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TMI Blog2024 (5) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner and not further appealed by the assessee before higher courts, have attained finality, therefore penalty is liable to be levied. We are not in agreement with such claim of the assessee, as the Hon ble Apex Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd [ 2010 (3) TMI 80 - SUPREME COURT] has clearly laid down the dictum that merely making an incorrect claim does not tantamount to furnishing of inaccurate particulars . We are also of the considered view that rejection of claim does not ipso facto leads to levy of penalty. Even otherwise in this case the penalty levied failed to pass the legal tests, as determined by the Higher Courts and therefore on the aforesaid analyzations and peculiar facts and circumstances in cumulative effects, the decision of the Ld. Commissioner for deletion of the penalty does not require any interference, as the same is neither perverse nor suffers from any impropriety and/or illegality. Consequently, deletion of penalty is sustained and Revenue s appeal is dismissed. - Shri Narender Kumar Choudhry, Judicial Member And Ms. Padmavathy S, Accountant Member For the Assessee : Shri Hirali Desai, C.A. Shri Amol Mahajan, A.R. And S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res and fittings permanent in nature. The expenditure incurred by the assessee was commercially expedient for smooth functioning of the business and was necessary for the purpose of carrying on and conducting business and for the purpose of properly utilization of the premises on lease. The expenditure incurred did not bring into existence any capital asset to provide enduring benefits to the assessee. As per section 37(1) of the Act, any expenditure not being as described in section 32 to 36 of the Act and not being in the nature of capital expenditure for personal expenses of the assessee, laid out or expanded wholly and exclusively for the purposes of the income chargeable under the head profits and gains of business or profession are permitted to be allowed. The provisions of section 37(1) further mandates that the expenditure must not be personal expenses of the assessee and must not be capital in nature . As the conditions prescribed under section 37 are satisfied in the instant case, therefore the expenditure for leasehold improvements should be considered as an allowable expenditure. The assessee also relied on various judgments including by the Jurisdictional Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Subsequently, the AO started the penalty proceedings and issued a notice dated 04.09.2018 (page No.4 of the paper book) whereby the final opportunity was given to the assessee to show cause as to why penalty under section 271(1)(c) of the Act is not leviable. The assessee in response to the said show cause notice filed its reply before the AO in the penalty proceedings. The assessee in support of its case also relied on various judgments. However, the AO not being convinced with the claim of the assessee, ultimately held that after taking into consideration the facts and legal position discussed in detail he is satisfied and of the opinion that the assessee has concealed/furnished inaccurate particulars of income qua computation of total income for the assessment year under consideration within the meaning of section 271(1)(c) read with explanation 1 to this section and consequently levied the penalty to the tune of Rs. 76,39,190/- @ 100% of the income sought to be evaded on the additions/disallowances totaling to Rs. 2,35,45,042/-. 7. The assessee being aggrieved, challenged the levy of penalty before the Ld. Commissioner, who by impugned order deleted the aforesaid penalty by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration. The Ld. D.R. at the outset claimed that the additions made by the AO have been confirmed by the Ld. Commissioner holding the same to be Capital expenditure and straight lining of rent expenditure . As no further appeal was filed by the assessee before the Hon ble Tribunal, therefore the determination of the expenditure as capital in nature by the AO on being affirmed by the Ld. Commissioner, has attained finality and consequently the penalty is liable to be restored. Ld. D.R. further relied on the judgment passed by the Hon ble Bombay High Court in the case of Veena Estate (P) Ltd. (2024) 158 taxmann.com 341 wherein non striking of the limb in the notice issued under section 271(1)(c) read with section 274 of the Act and defective notice has not been considered as a relevant factor for deletion of the penalty. The Ld. D.R. further submitted that furnishing of inaccurate particulars of income leads to concealment of income and therefore if in the penalty order the AO has cited both the limbs then it cannot be said that the penalty has not been levied on the ground on which the proceedings were initiated. In the instant case the proceedings were initiated for furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders passed by the authorities below, material available on record and the rival claims of the parties, following two questions emerged. 1. Whether the penalty can be imposed on a limb on which no satisfaction was recorded and no penalty proceedings were initiated in the assessment order? 2. What would be the result of notice issued under section 274 read with section 271(1)(c) of the Act, without specifying the particular limb for which notice has been issued and/or penalty proceedings have been started? 10.1 First we will deal with the issue Whether the penalty can be imposed on a limb on which no satisfaction was recorded and no penalty proceedings were initiated in the assessment order? 10.2 The AO vide assessment order dated 31.03.2015 under section 143(3) of the Act completed/assessed at loss and also made following additions: 1. Disallowance of leasehold improvements of Rs. 2,16,88,667/- 2. Addition of Rs. 18,56,375/- on account of straight lining of rent expenditure. 10.3 The AO though recorded the satisfaction for initiation of penalty proceedings under section 271(1)(c) of the Act for furnishing the inaccurate particulars of income qua both the additions/claims of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied would not be sustainable in the case where the AO records satisfaction while initiating the penalty proceedings under section 271(1)(c) of the Act qua alleged concealment of income but finally imposes penalty for concealment/furnishing the inaccurate particulars of income . The Hon ble Third Member has categorically held that the AO may initiate the penalty proceedings for both the limbs or the AO during initiation of penalty proceedings may be confused but while imposing the penalty has to come to definite findings. 10.7 Further, Hon ble Gujarat High Court in the case of CIT Vs. Manu Engineering Works (supra) has also clearly laid down the principle that it is incumbent upon the AO to come to a positive finding as to whether there was concealment of income or furnishing of inaccurate particulars of income . In the absence of such clear-cut findings, the penalty order is liable to be struck off. 10.8 On the aforesaid analyzations, we are of the considered view that where there is confusion in recording the satisfaction for initiation of penalty proceedings or levy of penalty on the limb for which no satisfaction was recorded and no penalty proceedings were initiated in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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