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Asst. Commissioner of Income-tax, Circle – 16 (3) , Hyderabad Versus M/s Prajay Holdings Pvt. Ltd.

2016 (7) TMI 268 - ITAT HYDERABAD

Penalty u/s 271(1)(c) - inaccurate particulars of income by debiting the expenses towards ROC fees to the P&L A/c - revenue or capital nature - Held that:- Assessee has not explained as to why it made the claim for the expenditure in the return of income when the Hon’ble Apex Court laid down the law in the case of Punjab State Industrial Development Corporation Ltd. (1996 (12) TMI 6 - SUPREME Court ) wherein the nature of expenditure claimed by the assessee was held to be capital. - We fail .....

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was due to bonafide error. Now, assessee cannot argue before us that the Apex Court decision itself can be distinguishable simply because the different High Courts had expressed different opinion. Once, the Hon’ble Apex Court laid down decision, it becomes the ‘law of the land’. Hence, the assessee comes within the purview of the explanation 1 of section 271(1)(c) of the Act for levy of penalty for furnishing of inaccurate particulars. Claim made by the assessee to be not due to a bonafide erro .....

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case are that the assessee company engaged in the business of "Property Developers", filed its e-return of income for the Asst. Year 2008-09 on 30.09.2008 admitting total loss of ₹ 92,25,188/- under normal provisions and Book Loss u/s. 115JB was admitted at ₹ 91,90,000/- The case was selected for scrutiny as per CASS and statutory notices were issued. 2.1 During the course of assessment proceedings u/s 143(3) of the I.T. Act, on verification of the details filed, it was not .....

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Profit & Loss a/c and claimed as Revenue expenditure. Referring to the Apex Court decision rendered in the case of M/s Punjab State Industrial Development Corporation Ltd. Vs. CIT, AO observed that the ROC fees paid towards enhancement of authorized share capital was held to be in the nature of capital expenditure. The same was confronted with the assessee and as the expenditure incurred gives enduring benefit to the assessee, the assessee was asked to explain why the same should not be trea .....

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o the P&L A/c, the AO initiated penalty proceedings u/s 271(1)(c) by issue of notice u/s 274 r.w.s. 271 of the IT Act on 22/12/2010 and again a letter dated 10/06/2011. In response, the assessee filed written submissions on 20/06/2011 wherein it was stated as under: the assessee company has furnished all the necessary details/ particulars relating to expenditure incurred to increase of share capital paid to ROC. Moreover, the assessee's representative agreed to add the- same though, it i .....

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₹ 39,90,500/- u/s 271(1)(c) by holding that this is a fit case to levy penalty u/s 271(1)(c) for furnishing inaccurate particulars of income and for failure to furnish explanation during the course of assessment proceedings and also for failure to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by it. 3. Aggrieved, the assessee preferred an appeal before the CIT(A) 4. Before the CI .....

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No. 3859/Del/2010, dated 07/01/2011, cancelled the penalty levied by the AO u/s 271(1)(c) by observing as under: 6.1 ………..it is clear that there is a difference of opinion on the issue and there is no concealment of any facts by the appellant. It is a settled law that for mere disallowances, even though they may be confirmed in appeal, penalty for concealment of income is not attracted. I further find that the AO has not placed on record an fact to show that the appellant ha .....

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es having enduring benefit on the revenue generating capacity of a concern be treated as capital expenditure. 3. The CIT (A) ought to have appreciated the fact that the facts of the case in respect of CIT Vs Reliance Petro Products P Ltd are not applicable to the present case as the assessee has not made and claim of deduction. 4. The CIT(A) ought to have considered a fact that the assessee offered an explanation at the time of appeal which he is not able to substantiate as to how the expenses h .....

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me was confronted with the assessee, there is no clarification from the assessee and it was accepted. It clearly shows that assessee had claimed the expenses deliberately as revenue. He submitted that CIT(A) has relied on M/s Reliance Petro Products (P) Ltd. (supra),but, the facts of this case are different. He submitted that this is a fit case for penalty. He further submitted that the accounts were audited by M/s Deloitte and they are aware of the statutory position, in such case, assessee is .....

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rstood from the order of the Hon ble Supreme Court, the issue has been answered in favour of the assessee by the High Court of Madras, Karnataka AP & Kerala and some of the Hon ble High Court are in favour of the revenue i.e. Allahabad, HP, Delhi, Kolkatta, Punjab, Gujarat & Rajasthan. The Hon ble Supreme Court has appreciated the difference of opinion among the different High Courts and followed the decision of the majority and held in favour of the revenue. Ld. AR submitted that in vie .....

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of income or filing of inaccurate particulars. 8.2 Ld. AR further submitted that CIT(A) has rightly allowed the assessee s appeal by considering the rationale of the Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd. (supra). He also relies on the decision in the case of Alankit Assignments Ltd. VS. DCIT, ITA No. 3859/Del/2010. 9. Considered the submissions of both the parties and material facts on record. There is no dispute that assessee had claimed the ROC fees paid .....

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ure incurred by a company in connection with issue of shares with a view to increase its share capital, directly related to expansion of capital base of the company, and is capital expenditure even though it may incidentally help in the business of the company, and in the profit making. It means, the nature of this expenditure is clearly explained by the Hon ble Apex Court and hence there is no question of forming two opinions regarding the nature of such expenditure. In such cases, there cannot .....

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entionally giving wrong particulars/information with a hope that the return of income may not come under scrutiny and return of income may be accepted as filed on the basis of self-assessment cannot be ruled out. 11. Coming to the facts of the present case, we find that the assessee has not explained as to why it made the claim for the expenditure in the return of income when the Hon ble Apex Court laid down the law in the case of Punjab State Industrial Development Corporation Ltd. (supra) wher .....

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