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TMI Blog2023 (4) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter, holding therein that no reply to be filed. 04. That the learned CIT (A) erred in confirming penalty of Rs. 3400000/ under section 271(1)(c) of the Income Tax Act. 05. That the penalty levied is not based on the facts of the case and needs to be deleted. 06. That the assessee company craves leave to add, alter, amend and/or delete any of the grounds of appeal. 2. The assessee is a Private Limited Company and engaged in the business of construction of commercial complex. The assessee filed its return of income for the year under consideration on 25.09.2012 declaring total income at NIL with current year loss of Rs. 1,03,28,211/-. During the scrutiny assessment Ld. AO noticed that the assessee has debited in the Profit and Loss account the expenditure under the head Employees benefit expenses, depreciation, administrative and other expenses total amounting to Rs. 1,03,54,633/-. Since there was no sale during the year under consideration, therefore, the Ld. AO was of the view that all the expenses must have been capitalized instead of showing as revenue expenditure. Ld. AO consequently, disallowed these expenses total amount to Rs. 1,03,54,633 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim and cannot be held as assessee has committed any default of concealment of income or furnishing inaccurate particulars of income. In support of his contention he has relied upon the judgment of Hon'ble Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 and submitted that the disallowance of claim which is not allowable as per the provisions of law by itself will not amounting to furnishing of inaccurate particulars of income when the assessee has disclosed and furnished all the relevant facts and details. He has also relied upon the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Praveen B. Gada (HUF) (2011) 18 ITJ 65 (MP). 4. On the other hand, Ld. DR has submitted that in the quantum appeal Ld. CIT (A) has decided this issue against the assessee and therefore, addition made by the AO has attained finality as assessee has not filed further appeal. The assessee has made impermissible claim of expenses when there is no business activity of the assessee particularly no sale during the year under consideration. Therefore, the claim of the assessee was rightly disallowed by the AO as incorrect claim and consequently levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted by the Ld. AO but the claim was disallowed only on the ground that during the year under consideration there was no sale and therefore, these expenses must be capitalized instead of showing as revenue expenditure. It is also not in dispute that the very by nature of these expenses reveals that these are not falling under the capital field but all are revenue expenditure as these are all incurred for keeping the assessee company alive and going concern. It is also not the case of the department that the assessee has closed its business but it was only an isolated instance for the year under consideration, where there were no sales. When inherent nature of these expenses are revenue then the claim of the assessee is a bona fide claim and the assessing officer has disallowed said claim not on the ground of correctness or genuineness of the expenditure incurred by the assessee but due to no sale during the year under consideration. It is a simple case of difference of opinion as the assessee has claimed these expenses as allowable whereas the Ld. AO has opined that the expenses are not allowable for want of any sale during the year and held that all the expenditure ought to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with Explanations indicated with the said Section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, willful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra) was overruled by this Court in Union of India Vs. Dharamendra Textile Processors (cited supra), was that according to this Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Mumbai & Anr. (cited supra). However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors (cited supra), no fault was found with the reasoning in the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature. 8. Thus, when particulars provided by the assessee in the return of income are found to be correct except the allowability of the claim due t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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