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TMI Blog2015 (9) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... the case is contained in ground no. 1 which reads as under:- "1. The Id. CIT(A) has erred in confirming the order of the A.O. levying penalty u/s 271(1)(c) of Rs. 11,60,011/-. The appellant contends that there is no concealment of income or furnishing of any inaccurate particulars of income and therefore, the penalty levied is wrong and bad in law and has to be cancelled." 2. The other grounds of the assessee are supportive and argumentative to the main ground no. 1 which read as under:- "2. The appellant contend that the explanation provided is bonafide and correct. It is not a case where appellant has made a claim for wrong or bogus expenses. The expenditure claimed is allowable under the Income Tax provisions. However, the claim is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in his order dated 30.11.2011 passed u/s 143(3) of the Act and allowed only 1/5th of the expenses in the year under consideration and remaining amount of Rs. 34,12,800 was added back to the returned income of the assessee. The assessee accepted the assessment order without agitating the issue further before higher forums. 4. Subsequently, the AO issued notice u/s 271(1)(c) of the Act to the assessee and after affording due opportunity of hearing, the AO imposed impugned penalty of Rs. 11,60,011 by holding that it is established beyond doubt that the assessee has furnished inaccurate particulars of income to the extent of Rs. 34,12,800 on account of disallowance of expenses written off u/s 35D of the Act. The assessee carried the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the profit & loss account and that in the tax audit, there was no reference by the tax auditors for claim u/s 35D. Under these facts and circumstances, the appellant should not be penalized u/s 271(1)(c) of the Act. Ld. Counsel further pointed out that for imposing penalty, the AO has placed reliance on the decision of Hon'ble Delhi High Court in the case of CIT vs Zoom Communication (P) Ltd. passed in ITA NO. 7/2010 dated 24.5.2010 which is not applicable to the facts of the present case. Ld. AR further submitted that the issue is squarely covered in favour of the assessee by the judgment of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (2012) 348 ITR 306 (SC) and in the case of CIT vs Petroproducts (P) Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T vs Brahmputra Consortium Ltd. (supra). Replying to the above, ld. DR supported the penalty order and the impugned order and submitted that in view of provisions of section 35D of the Act, the entire preliminary expenses are allowable in five equal instalments and the assessee made claim of entire preliminary expenses in the year wherein the assessee started business operations which was the wrong claim, therefore, penalty u/s 271(1)(c) of the Act was imposable on the assessee. However, ld. DR fairly accepted that the claim of the assessee has not been found incorrect or bogus and the same has been allowed in five instalments during five assessment years starting from AY 2009-10 i.e. the period under consideration in this appeal. 7. On ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee by the judgement of Hon'ble Supreme Court in the case of CIT vs Reliance Petroproducts and judgement of Hon'ble Supreme Court in the case of CIT vs Brahmputra Consortium Ltd. wherein dismissing the respective appeals of the revenue, it was held that the AO did not contradict the plea of the assessee that excess claim was an inadvertent error and the excess claim was not advantageous to the assessee, therefore, deletion of penalty was held as justified. 8. In the case of CIT vs Reliance Petroproducts (supra) in para 12, their lordships held as under:- "10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." 9. In view of above ratio laid down by Hon'ble Apex Court in this case, it is clear that the mere making of a claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to furnishing of inaccurate particulars. Their lordships speaking for the apex court further held that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty u/s 271(1)(c) of the Act. The Hon'ble apex court was cautious enough in this situation that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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