TMI Blog2014 (1) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... bar under the name and style "Tavern on the Greens". The assessee company was incorporated on 5-10-2005 with business objects of hospitality, including managing hotels and restaurants and in furtherance thereof entered into an agreement on 10-10-2005 with AHPL to take over the management of restaurant and bar under the name and style of "Climax". For attraction of customers it was decided to renovate, refurbish and improve the existing set up. As per agreement, assessee incurred an expenditure of Rs. 44,03,606/- on refurbishing, repairs and renovation of these premises and filed the return of income claiming the same as revenue expenditure. The Assessing officer treated this amount as capital expenditure, which was challenged by assessee. The ITAT vide order dated 23-10-2009 upheld the action of assessing officer. Qua this addition, the assessing officer initiated penalty proceedings u/s 271(1)(c) and vide penalty order dated 30-6-2010, levied a penalty of Rs. 14,08,142/- by following observations: "A fresh show cause notice u/s 271(1)(c) was issued to the assessee on 18-05-2010 and the assessee has filed reply. In its reply the assessee has stated the same facts as already subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of the ld AR and perused the order passed by the AO. It is not in dispute that the expenditure I question was a capital expenditure as has been held by the ld. CIT(A) and the Hon'ble ITAT. Therefore, the arguments of the ld. AR that the expenditure was a revenue expenditure cannot be accepted as the Hon'ble ITAT has given categorical findings that the expenditure was a capital expenditure. Regarding the question as to whether the penalty is leviable or not, the ld. AR submitted that the appellant has disclosed all the facts in the return of income and ha snot concealed any facts. On perusal of a case records, I find that the appellant has shown the expenditure in Schedule 12 of the Profits and Loss Account as Rs. 44,03,606/- under the head of repair and renewal of leased premises. Since the appellant ha shown the expenditure in the Profit and Loss Account, it can not be said that the appellant has concealed the particulars of its income. The disallowance of expenditure of Rs. 44,03,606/- occurred due to difference of opinion between the appellant and the AO. Since there is very thin line between the revenue and capital expenditure, the difference in opinion is very much p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, I find that the facts of t he appellant's case are similar to the case of CIT vs. HMA Udyog (P) Ltd. (supra). In that case also the expenditure was claimed by the assessee as revenue expenditure on account of extensive repairs. However, the AO held the said expenditure as capital expenditure and in appeal the CIT(A) and ITAT upheld the findings of the AO. Later on, the penalty u/s 271(1)(c) was levied against the said disallowance of expenditure and Hon'ble Delhi High Court dismissing the departmental appeal observed that it was a debatable issue and penalty was not leviable against the disallowance of said expenditure by treating the same as capital expenditure. Considering the facts and circumstances of the case, legal provision and judicial pronouncements, I hold that the ratio laid down by Hon'ble Delhi High Court in the case of CIT vs. HMA Udyog (P) Ltd. (supra) is applicable to the appellant's case. Therefore, respectfully following the judgment of Hon'ble Jurisdictional High Court, the penalty levied by the AO is cancelled. The grounds of appeal are allowed." 2.2. Aggrieved. Revenue is before us. 3. Ld. DR relied on the order of assessing officer and contends th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court's proposition that a debatable issue cannot be a basis for imposition of penalty u/s 271(1)(c). The bona fide belief of the assessee has been questioned by the assessing officer on summary assumptions without analyzing and appreciating the facts of the case. (iv) Further reliance is placed on Hon'ble Supreme Court judgment in the case of Reliance Petro Products 322 ITR 158 for the proposition that if the assessee has furnished details and made a claim in the return of income, merely because the same is disputed by assessing officer, cannot be held to be furnishing of inaccurate particulars or concealment of income. The analogy of this judgment is clearly applicable inasmuch as all the details about the claim were properly disclosed in the return of the assessee. Assessing officer has chosen to treat the expenditure from revenue head to capital head only on his interpretation about the facts. Such debatable interpretation cannot be held to be a reason for imposition of penalty u/s 271(1)(c). Further reliance is placed on the ratio of decisions in the cases of:- CIT v. Manibhai Bros. (2007) 294 ITR 501 (Guj) CIT v. Auric Investment Securities Ltd. (2007) 163 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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