2016 (5) TMI 1344 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - expenditure on account of fees paid to the Registrar of Companies for increase in its share capital disallowed as claimed revenue expenditure - Held that - Admittedly the details supplied by the assessee in its return of income are not found to be incorrect or erroneous or false. The Assessing Officer has disallowed fees paid to Registrar of Companies for increase in the share capital treating the same to be capital expenditure. Thus it is a case where the assessee s claim that the expenditure incurred is revenue expenditure is found by the Assessing Officer to be not sustainable in law. But that by itself will not amount to furnishing of inaccurate particulars so as to expose the assessee to penalty u/s 271(1)(c) of the act. See CIT Vs. Reliance Petroproducts Pvt.Ltd. (2010 (3) TMI 80 - SUPREME COURT ). - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2008-09 based on disallowance of expenditure claimed as revenue expenditure by the assessee.

Analysis:

1. Issue of Penalty under Section 271(1)(c):
The appeal was against the order of the learned CIT(A)-IV, New Delhi dated June 21, 2013, regarding the levy of a penalty of Rs. 3,72,177 under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2008-09. The Assessing Officer disallowed the expenditure claimed by the assessee on fees paid to the Registrar of Companies for an increase in its share capital, treating it as capital expenditure. The issue revolved around whether the disallowance of the expenditure could lead to the imposition of a penalty. The Tribunal referred to the decision of the Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. where it was held that a mere claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars regarding the income of the assessee. Since there was no finding that the details supplied by the assessee were incorrect or false, the Tribunal concluded that the penalty under section 271(1)(c) was not justified. The Tribunal canceled the penalty based on the above legal principle.

2. Disallowance of Expenditure Claimed as Revenue Expenditure:
The Assessing Officer disallowed the expenditure claimed by the assessee on fees paid to the Registrar of Companies for an increase in its share capital, treating it as capital expenditure. The Tribunal noted that the details supplied by the assessee in its return of income were not found to be incorrect or false. While the claim of the assessee regarding the expenditure being revenue expenditure was found to be unsustainable in law by the Assessing Officer, this alone did not amount to furnishing inaccurate particulars to attract a penalty under section 271(1)(c) of the Act. The Tribunal, following the decision of the Hon’ble Apex Court, held that the penalty was not justified in this case. Consequently, the Tribunal allowed the appeal of the assessee and canceled the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2008-09.

This detailed analysis of the judgment highlights the key legal issues involved, the application of relevant legal principles, and the final decision reached by the Tribunal regarding the penalty imposed on the assessee.