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2021 (5) TMI 428 - AT - Income TaxPenalty u/s 271(1)(c) - Validity of notice u/s 274 - whether there is concealment of income or furnishing of inaccurate particulars of income and as such the notice issued under section 274 ? - HELD THAT:- At the first instance, while replying to the penalty show-cause notice the assessee has not protested that the show-cause notice issued by the Department was not proper as there was no basis for issuance of the notice under section 271(1)(c) of the Act and both limbs in the said provision do not get attracted in assessee’s case. Since the assessee has not been objected to the issuance of the show-cause notice that the same was not proper. Accordingly, the ground raised by the assessee stands dismissed. Disallowance of interest expenditure under section 43B as well as disallowance export product development expenses - In this case, when there was no revival of assessee’s business while the business was closed down permanently, the question of “enduring benefit” does not arise. Whether the expenditure is in the form of capital or revenue in nature are always debatable issue. Therefore, though the assessee has claimed the capital expenditure as revenue expenditure that itself is not sufficient to levy penalty. The non-acceptance of the claim of the assessee cannot tantamount to furnishing of inaccurate particulars warranting levy of penalty as has been held by the Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd.. [2010 (3) TMI 80 - SUPREME COURT] 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 the 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 was found to be a wrong claim and is disallowed, it does not per se attract imposition of penalty under section 271(1)(c) of the Act. Just because the assessee has not preferred further appeal before the appellate authority against the quantum addition that itself cannot attract imposition of penalty. Under the above facts and circumstances, the penalty levied under section 271(1)(c) of the Act towards disallowance of interest expenditure under section 43B of the Act as well as disallowance export product development expenses stand deleted - Decided in favour of assessee.
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