9911796707
TMI Blog2023 (4) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(c). As relying on judgment of Reliance Petroproducts Pvt. Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] as well as Praveen B. Gada (HUF) [ 2011 (2) TMI 1106 - MADHYA PRADESH HIGH COURT] the penalty levied by AO u/s 271(1)(c) of the Act by treating the expenditure as capital is not justified and the same is deleted. Appeal of the assessee is allowed. - Shri Vijay Pal Rao, Judicial Member And Shri B.M. Biyani, Accountant Member For the Assessee : Shri Manjeet Sachdeva Avinash Gaur, ARs. For the Revenue : Shri Ashish Porwal, Sr. DR. ORDER PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the order dated 11.08.2022 of Ld. Commissioner of Income Tax (Appeals) (in short Ld. CIT(A), National Faceless Appeal Centre, Delhi arising from the penalty order passed u/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act ) for Assessment Year 2012-13. The assessee has raised following grounds of appeal: 01. The order has been passed ex-parte without taking into consideration the submission made before CIT (A) manually. 02. That the learned CIT (A) erred in passing the order when he was aware that the matter was first fixed for hearing on 10.10.2019, when the matters were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide. He have further submitted that the levy of penalty u/s 271(1)(c) of the Act is otherwise not sustainable as it is not a case of concealment of particulars of income or furnishing inaccurate particulars of income. The assessee has disclosed all the relevant facts in the return of income and the claim of expenditure is not found to be bogus or incorrect but Ld. AO has disallowed the claim of expenditure on the ground that there was no sale during the year under consideration and in the opinion of the Ld. AO entire expenditure should have been capitalized. The ld. AR has submitted that all the expenses are general in nature and have been incurred for the purpose of running and maintaining the business of assessee company. The expenses are recurring in nature and day to day expenses which are in revenue nature and therefore the assessee has rightly debited the same in the profit and loss account. None of the expenses are related to the project but these expenses are only recurring in nature being payment to employees on account of salaries and wages as well as staff welfare expenses, depreciation on the business assets and other administrative expenses incurred on account of rent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel was asked to show cause why the expenses of employee benefit exp., depreciation and administrative and other expenses should not be capitalized as per accounting standard and policy. The facts brought to the knowledge of Ld. Counsel. Therefore, the Ld. Counsel of the assessee has not filed any written submission in respect of claim of expenses. Therefore, in absence of documentary evidences total expenditure of Rs. 1,03,54,633/- which is not a revenue expenditure and must be treated as capital expenditure, and it is hereby being disallowed and added back to closing stock of the Assessee company. Penalty proceedings u/s 271(1)(c) of the IT Act, 1961 is hereby being initiated separately for assessee furnishing inaccurate particulars of his income. 6. Ld. AO has disallowed the claim of expenses under the head Employees benefit expenses, depreciation, administrative and other expenses. The Ld. AO disallowed these expenses by treating the same as capital in view of the fact that during the year under consideration there was no sale by the assessee. Ld. AO did not doubt the correctness of the expenditure incurred by the assessee under these heads. Therefore, the genuineness and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term inaccurate particulars was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai Anr. was upset. In Union of India Vs. Dharamendra Textile Processors (cited supra), after quoting from Section 271 extensively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 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 does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 271(1)(e) of the Act would not attract. In the circumstances, we find no infirmity in the order passed by the Tribunal. 7. In our considered view, the finding recorded by the Tribunal that the assessee did not conceal his income nor furnish the inaccurate particulars, are wholly justified and needs no interference. Merely on the basis of finding recorded by the Tribunal in the original proceedings (quantum proceedings) in which it has been observed that the assessee has concealed certain facts, would not itself attract provisions of s. of the Act. In the absence of any mens rea a finding about concealment of particulars of income or furnishing inaccurate particulars, in our considered view, could not have been arrived at. Accordingly, no case for interference in the order passed by the Tribunal is made out As a result, the appeal fails and is hereby dismissed. 10. Accordingly, in the facts and circumstances as discussed above as well as following judgment of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra) as well as judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Praveen B. Gada (HUF) (supra), the penalty levied by AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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