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TMI Blog2013 (3) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that this expenditure cannot be allowed against the miscellaneous income of `1000 shown by assessee, as major income in all the years was only dividend income and claim of legal expenses was not allowable under section 57 of the Act. Further, he also invoked section 14A, which was then introduced in the financial year 2000-01 and held that the new provisions of section 14A was squarely applicable to the facts. Accordingly, the entire legal expenditure of ₹ 17,44,896 was disallowed. This assessment was the subject matter of appeal before the CIT (A) and the ITAT and the disallowance was confirmed. Penalty under section 271(1)(c) was levied vide order dated 30.05.2005. The penalty order was appealed before the learned CIT (A) who after considering assessee s submissions deleted the penalty by stating as under: 4. I have considered the submission as made before me and also perused the order imposing penalty as well as assessment order. On the facts of the present case it can be seen that assessee has given the complete details in the return of income with regard to the legal expenditure incurred by assessee. Assessee has also explained that the legal expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain facts in its return of income before AO but that cannot be considered as true disclosure of facts. If an assessee has disclosed certain facts and figures to justify its own disallowable claim for which it is not entitled, then, it cannot be said that the appellant has not furnished inaccurate particulars of income. It is very clear from the orders of the CIT (A) as well as ITAT in the quantum appeal that the claim of legal expenses made by the appellant was wrong and not justifiable at all. 2.7 The appellant was not doing business of shares of M/s Herbertsons Ltd. It should not have made the claim of legal expenses as revenue expenditure. The appellant was owning the shares from AY 1994 onwards and dividend income was also considered for assessment purposes every year. Assessee was having only shares of M/s Herbertsons Ltd and no shares of any other company were owned by assessee. There was no regular purchase and sale of shares. There was no sale of shares whatsoever till 31.03.2002. The shares in question were an investment in the hands of the appellant as per the conduct of the appellant. Therefore, the appellant was wrong in making the claim of legal expenditure as busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was his submission that the expenditure was genuine expenditure for the purpose of business and therefore mere disallowance of legal expenses does not attract penalty. It was further submitted that on identical facts in the case of associate concern M/s Algid Investments Finance Pvt. Ltd, the CIT (A) cancelled the penalty which was upheld by the ITAT in ITA No.6823/M/2005 dated 24.07.2009 and the appeal by the Revenue against such decision was dismissed by the Hon'ble Bombay High Court in ITA No.5552/Mu/2010 vide judgment dated 01.07.2011. It was submitted that there cannot be any penalty under section 271(1)(c) on the facts of the case. 5. The learned DR however, relied on the orders of the CIT (A) and further relied on the decision of the Hon'ble Bombay High Court in the case of Sanghvi Swiss Refills (P) Ltd (2012) 28 Taxmann.com 208 (Bom.) for the proposition that the penalty can be imposed for filing inaccurate particulars of income by showing false/exaggerated expenses. 6. We have considered the issue and examined the facts on record. Assessee has shown only ₹ 1000 as miscellaneous income and claimed expenditure mainly for legal and professional ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also held not allowable. The Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd has considered similar claim under section 14A had held as under: A glance of provision of section 271(1)(c ) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 271(1)(c) is not attracted; mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee. Therefore, on the principles laid down by the Hon'ble Supreme Court in the above said case, penalty under section 271(1)(c) is not warranted on the facts of this case. 9. As rightly pointed out by the learned Counsel, on identical facts, in the case of group concern, M/s Algid Investment Finance Pvt. Ltd where similar legal expenses were disallowed, the learned CIT (A) cancelled the penalty in the same manner, he cancelled the penalty originally in assessee s case. That order was upheld by the ITAT. It was further approved by the Hon'ble Bombay High Court by stating as under in IT No:5552 of 2010 dated 01.07.2011: 2.The Tribunal in Para 4 of its order has recorded a finding of fact that in the present case assessee had claimed expenditure on account of legal/professional charges incurred in connection with the retention of control and management, which were disallowed and in such a case penalty cannot be levied as it was not a case of concealing the particulars of income or furn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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