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2019 (10) TMI 251

..... incurred has not been doubted per se. What is the subject matter of controversy is the nature of expenditure that is whether the expenditure incurred would acquire the character of capital expenditure or a revenue expenditure. CIT(A) has demonstrated in its order that the issue is sufficiently debatable and there is sufficient room for entertaining a different view. Conclusion drawn in the quantum proceedings would not automatically apply to the penalty proceedings which are distinct in character. The assessee is entitled to demonstrate its bonafide towards claim of expenditure in penalty proceedings. It is trite that every disallowance of claim cannot lead to as an automatic consequence in the form of penalty. The confirmation of addition/ .....

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..... the Revenue relied upon the penalty order passed by the AO and submitted in furtherance that the claim of the assessee towards certain expenditure on account of professional fees, travelling expenses and tender expenses aggregating to ₹ 4,75,07,667/- concerning new power projects were wrongfully claimed as revenue expenditure by the assessee. It was submitted that the expenditure so claimed was disallowed by the AO in quantum proceedings and held the same to be capital expenditure. Quantum additions have been upheld by the concurrent findings of the CIT(A) as well as of ITAT. The learned DR referred to the decision of the Tribunal in quantum proceedings against the assessee in ITA No. 531 & 3214/Ahd/2011 order dated 21.02.2014 in .....

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..... e facts, the learned counsel submitted that the assessee is engaged in the business of development of power projects and operations and maintenance of power projects. The development of power projects being the business of assessee, the assessee initiated several projects. A detailed note of each project was placed before the AO showing its status and reason for creating the project as recorded in para 6 of the assessment order. It was pointed out that various projects could not be persuaded for feasibility reasons ranging from stiff timeline and bid conditions, unsuccessful biding, bid process coordination extension of time not agreed and so on and so forth. 4.2 The learned counsel submitted that after the decision in the quantum proceedin .....

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..... /s. 271(1)(C) of the Act. The appellant raised grounds both on technical issue as well as on merit. There are certain undisputed facts, which requires consideration before adjudication, these are as follows: (i) The appellant during previous year debited in profit & loss account and claimed expenses of Rs, 4,75,07,667/- as revenue expenses. The A.O. after observing tax audit report in form no. 3CD at Cl. 8(a) that appellant's business is " The assessee is engaged in inter alia in the business of development of power project and operation and maintenance of power projects" but reflected income from "operation & maintenance fees & other income" called for details of such expenses. As per para 6 of Asst. Ord .....

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..... dum of Association (OCMA) was submitted. (b) Hon'ble Gujarat High Court in the case of GMDC Ltd. 314 ITR 322 and Hon'ble Gauhati High Court in the case of Assam Aesbestos Ltd. 263 ITR 357 held such expenses as revenue expenses. (c) The appellant relied on (i) Kesoram Industries & Cotton Mills Ltd. Vs. CIT [1992] 196 ITR 845 (Cat) (ii) CIT vs. Priya Village Roadshows Ltd. [2009] 185 Taxman 44 (Delhi) (iii) Indo Rama Synthetics (I) Ltd. Vs. CIT[2009] 185 Taxman 27(Delhi) (iv) CIT vs. Escorts Auto Components Ltd. [2010] 323 ITR 11 (Punj & Har.) (d) The A.O. has not granted depreciation an such capital expenditure. (e) The said expenditure had a direct and permanent nexus with the existing business operation and this loss is inh .....

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..... r the claim of such expenditure cannot be doubted or questioned. (ii) All the details & material facts were either disclosed or submitted before A.O. as and when asked for. None of these expenses were found bogus or excessive. These genuine expenses were disallowed being held as capital in nature. This preposition cannot lead to satisfaction that appellant has furnished inaccurate particulars of income. (iii) There are two opinions on this issue, Even Hon'ble Gujarat High Court's latest order in the case of GNFC (Supra) as relied on is in favour of appellant. This reflects that issue is contentious in nature and debatable. In view of latest order of Hon'ble Gujarat High Court, the ratio is binding on lower appeal authorities .....

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..... is entitled to demonstrate its bonafide towards claim of expenditure in penalty proceedings. It is trite that every disallowance of claim cannot lead to as an automatic consequence in the form of penalty. The confirmation of addition/disallowance in quantum proceedings is not conclusive on standalone basis. In the absence of any malafide in the action of the assessee, we see no reason to interfere with the order of the CIT(A). In the instant case, in our view, the CIT(A) has correctly applied law and deleted the penalty. We totally concur with the view expressed by the CIT(A). The Revenue could not demonstrate the lack of bonafide in the action of the assessee. The assessee with reference to several judicial precedents has demonstrated befo .....

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