TMI Blog2017 (1) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... being correct cannot be totally ruled out. Under these circumstances, it can certainly be said that the claim of the assessee was not disproved by the AO. Further, it is noted from the order of the Tribunal dated 17.04.2014 passed in the quantum proceedings that it was found by the Tribunal after analyzing all the facts and circumstances of the case that assessee’s case was unsubstantiated and unproved. Apart from that, it is further noted by us that full particulars of expenses claimed have been furnished. Nothing has been brought on record by the AO indicating if any expense was bogus or false. Thus though the claim of expenses made by the assessee has been found to be not sustainable by the AO, but without bringing anything on record to show whether any inaccurate particulars were filed by the assessee or if any concealment was done by the assessee. Rather, in the given facts and circumstances, it can be said that the claim of the assessee was bonafide. Thus we do not find it to be a fit case for levy of penalty - Decided in favour of assessee - ITA No.2486/Mum/2014 - - - Dated:- 15-12-2016 - Shri Mahavir Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and it is not necessary that all categories of its business activities must start either simultaneously or that the last stage must start before it can be said the business was set up . 3.1. The AO considered the submissions of the assessee but found the same as unacceptable. It was held by him that no business was done by the assessee during the year, therefore entire expenses were disallowed. The assessee had filed return at loss of ₹ 36,63,262/- which was converted into nil by the AO by disallowing entire expenses claimed in the Profit Loss Account. The matter reached up to Tribunal where the disallowance made by the AO was confirmed. 3.2. Subsequently, the penalty proceeding were initiated by the AO u/s 271(1)(c). The assessee was asked to justify, why penalty should not be levied. In response the assessee explained to the AO vide its letter dated 23.01.2013 as under: (a) The assessee company was incorporated in February, 2005. The necessary infrastructure was put in place by acquiring off ice premises, staff , furniture and fittings etc. A whole time Director was also appointed. (b) The assessee company therefore contended that as the company was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 11.02.2005. The company had appointed its managing director Mr. K. Sugit Reddy, who was Chartered Accountant by profession. He was a professional employee and did not own any ownership in the company. The company incurred expenses on salary of its employee which included fee for his children as per terms of the employment, the rent of office premises, brokerage for office taken on rent, legal and professional fee, printing stationary and motor expenses for the purpose of business of the company. The assessee had made all the requisite arrangements to cater to its customers. Thus, in the view of the same, though business of the assessee was set up, but could not be commended for want of orders from the customers. But, as per law expenses are allowable immediately after the setting up of business. Therefore, these expenses were claimed in the profit and loss account and in the return under the head business. Thus, the claim of the assessee was made in bonafide manner and full disclosure was made in the profit and loss account. Nothing in-genuine or bogus or false could be discovered by the lower authorities. Under these circumstances, no penalty was leviable, therefore penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005-06), but in absence of any order from the customers, no revenue could be earned. The claim of the assessee cannot be said to be without any basis. Under these circumstances, the view adopted by the assessee that its business was set up cannot be said to be devoid of any bonafide belief. As per AO, assessee s claim of set up of business in A.Y. 2005-06 remained unsubstantiated therefore, it was rejected by him. But, it is noted that the AO was also not able to disprove the claim of the assessee. The possibility of the claim of the assessee being correct cannot be totally ruled out. Under these circumstances, it can certainly be said that the claim of the assessee was not disproved by the AO. Further, it is noted from the order of the Tribunal dated 17.04.2014 passed in the quantum proceedings that it was found by the Tribunal after analyzing all the facts and circumstances of the case that assessee s case was unsubstantiated and unproved. 4.8. Apart from that, it is further noted by us that full particulars of expenses claimed have been furnished. Nothing has been brought on record by the AO indicating if any expense was bogus or false. Thus, taking into account, all the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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