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TMI Blog2019 (10) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... , we see no reason to interfere with the order of the CIT(A). In the instant case, in our view, the CIT(A) has correctly applied law and deleted the penalty. We totally concur with the view expressed by the CIT(A). The Revenue could not demonstrate the lack of bonafide in the action of the assessee. The assessee with reference to several judicial precedents has demonstrated before us that the issue as to whether expenditure in question is capital or revenue is highly debatable.- Decided against revenue - I.T.A. No. 1128/Ahd/2015 - - - Dated:- 4-10-2019 - Shri Pradip Kumar Kedia, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri L. P. Jain, Sr.D.R. For the Respondent : Shri S. N. Soparkar, Sr. Advocate with Shri Nishit Shah, A.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-1, Ahmedabad (CIT(A) in short), dated 15.01.2015 arising in the penalty order dated 30.12.2012 passed by the Assessing Officer (AO) under s. 271(1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid position has been reaffirmed that where the assessee has claimed expenditure as revenue, which was held as capital by AO, could not be the reason for imposition of penalty. 4.1 Adverting to the facts, the learned counsel submitted that the assessee is engaged in the business of development of power projects and operations and maintenance of power projects. The development of power projects being the business of assessee, the assessee initiated several projects. A detailed note of each project was placed before the AO showing its status and reason for creating the project as recorded in para 6 of the assessment order. It was pointed out that various projects could not be persuaded for feasibility reasons ranging from stiff timeline and bid conditions, unsuccessful biding, bid process coordination extension of time not agreed and so on and so forth. 4.2 The learned counsel submitted that after the decision in the quantum proceedings in February 2014, the Hon ble Gujarat High Court in DY. CIT(ASSTT) vs. Gujarat Narmada Valley Fertilizers Co. Ltd. in Tax Appeal No. 447 of 2000 Ors. has come out with favourable observations in its judgment rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t wise) explanation before A.O. vide order dt. 14/11/2009 (para 7 of the impugned Asst. Order dt. 27/11/2009). The A.O. rejected appellant's explanation with placing reliance on Hon'ble Gujarat High Court order in the case of Ambica Mills Ltd. 236 ITR 921, Shri Digvijay Cement Co. Ltd. 153 ITR 253, SLM Maneklal Industries Ltd. 107 ITR 133 and Hon'ble Madrass High Court order in the case of CID Parry (India) Ltd. 257 ITR 253 and held that Although the auditors may have mentioned in the 3CD report, or that memorandum of Association may speak of the activity as one of the objects none the less the fact remains that the proposed new plant was not business activity being carried on by the assessee . The A.O. disallowed claim of revenue of ₹ 47507667 as capital expenses and initiated penalty u/s. 271(1)(C)of the Act for furnishing inaccurate particulars of income. (ii) Ld. CIT(A)-VI Ahmedabad vide order dt. 16/12/2010 against such order dt. 27/11/2009 u/s. 143(3) of the Act considered appellant's explanation that (a) As per tax audit report there is no change in the nature of business of the assessee as compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt claimed such expenses on the basis of audited accounts and tax audit report which has not brought out these expenditure as capital in nature. It is therefore the bonafide for the claim of such expenditure cannot be doubted or questioned. (ii) All the details material facts were either disclosed or submitted before A.O. as and when asked for. None of these expenses were found bogus or excessive. These genuine expenses were disallowed being held as capital in nature. This preposition cannot lead to satisfaction that appellant has furnished inaccurate particulars of income. (iii) There are two opinions on this issue, Even Hon'ble Gujarat High Court's latest order in the case of GNFC (Supra) as relied on is in favour of appellant. This reflects that issue is contentious in nature and debatable. In view of latest order of Hon'ble Gujarat High Court, the ratio is binding on lower appeal authorities. It is therefore despite Hon'ble ITAT considered the issue against appellant, the penalty is not exigible. (iv) Apart from ratio of Hon'ble Supreme Court order in the case of Reliance Petro Product Ltd. (Supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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