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2021 (7) TMI 835 - AT - Income TaxPenalty u/s. 271(1)(c) - expenditure on account of annual exchange service charge - whether revenue expenditure or capital in nature - HELD THAT:- we find that the assessee’s claim is that an expenditure on account of annual exchange service charge is to be treated as revenue expenditure. In our considered opinion, the aforesaid claim, by no stretch of imagination can be said to be ex-facie bogus - a disallowance of the same cannot lead to the conclusion that the assessee is guilty of furnishing of inaccurate particulars of income or concealment of income. The conduct of the assessee is not contumacious to warrant levy of penalty u/s.271(1)(c) of the Act. In this regard, we draw support from the decision of the larger bench of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] or the proposition that an authority may not levy penalty unless the conduct of the assessee is found to be contumacious. The penalty u/s.271(1)(c) is not at all leviable on the facts of the case. The reference to the decision of Hon'ble Supreme Court in the case of Dharmender Textile [2008 (9) TMI 52 - SUPREME COURT] and Hon'ble Delhi High Court in the case of CIT vs. Zoom Communications Pvt. Ltd. [2010 (5) TMI 34 - DELHI HIGH COURT] by the A.O. are not at all relevant on the facts here. On the facts of this case, the aforesaid two Supreme Court’s decisions referred by us are germane and applicable on all fours on the facts of this case. We agree with the ld. Counsel of the assessee that the ld. CIT(A) has made irrelevant observation in his appellate order, which are not only factually incorrect but have no relationship to the issue by way of penalty u/s.271(1)(c). This amply reflects lack of application of mind by the ld. CIT(A). Assessee has also further raised the ground that since the assessee has been made liable to pay tax only on book profit, the penalty u/s.271(1)(c) cannot be sustained with reference to addition in normal computation. For this proposition, he has relied upon the decision of Hon'ble Supreme Court in the case of Nalwa Sons Investment Ltd [2012 (5) TMI 150 - SC ORDER] and CBDT Circular in this regard. In our considered opinion, since we have already held on merits that the penalty levied is not at all sustainable, adjudication of this aspect of ld. Counsel of the assessee’s submission is only of academic interest. Hence, we are not engaging into the same. In the result, we set aside the orders of the authorities below and direct that the penalty in this case be deleted. Appeal by the assessee stands allowed.
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