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TMI Blog2014 (8) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... actually incurred by him – Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - where there is no finding that the particulars furnished by the assessee in its return are in-accurate or erroneous or false, there is no question of imposing penalty u/s 271(1)(c) of the act merely because the claim of the assessee for deduction is disallowed in the quantum proceeding – thus, it is not a fit case to impose penalty u/s 271(1)(c) of the Act and the CIT(A) is not justified in confirming the penalties imposed by the AO for both the years – Decided in favour of Assessee. - ITA No.2559,2560/Mum/2013 - - - Dated:- 30-7-2014 - H L Karwa And P M Jagtap, JJ. For the Appellant : Shri P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years under consideration. On appeal, the ld. CIT(A) deleted the disallowance made by the A.O. on account of legal expenses for both the years under consideration observing that the said expenses were incurred by the assessee for the preservation and protection of his profession from any legal process or proceedings which might have resulted in reduction of his income. In support of this conclusion, the ld. CIT(A) relied on the decisions of Hon ble Supreme Court in the case of CIT vs. Birla Cotton Spinning Wvg. Mills, 82 ITR 166 and CIT vs. Dharajgiri Raja Narasingirji, 91 ITR 544. On further appeal, the Tribunal, however, reversed the decision of the ld. CIT(A) on this issue and confirmed the disallowance made by the A.O. on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. He therefore imposed penalty of ₹ 3,68,550/- and ₹ 10,24,650/- u/s 271(1)(c) of the act for assessment years 2003-04 and 2004-05 respectively being 100% of the tax sought to be evaded by the assessee in respect of addition made to the total income of the assessee on account of disallowance of legal expenses. On appeal, the ld. CIT(A) confirmed the penalties imposed by the A.O. for both the years under consideration holding that the claim of the assessee for deduction on account of legal expenses, which represented personal expenses, was not permissible as per law as held by the Tribunal in the quantum proceedings and the assessee was unable to offer any satisfactory explanation to substantiate his claim for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legal expenses and although the Tribunal has reversed the decision of the ld. CIT(A), it is sufficient to show that the claim of the assessee for deduction on account of legal expenses was a legal claim on which two views were clearly possible. He contended that this also shows that the claim made by the assessee for deduction on account of legal expenses was a bonafide claim and since all the particulars relevant to the said claim were duly furnished by the assessee, there was no case for imposition of penalty u/s 271(1)(c) of the Act. In support of this contention, he relied on the decision of Hon ble Supreme Court in the case of Reliance Petroproducts Ltd., 322 ITR158. He also contended that the claim of the assessee for legal expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the deduction claimed by the assessee on account of legal expenses was disallowed by the A.O. in both the years under consideration by treating the said expenses as of personal nature. A perusal of the orders passed by the A.O. in this regard clearly shows that the relevant aspects of the matter such as the nature of complaint filed against the assessee, the nature of legal proceedings initiated against the assessee, the nature of expenses incurred by the assesse etc. were not gone into by the A.O. and a very cryptic order was passed by him on this issue making the disallowance on account legal expenses treating the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute that the legal expenses claimed by the assessee were actually incurred by him and it is not the case of the Revenue at any stage that the expenses so claimed by the assessee were bogus. 7. In the case of Reliance Petroproducts Ltd., (supra), the Hon ble Supreme Court held that in order to be covered by the provisions of section 271(1)(c), there has to be concealment of particulars of income by the assessee or furnishing of in-accurate particulars of his income. Explaining further, the Hon ble Supreme Court observed that when no information given in the return is found to be in-correct or in-accurate, the assessee cannot be held guilty of furnishing in-accurate particulars of its income and unless the case is strictly covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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