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2016 (7) TMI 29 - ITAT AHMEDABAD

2016 (7) TMI 29 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - disallowance of expenditure spent on laying of cables for 950 KVA transformer as revenue expenditure - Held that:- As at the time when the expenditure of ₹ 959886/- was booked in the books as revenue expenditure the assessee was having certain belief which was duly supported with the agreement with DGVCL evidencing that the ownership and liberty regarding the use of transformer for supply of electricity to other consumers wil .....

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apital expenditure, certainly assessee will be entitled to claim depreciation but the crux is, it is allowable expenditure. Such situation certainly does not call for a penalty u/s 271(1)(c) of the Act. So, assessee cannot be held for furnishing inaccurate particulars. - Decided in favour of assessee - ITA No.2147/Ahd/2013 - Dated:- 1-6-2016 - Shri R. P. Tolani, JM, & Shri Manish Borad, AM. For The Appellant : Shri P. F. Jain, AR For The Respondent : Shri B.P.K. Panda, Sr.DR ORDER PER Manish .....

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eing amount spent on cables on the ground of furnishing inaccurate particulars of income without property appreciating the facts of the appellant. 2. On facts of the appellant no such penalty ought to have been levied. 3. The appellant craves leave, to add to alter and/or modify any ground of appeal. 2. Briefly stated facts as culled out from the records are that the assessment u/s 143(3) of the Act for Asst. Year 2007-08 was framed on 24.12.2009 at an assessed loss of ₹ 37,87,178/- after .....

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nsformer as revenue expenditure which was denied by ld. Assessing Officer by treating the same as capital in nature. Ld. Assessing Officer was not convinced with the reply of assessee and imposed penalty u/s 271(1)(c) of the Act. Penalty was confirmed on another issue also relating to payment of ₹ 93552/- on account of legal and professional charges for non-furnishing of copies of bill(s). 4. On appeal before ld. CIT(A) against the order u/s 271(1)(c) of the Act penalty was confirmed on th .....

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,886/- on account of electric power. The appellant has claimed these expenses as revenue whereas the A.O held to be capital expenditure. The facts are that the appellant started manufacturing pharmaceuticals from 1/2/2003 and separate unit was set up at Vapi, Silvasa which started commercial production in May 2006. The appellant made certain payments to Dakshin Gujarat Electricity Board on 17/8/2005 out of which an amount of ₹ 9,58,382/- was adjusted by the electricity board towards cable .....

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. There was an inadvertent error of not including it in preoperative expenses. The appellant during the appellate stage for the quantum proceedings claimed that since it was not in the owner of the P & M it should be taken as a revenue expenditure. The appellant has further submitted that the mistake was a bonafide one. The fact remains that the expenditure pertain to the period prior to commencement of production and therefore, irrespective of the nature of expenditure that is capital or re .....

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re. The deposit with the electricity board was made in the month of August 2005, the power was connected by the electricity board in the month of October 2005 and the commercial production started in May 2006. The adjustment of the amount of ₹ 9,58,382/- has been made before commencement of production and there is no doubt about it. The claim of the appellant that the journal entry was passed after 6 months of start of production and it resulted in the wrong claim is without any merit as t .....

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t is not applicable to the current facts as there is no dispute about the nature of expenditure in the present case. The expenditure clearly pertains to preoperative period whereas in the cases quoted by the appellant, there was a doubt about the nature of the claim. In view of the above clear facts, I am constrained to hold that the imposition of penalty u/s. 271(1)(c ) on the appellant was justified on this issue. The action of the A.0 is accordingly upheld. Therefore, this issue is dismissed. .....

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med by the appellant was false. It was a different matter that due to non-availability of the bill the appellant could not substantiate the claim before the A. 0 and the addition was made. The expenditure has not been to proved to be bogus and therefore, it cannot be held to be concealment of income and no penalty cannot be imposed for the same. The penalty imposed by the A 0 on this issue therefore, directed to be deleted. 5. Now the assessee is in appeal before the Tribunal against the order o .....

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city to other customers and payment made by the assessee to DGVCL is merely contribution of the total cost on transformer. He further submitted that there is a clear stipulation evidencing the ownership and liberty of DGVCL regarding the use of transfer for supplying electricity to other customers. Therefore, as the ownership is not vested with the assessee but to DGVCL it was claimed as revenue expenditure. However, the lower authorities denied assessee s claim of revenue expenditure and treate .....

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in ITA No.1574/Ahd/2012 for Asst. Year 2006-07 dated 18.07.2014 . 8. On the other hand, ld. DR along with supporting the orders of lower authorities also placed reliance on the decision of Hon. Delhi High Court in the case of CIT vs. Zoom Communication Pvt. Ltd. in ITA No.07/2010 dated 24.05.2010. 9. We have heard the rival contentions and perused the material on record. Through this appeal, assessee is aggrieved with the action of ld. CIT(A) upholding the penalty on the disallowance of ₹ .....

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2006. Out of the total deposit held with DGVCL a sum of ₹ 959,886/- was adjusted by DGVCL towards cable laying charges of 950 KVA and entry for such adjustment was passed in the books of account by the assessee on 27.09.2006 and claimed as revenue expenditure. However, ld. Assessing Officer treated the same as capital in nature and is further confirmed by ld. CIT(A). 10. Now examining the above facts in the light of provisions of section 271(1)(c) of the Act which deals with imposition of .....

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ot found to be incorrect, simply by making incorrect claim, it does not amount to concealment of particulars. By no stretch of imagination making an incorrect claim tantamounts to furnishing inaccutate particulars. When the details supplied by the assessee in the return are not found to be incorrect or erroneous or false, there is no question to invite penalty u/s 271(1)(c). A claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income by the .....

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es and on account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee company. We cannot lose sight of the fact that the assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily1 subjected to audit. In the absence of any details from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the asses .....

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e in respect of the deduction due to certain assets being written off was a bonafide explanation. The Tribunal has nowhere held that it was due to oversight that the amount of this deduction could not be added while computing the income of the assessee company. 23. As regards deduction on account of income tax paid by the assessee, the Tribunal felt that since no person would claim the same as deduction, to evade payment of tax, the claim made by the assessee was not malafide. In the absence of .....

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tances prevailing in this case and, therefore, the decision of the Tribunal in this regard suffers from the vice of perversity. We cannot accept the general proposition that no person would ever claim the amount of income tax as a deduction with a view to avoid payment of tax. No hard and fast rule in this regard can be laid down and every case will have to be decided considering the facts and circumstances in which such a deduction is claimed, coupled with as to whether the explanation offered .....

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t of the assessee. The appeal stands disposed of accordingly. 13. From going through the decision referred and relied by the ld. DR we observe that the issue in that case related to claim of incometax paid as revenue expenditure and write off of ₹ 1324539/- under the head equipment and for making such incorrect claim penalty imposed u/s 271(1)(c) of the Act was confirmed. However, we observe that the facts of the case in the appeal before us are fairly different because at the time when th .....

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