TMI Blog2013 (10) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... ), to allow the assessee an opportunity to substantiate its case in respect of cost incurred toward the Greenhouse, if any, included therein, as well as of the same as not representing a capital expenditure - For the balance expenditure qua the Bhiwandi property, we confirm the levy of penalty u/s. 271(1)(c), save qua expenditure for which it has a plausible explanation; the assessee having completely failed to explain the same as representing repair and maintenance of building; rather, its explanation having been found as contrary to facts as well as inconsistent with the material on record - Its claim for depreciation on the Bhiwandi building would also follow suit inasmuch as there has been no explanation, much less its substantiation, as to the user of the Bhiwandi property or even of its being ready for its intended user – Decided partly in favour of Assessee. - I.T.A. No. 7718/Mum/2011 - - - Dated:- 14-10-2013 - Shri D. Manmohan, VP And Shri Sanjay Arora, AM,JJ. For the Appellant : Shri Yogesh A. Thar For the Respondent : Shri S. K. Madhuk ORDER Per Sanjay Arora, A. M. This is an Appeal by the Assessee challenging the confirmation of the penalty levied u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustain the levy of the penalty for concealment or furnishing inaccurate particulars of income. It is difficult to see in the instant case as to what is the concealment or inaccurate furnishing of particulars of income. Even if the expenditure is held to be capital in nature, it needs to be appreciated that the question of the expenditure being capital or revenue is a debatable one, and would, therefore, not lead to levy of penalty, which has to be on some definite, firm basis. In this regard, it is also relevant to note that the tax auditor has clearly indicated that no capital expenditure has been debited to the profit and loss account; the same must be considered as an expert's opinion, so that the assessee relying on the same cannot be subject to penalty. In fact, similar claims for the immediately preceding year, i.e., A.Y. 2003-04, had been allowed in assessment u/s. 143(3) of the Act without making any adjustment/s (PB pgs. 57 - 60). The same itself forms a reasonable cause for the assessee entertaining a belief as to the said expenditure being allowable, and for which he would take us to the extracts of the balance-sheet and the profit and loss account for that year (PB pg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the orders by the authorities below. It is apparent that the buildings are not complete as at the year-end, so that the question of the same being put to use or for incurring expenditure on their repair and maintenance does not arise. The assessee's explanations are completely unsatisfactory; the same not even revealing the nature of the expenditure stated to be toward repair and maintenance. How could it be when the buildings are incomplete? 3. We have heard the parties, and perused the material on record. 3.1 It firstly needs to be clarified that there are two buildings under reference, and while the claim is being preferred in respect of both the buildings together, the two would have to be considered separately, as the question is essentially one of fact/s, and which could not be and are not the same for both the buildings. With regard to the Kodaikanal building, the same stands capitalized in the financial year 1998-99. The assessee has accordingly claimed, and also been allowed, expenditure on repairs and maintenance at Rs.1.47 lacs (on building) and Rs.6.28 lacs (on garden maintenance) qua the said building in its assessment for A.Y. 2003-04 (PB pgs.51-55). Even the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also observed earlier, the expenditure for the said year is qua the kodaikanal property (PB pgs. 52 - 54). There is also no question of passive user when the building is itself incomplete, and being made ready for being put to use. Again, reference to AS 10 is also inapposite as the assessee has itself capitalized expenditure on the building in its books, and which is consistent with its explanation in assessment proceedings of the buildings being made ready for use. As it, therefore, appears to us, the said building is in the process of completion, work for which has been contracted and, in any case, was in progress. The construction or the acquisition of an asset cannot be said to be complete prior to it attaining a working condition, which has to be reckoned with reference to its intended user, as for the purpose of guest house in the instant case. It is, therefore, not the case, as has been sought to be projected by the assesse, that the Revenue has not accepted its claims in the absence of actual user, even though the building is ready for use, so that it is a case of passive user. Why, the detail of the expenditure itself reveals a good part of the expenditure to be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decide the issue in accordance with law, issuing definite findings of fact, and after hearing both the parties. Needless to add, he shall allow the assessing authority an opportunity to examine the material on which the assessee may rely in substantiation of its case. For the balance expenditure qua the Bhiwandi property, we confirm the levy of penalty u/s. 271(1)(c), save qua expenditure for Rs.1.93 lacs supra for which it has a plausible explanation; the assessee having completely failed to explain the same as representing repair and maintenance of building; rather, its explanation having been found as contrary to facts as well as inconsistent with the material on record. Its claim for depreciation on the Bhiwandi building would also follow suit inasmuch as there has been no explanation, much less its substantiation, as to the user of the Bhiwandi property or even of its being ready for its intended user. Finally, there is no case for the application of the decision by the apex court in the case of CIT vs. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC), the matter, as afore-stated, being purely factual, with the assessee being unable to make out any case. We decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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