DCIT, NEW DELHI vs. M/S. DLF UTILITIES LTD., NEW DELHI

Brief facts of the case are that during the scrutiny of return of income, the Ld. Assessing Officer made certain disallowances on the ground that though the assessee claimed to have set up their business on 01.04.2002 the same was in fact set up on 07.03.2003, as such, certain expenses are for pre-operational period and certain expenses are allowable only 1

In appeal Ld. CIT(A) found that there was no concealment of income nor any furnishing of inaccurate particulars, but its only the disallowance of expenditure claimed bonafidely by the assessee on application of law. On this premise while following the decision of the Hon’ble Apex Court in CIT vs. Reliance Petro Products P. Ltd. 322 ITR 158, Ld. CIT (A) deleted the penalty.

Revenue is, therefore, in this appeal before us stating that the Ld. CIT(A) failed to appreciate that the assessee had furnished inaccurate particulars of its income by claiming deduction and expenses for the period between 01.04.2002 and 31.12.2002 which were preoperative in nature and were liable to be capitalized.

It is the argument of the Ld. DR that in this matter against the quantum addition an appeal was preferred by the assessee and the Ld. CIT(A) did not agree with the assessee that the business was set up on 01.04.2002 and it was upheld by the ITAT also, as such, in so far as the disallowance for the proportionate period is concerned it amounts to furnish of inaccurate particulars, as such, the Ld. CIT (A) is not justified in deleting the penalty.

It is the argument on behalf of the assessee that in this matter the assessee claims to have setup the business on 01.04.2002, whereas according to the Ld. AO it was on 07.03.2002 but ultimately the Ld. CIT (A) and the ITAT held that the business was commenced on 01.01.2003. The date of set up of business is a mixed question of fact and law in this matter and it is highly debatable as is evident from the difference of opinion of the authorities.

We have gone through the record. In so far as the facts are concerned absolutely there is no dispute. Assessee claimed to have set up of business on 01.04.2002, whereas the Ld. AO held it to be on 07.03.2003 but ultimately the Ld. CIT (A) and a coordinate bench of this Tribunal found it to be on 01.01.2003. This difference of opinion between the authorities itself clearly shows that it is not an open and shut case but a debatable one involving the mixed question of facts in law. It is not the case of the Assessing Officer that the assessee suppressed any income or willfully distorted the figures relating to the income.

The entire dispute revolves around the allowances or disallowances are certain expenses which are dependent upon the date of set up of business. Authorities reached different conclusions basing on the same set of facts. The disallowance is the result of the disagreement of the Ld. AO with the view of the assessee.

Unless and until there is an averment and proof that there is concealment of income of furnishing of inaccurate particulars thereof, mere disallowance of an expense will not automatically trigger the levy of penalty. Decision of the Hon’ble Apex Court in Reliance Petro Products case (supra) is applicable to the facts of the case on hand. It binds the Ld. CIT (A) and this Tribunal as well. We, therefore, while respectfully following the same, do not find any illegality and irregularity in the findings of the Ld. CIT(A), as such, we find this appeal is devoid as merits. We, accordingly, dismissed the same.

In the result, the appeal of the Revenue is dismissed.