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2020 (12) TMI 229 - HC - Income TaxPenalty u/s 271(1)(c) - Revised return filed - expenditure being operating and administrative expenses and finance charges being interest on loan taken by the Assessee claimed by the Assessee were not allowable expenditure, because the Assessee had not yet commenced its regular business operations - HELD THAT:- If the Assessee had declared “Nil” income in its original return of income, as it had not commenced the business, but filed revised return of income to fairly disclose its foreign exchange gain made during the year, even prior to commencement of business, but, at the same time bona fide claimed the expenditure incurred during that year in the form of interest or finance charges or administrative expenses against such income, and disclosed all these facts in audited Balance Sheet filed with the Return of Income and filed a Loss Return before the authority, the authority concerned was entitled to take a different view of the matter that such expenditure was not allowable, as the Assessee had not commenced its business operations and on that issue, there was no serious dispute from the side of the learned counsel for the Assessee before us also and that is why, the Assessee seems to have accepted the income tax liability fixed upon him and paid the said tax without a demur. The considerations for imposition of penalty under Section 271(1)(c) of the Act are however entirely different. It requires existence of mens rea on the part of the Assessee and either of the twin conditions of (i) concealment of income or (ii) filing of inaccurate particulars by Assessee, are required to be satisfied and the burden of proving that lies upon the revenue authority and not on the Assessee. Merely because the claim of expenditure made by the Assessee is found to be a wrong claim and is disallowed, it does not per se attract imposition of penalty under Section 271(1)(c). One fails to understand how the “reduction of loss” in the Assessment order would amount to “income” on which tax payment could have been evaded by Assessee. No positive income could result by such disallowance and therefore, no tax in fact could ever be imposed on such assumed “reduction of loss” considered by the Assessing Authority. This is just a hypothetical figure of “income” taken by the authority concerned in order to impose somehow penalty under Section 271(1)(c) upon the Assessee. In the present case, we are of very clear and firm view that it was not at all a fit case for the imposition of penalty under Section 271(1)(c) of the Act as the basic requirement for invoking that provision are not at all satisfied in the present case and the appeal of the Assessee therefore deserves to be allowed.
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