth is a bogus one, the entire expenditure claimed by the assessee for the assessment years under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion from the order of the CIT(A) is extracted hereunder: 4.8 Looking at the facts in the aforementioned case, I find that there is absolutely no truth in the assertion that all relevant facts and material had been disclosed. On the contrary, the conduct of the appellant establishes that the very intent from the beginning was to claim false carry forward losses and thereby to evade taxes. Firstly, the appellant was not carrying out any business of trading in cloth. In a well thought out plan, bogus purchase and sale bills were arranged just to show that some business of cloth trading had been carried out. Thereafter, an expenditure of more than Rs. 2 crores was off set against the income of this business so as to claim huge losses and later to carry forward these non-existent losses. In this way, for many years the appellant would not have to pay any taxes on the income that it would earn. Not only was the capital expenditure on development of property wrongly debited and claimed falsely as a revenue expenditure, but a non-existent business of cloth trading was created for the aforementioned purpose. It has been clearly held by the honourable ITAT that the alleged purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve no relevance. The fact pointed out by the assessee that necessary permission for dosing down the mill was obtained in April, 2003, is not very material to the present issue, because the legal proceedings in such matters always take substantial time. Therefore, the permission granted by Hon ble High Court in April, 2003 has to be understood as a subsequent event confirming the closure of business which had already taken place several years back. Since, we held that the transaction of purchase or sale of cloth is a bogus one, the entire expenditure claimed by the assessee for the assessment years under consideration cannot be allowed as business expenditure due to the facts that there is no manufacturing or business activity carried on by the assessee. In our considered opinion, the entire expenditure incurred by the assessee can be considered as only as capital expenditure which is relatable to the property development intended by the assessee company. Since we held that the intention of the assessee company is to develop the property, which was transferred from Mukesh Textiles, incurring certain expenditure to preserve and maintain assessee's corporate structure and existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) since was received much prior to the limitation of one year, penalty proceedings are barred by limitation. 11. The learned DR, on the other hand, submitted that the penalty order was passed well within the limitation prescribed u/s. 275(1) of the Act. 12. Having considered the submissions of both the parties on this issue, we are of the view that the argument of the learned AR is devoid of merit. Admittedly, in the present case, the assessee had challenged the order passed by the CIT(A) on quantum before the ITAT. The ITAT disposed of the appeals of the assessee on quantum vide order dated 11.2.2011. Hence the penalty order has been passed within the limitation prescribed u/s. 275(1)(a) of the Act. Accordingly, this ground of the assessee is dismissed. 13. In respect of merits of the issue, the learned AR apart from making submissions at the time of hearing has also filed an elaborate written submission reiterating the stand taken before the Departmental authorities. The learned AR submitted that the assessee was carrying on business activity which can be proved by various evidences brought on record. Therefore, the conclusion drawn by the Departmental authorities that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AR submitted that for the purpose of levying penalty the findings in the quantum proceedings are not conclusive. The explanation given needs to be reprocessed and examined afresh in the light of the evidences brought on record. It was finally submitted that the fact that the assessee has incurred expenditure had not been disputed by the CIT(A) or the Tribunal in the quantum proceedings. The assessee all the while has treated the expenditure incurred as business expenditure since it was incurred to protect and safeguard the assets of the company and the Departmental authorities as well as the ITAT concluded that the expenditure should be treated as capital in nature. Therefore, the difference of opinion in treating the expenditure either as revenue or capital will not amount to furnishing of inaccurate particulars of income as the assessee was under bona-fide belief that the expenditure is allowable as revenue expenditure. 17. The learned AR submitted that every claim of rejection of expenditure will not amount to concealment or furnishing of inaccurate particulars of income so as to impose penalty u/s. 271(1)(c) of the Act. For this proposition, the learned AR relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. Therefore, expenditure was claimed by the assessee having a bonafide belief that it is allowable as a business expenditure. 21. We find force in such contention of the assessee. When there is no dispute to the claim of expenditure itself, the only difference is with regard to nature of expenditure. While the assessee is claiming it as revenue, the finding of the Department which is also confirmed by the Tribunal is, it is of capital nature. However, that difference of opinion with regard to the nature of expenditure would not amount to furnishing of inaccurate particulars of income, when fact remains that the assessee has disclosed full particulars of expenditure incurred not only in its books of account but also in the return of income filed as well as during the assessment proceedings. 22. In the aforesaid circumstances, the assessee cannot be accused of furnishing inaccurate particulars of income. The Hon ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (supra) has held that every expenditure/deduction claimed by the assessee in the return of income when disallowed would automatically not lead to the conclusion that the assessee has either c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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