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2017 (1) TMI 44 - ITAT MUMBAIPenalty u/s 271(1)(c) - disallowance of entire expenses in absence of commencement of business - Held that:- In the facts brought before us it has been demonstrated by the assessee that the assessee had appointed its managing director and other employees in the impugned year itself. In the immediately subsequent year, the assessee had employed 25 employees and also made huge income as is evident from the profit and loss account of A.Y. 2006-07. The assessee claimed that it was ready to cater to its customers in F.Y. ending 31.03.2005 (i.e. A.Y. 2005-06), but in absence of any order from the customers, no revenue could be earned. The claim of the assessee cannot be said to be without any basis. Under these circumstances, the view adopted by the assessee that its business was set up cannot be said to be devoid of any bonafide belief. As per AO, assessee’s claim of set up of business in A.Y. 2005-06 remained unsubstantiated therefore, it was rejected by him. But, it is noted that the AO was also not able to disprove the claim of the assessee. The possibility of the claim of the assessee being correct cannot be totally ruled out. Under these circumstances, it can certainly be said that the claim of the assessee was not disproved by the AO. Further, it is noted from the order of the Tribunal dated 17.04.2014 passed in the quantum proceedings that it was found by the Tribunal after analyzing all the facts and circumstances of the case that assessee’s case was unsubstantiated and unproved. Apart from that, it is further noted by us that full particulars of expenses claimed have been furnished. Nothing has been brought on record by the AO indicating if any expense was bogus or false. Thus though the claim of expenses made by the assessee has been found to be not sustainable by the AO, but without bringing anything on record to show whether any inaccurate particulars were filed by the assessee or if any concealment was done by the assessee. Rather, in the given facts and circumstances, it can be said that the claim of the assessee was bonafide. Thus we do not find it to be a fit case for levy of penalty - Decided in favour of assessee
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