TMI Blog2018 (10) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty levied on this very ground is not sustainable. The CIT(A) has dealt with the issue threadbare and reached to the conclusion that even if the assessee has not carried any business during the previous year relevant to the assessment year, the expenses debited towards depreciation, bad debts, administrative expenses which are statutory in nature are to be incurred for complying with legal and statutory requirements under various laws are allowable deductions. Even if the AO disallowed these expenses during the course of Assessment, penalty is not leviable as the AO has not pointed out the concealment of particulars of income or furnished inaccurate particulars of income by assessee. No penalty is leviable in the instant case. - Decided in favour of assessee. - ITA No.329/Mum/2017 - - - Dated:- 30-8-2018 - Shri R.C. Sharma, AM And Shri Sandeep Gosain, JM For the Revenue : Shri Ashish Kumar For the Assessee : Shri Sanjay Kapadia ORDER PER R.C.SHARMA (A.M): This is an appeal filed by the Revenue against the order of CIT(A)- 3, Mumbai dated 27/10/2016 for A.Y.2012-13 in the matter of imposition of penalty u/s.271(1)(c) of the IT Act. 2. Rival co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curate particulars of its income to the tune of ₹ 85,65,690/- and claimed carry forward loss to the extent of Rs. 6.3 The AO has further noticed that the AR agreed that expenses are personal in nature during the course of assessment proceedings. Having noticed so, the AO came to the conclusion that the appellant has furnished inaccurate particulars of total income and imposed penalty of ₹ 27,00,000/- in view of the disallowances made. 6.4 On the other hand the appellant submitted that during the course of assessment proceedings the AO disallowed business expenses of ₹ 86,65,690/- on the ground that there is no income earned during the year under consideration and thus, the said expenses are personal expenses not incurred for the purpose of business. The AO initiated penalty u/s. 271(1)(c) for showing inaccurate particulars of income. During the course of penalty proceedings u/s, 271(1) (c) it was submitted to the AO that the expenses disallowed of ₹ 86,65,690/- are incurred for business purpose only and are not personal in nature. Further, it was explained to the AO that the company is engaged in the business of financial services for its clie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no business activity, certain expenses are fixed which are to be incurred to continue the existence of the entity and the business activity. 6.9 Whatever expenses the appellant has claimed are clearly of fixed nature, namely Employee benefit expenses, which include salaries to the director and staff, depreciation and amortization expenses, pertaining to fixed assets which the appellant has owned and entitled for depreciation as per IT Act and Other expenses, also of fixed nature, such as rent, repair and maintenance, insurance, rates and taxes, communication expenses, travelling and conveyance, printing and stationery, legal and professional fees, payment to auditors and miscellaneous expenses of petty nature. The AO did not point out any expenses which are inadmissible under the IT Act even if there is no business income during the year. His observation that there is no business activity during the year, that these expenses are inadmissible are to be disallowed. This notion of the AO is wrong and not in accordance with the provisions of IT Act in determining the taxable income. The fundamental principle of determining the taxable income is that income includes loss. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of an agreement made by himself. This being so, it could not be said that the assessee was not aggrieved by the orders of assessment made by the Assessing Officer on the basis of the agreement made by theAR and consequently he could not be denied the right of vindicating his grievance before a higher forum. 6.13 The Hon'ble Bombay High Court in the case of Dayaram Vasudeo [57 Taxman 209 (Bom)], held that it u;as agreed by the representative on behalf of the assessee to make the addition if the assessee filed an affidavit before the Tribunal stating that though the Chartered Accountant had agreed to the addition, the ITO has erred in adding Rs. i3,i77/~ and as such there could be estoppel against the assessee with regard to the addition. It was held that it was not proper to remand the matter to the Tribunal for giving effect to the Court's order on the factual aspects of the merits, as the affidavit of the Chartered Accountant of the assessee gave full details of the merits of the case and the contents thereof had been totally accepted by the Tribunal itself. Under the circumstances, the Tribunal was justified in deleting the addition made by the ITO. 6.14 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by any documentary evidence. Perusal of the expenses claimed by the appellant are allowable expenses under the IT Act, even if there is no income and no business activity, since some of the expenses are fixed in nature and bound to incur even if there is no income during the financial year. On the contrary, the AO should have done justification to the appellant by determining the loss after allowing the expenses as all expenses are of revenue nature and allowable u/s 37 of the IT Act. 6.18 In view of the above facts and circumstances of the case, I am of t the firm opinion that even if the appellant has not carried any business during the previous year relevant to the assessment year, the expenses debited towards depreciation, bad debts, administrative expenses which are statutory in nature are to be incurred for complying with legal and statutory requirements under various laws are allowable deductions. 1 Even if the AO disallowed these expenses during the course of Assessment, penalty is not leviable as the AO has not to point out the concealment of particulars of income or furnished inaccurate particulars of income by appellant. In view of the same, no penalty is levia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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