WEST-INN LIMITED,AHMEDABAD vs. THE DCIT.,CIRCLE-4(1)(1), AHMEDABAD

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ITA 2430/AHD/2018Status: DisposedITAT Ahmedabad05 July 2021AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that merely because an expenditure was disallowed as capital instead of revenue, it does not automatically attract penalty under Section 271(1)(c) if there was no concealment or furnishing of inaccurate particulars with intent to evade tax.

What were the facts?

The Assessing Officer disallowed share capital expenses treated as revenue by the assessee and imposed a penalty. The CIT(A) confirmed this penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when an expenditure is disallowed due to its capital nature, despite the assessee treating it as revenue in good faith.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’

Before: SHRI RAJPAL YADAV, VICE- & SHRI WASEEM AHMED

For Appellant: Shri K.C. Thakor, AR
Hearing: 30/06/2021Pronounced: 05/07/2021

आदेश/O R D E R

PER RAJPAL YADAV, VICE-PRESIDENT

1.

Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-8, Ahmedabad dated 3.10.2018 passed under section 271(1)(c) of the Income Tax Act, 1961 for the Asstt.Year 2011-12.

2.

Only grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of Rs.99,653/- imposed by the ld.AO under section 271(1)(c) of the Act.

2 3. With the assistance of the ld.representatives, we have gone through the record and perused the impugned order. As the facts emerge, in a scrutiny assessment under section 143(3) of the Act, the ld.AO made various additions including addition on account of disallowance of share capital expenses. This action of the ld.AO in making the additions was challenged before the first appellate authority, who deleted the same except disallowance on account of share capital expenses incurred by the assessee for increase of authorised share capital. The reason for disallowance on account of share capital expenses was that, the assessee treated share capital expenditure as revenue and debited the same to the profit & loss account. According to the ld.AO this expenditure was not allowable as per the provisions of law, as the same was capital in nature. This addition was confirmed by the assessee ld.CIT(A). The ld.AO initiated penalty under section 271(1)(c) of the Act qua the share capital expenditure, for furnishing inaccurate particulars of income and imposed penalty of Rs.99,653/- being 100% of tax sought to be evaded. This was confirmed by the first appellate authority by holding that the assessee has made patently a wrong claim, which could not be said to be a bona fide mistake. Aggrieved assessee is now before the Tribunal.

4.

On due consideration of the facts and circumstances of the case, we find that the issue on hand is about treatment of the expenditure as to whether revenue or capital. The assessee has given all the material facts to the computation of total income, and furnished details and explanation with regard to the claim of expenditure incurred for increase of share capital, and nothing was concealed or furnished inaccurate. It is settled law that 3 merely because assessee claimed expenditure as revenue, which was held as capital by the Assessing Officer, penalty for concealment could not be imposed, more so when there is no finding by the Revenue authorities that there is a conscious and deliberate attempt by the assessee either by concealment of income or by furnishing inaccurate particulars of income for evading taxes. The details and explanation given by the assessee bona fide, but was not appreciated by the Revenue authorities. Simply because a particular amount of expenditure is not allowable, the same cannot be said that inaccurate particulars had been filed so as to visit the provisions of section 271(1)(c) of the Act. No mala fide can be attributable to the assessee in treating the impugned expenditure as revenue instead of capital in nature. Therefore, we are of the view that this is not a fit case where the provisions of section 271(1)(c) is attracted for levy of penalty, and thus we delete the impugned penalty, and set aside the orders of the Revenue authorities passed under section 271(1)(c) of the Act.

5.

In the result, appeal of the assessee is allowed.

Order pronounced in the Court on 5th July, 2021.

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