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2009 (8) TMI 677

..... laimed 50 percent. of the entertainment expenses on account of the employees participation in the business meeting while entertaining company's guests. In earlier years, the employees participation was estimated only at 25 percent. accordingly he disallowed entertainment expenses. The Assessing officer not treated the loss as long term loss and gain as short term capital gain. Assessing officer also imposed penalty. Commissioner (Appeals) set aside penalty and allowed appeal of assessee, which was upheld by Tribunal. Held that- in case of entertainment expenses, if the Assessing Officer reduced it from 50 percent to 35 percent that could not attract penalty. For the expenses of section 35D matter was remand back. For the capital loss/gain, since a finding of fact regarding 'inadvertent error' was recorded by the two authorities below, and while imposing the penalty the Assessing Officer has nowhere contradicted that the error was not inadvertent, matter need not be interfered. - 1005 of 2008 - 24-8-2009 - A. K. SIKRI and VALMIKI J. MEHTA JJ. Ms. Prem Lata Bansal with Ms. Anshul Sharma and Paras Chaudhary for the appellant. R. M. Mehta for the respondent. JUDGMENT The judgment of th .....

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..... xed cost of investment had been reduced from the profit on sale of investment instead of sale consideration. The assessee filed a revised computation of capital loss and capital gain and accordingly, the Assessing Officer made an addition of Rs. 6,45,070 to the income of the assessee on account of short-term capital gain. 3. While framing the assessment order the Assessing Officer also decided to initiate penalty proceedings under section 271(1)(c) of the Act and issued show-cause notice for this purpose. The assessee did not give any reply. After considering the matter, the Assessing Officer passed orders dated July 29, 2005 imposing penalty of Rs. 13,18,151 on the ground that the assessee had furnished inaccurate particulars of income. 4. The assessee challenged this order by filing appeal before the Commissioner of Income-tax (Appeals) who allowed the appeal and set aside the penalty order passed by the Assessing Officer. The Commissioner of Income-tax (Appeals) was of the opinion that all the facts had been duly disclosed by the assessee in the return of income and therefore, it was not a case of furnishing inaccurate particulars for concealing any income chargeable to tax. He .....

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..... available to the assessee. It is for this reason the matter was argued on the merits before us by counsel for both the sides. 7. The following substantial question of law was framed by this court while admitting the appeal on August 4, 2009 : Whether the Income-tax Appellate Tribunal was correct in law in which in deleting the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act ? 8.3 Since counsel for the parties were ready to argue the matter finally, we heard the arguments on the aforesaid issue there and then. 9. There is no quarrel about the proposition of law for invoking the provisions of section 271(1)(c) of the Act, particularly Explanation 1 thereof. This section with Explanation 1 reads as under : 271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person-. . . (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or . . . Explanation 1.-Where in respect of any facts material to the computation of the total income of any pers .....

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..... Learned counsel for the respondent on the other hand submitted that the authorities below had taken into consideration all the material circum-stances on the basis of which findings were arrived at that the mistake of the assessee was bona fide and thus, he pleaded that the order of the Tribunal should not be interfered with. Both the counsel referred to various judgments most of which are taken note of by the Commissioner of Income-tax (Appeals) as well as the Tribunal. 13. We find that action for penalty proceedings was initiated by the Assessing Officer on various grounds. The first ground was predicated on the claim made by the assessee for entertainment expenses. As against 50 per cent. amount claimed by the assessee on account of the employees participation, the Assessing Officer reduced the same to 35 per cent. We are of the opinion that the Commissioner of Income-tax (Appeals) as well as the Tribunal rightly observed that there was no concealment of income or furnishing of inaccurate particulars. The addition was only on account of difference in estimate made by the assessee and the other estimate made by the Assessing Officer. Therefore, in so far as this claim is concerne .....

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..... countant. Learned counsel for the Revenue, however, submitted that a bare reading of section 35D would reveal even to a layman that there was no scope for getting the benefit of those provisions in respect of expenses incurred in connection with the public issue of shares such as underwriting commission, brokerage and other charges, etc., inasmuch as certain expenses are allowable only when they are incurred with the expansion of the assessee s industrial undertakings or in connection with his setting up of a new industrial undertaking or industrial unit whereas the assessee is a finance company. 17. We are in agreement with the aforesaid submission of learned counsel for the Revenue. We fail to understand as to how the chartered accountants who are supposed to be experts in tax laws, could give such an opinion having regard to the plain language of section 35D of the Act. It would be important to note that the assessee has nowhere pleaded that the return was filed claiming the benefit of section 35D of the Act on the basis of the said opinion. What was stated was that in the prospectus it was mentioned that as per the opinion given by the chartered accountants, the company would b .....

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