TMI Blog2022 (10) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... he action of the Assessing Officer was tax neutral to the assessee, no appeal was preferred before the appellate authority. But this does not mean that the assessee has accepted the action of the Assessing Officer. In our considered opinion, whether an expenditure is of capital in nature or Revenue in nature, or whether part of the expenditure is capital and part is Revenue, is a highly debatable issue and, therefore, in our humble opinion, no penalty is leviable u/s 271(1)(c) of the Act on such a debatable issue. At the same time, we cannot ignore the fact that disallowance is on adhoc basis and for that reason also, no penalty is leviable. Considering the facts of the case in totality, we do not find any reason to interfere with the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that part of the expenditure i.e. 60% is disallowed as capital expenditure and 40% is allowed as Revenue expenditure. The amount disallowed as capital expenditure was treated as intangible asset and the Assessing Officer allowed depreciation as per provisions of section 32 of the Act. 6. The assessee did not prefer any appeal against this action of the Assessing Officer as tax effect was neutral. 7. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act and accordingly, notice was issued and served upon the assessee. 8. During the penal proceedings, once again referring to the assessment proceedings, the Assessing Officer formed a belief that the assessee has furnished inaccurate particulars of income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer while levying penalty u/s 271(1)(c) of the Act. 12. Per contra, the ld. counsel for the assessee reiterated what has been stated before the first appellate authority. 13. We have given thoughtful consideration to the orders of the authorities below. The undisputed fact is that the Assessing Officer allowed 40% of the total expenditure claimed by the assessee and treated 60% as capital expenditure. However, we do not find any basis for this estimation of the Assessing Officer. 14. A perusal of the order of the ld. CIT(A) shows that similar disallowance was made by the Assessing Officer in the preceding Assessment Years i.e. 2011-12 and 2012-13 and in Assessment Year 2011-12, the Assessing Officer considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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