2013 (1) TMI 186

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....revenue authorities to conclude that the assessee's conduct was malafide in claiming the expenditure towards renovation and other repairs which was ultimately disallowed. The brief facts to the extent they are relevant are that as on 26.2.2002 the assessee assumed the management and affairs of the Laxmi Vilas Palace Hotel, Udaipur from India Tourism Development Corporation (ITDC). It filed return disclosing an amount of Rs. 2,86,58,220/-crores as loss. The assessing officer disallowed what was claimed by the assessee as revenue expenditure to the tune of Rs. 45,48,371/- on account of renovation of bar and lounge, corridor, guest rooms, staircase, entrance lobby and other spaces. The assessee's claim that this expenditure has been incurred b....

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....rect in law would not amount to giving inaccurate particulars of the income of the assessee but if the claim, besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) would come into play. If the assessee's claim is bona fide, then he will not be liable for penalty. Therefore, the precise question to be adjudicated by us is whether the assessee's claim was bona fide or mala fide. 9. After considering the facts of the case and the arguments of both the sides, we do not find any justification to hold the assessee's action to be mala fide. Undisputedly, during the year under consideration, the assessee acquired the hotel, viz., Laxmi Vilas Palace, Udaipur under the disinvestment process from ITDC. The Assessing Office....

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....entrance lobby etc. is a capital or revenue is a highly debatable issue. Therefore, merely because the expenditure was claimed by the assessee as a revenue expenditure but treated as capital expenditure by the Revenue would not be sufficient to hold that the assessee either furnished inaccurate particulars or concealed the income. It is not the case of the Revenue that the assessee furnished any inaccurate or false details. Moreover, in the case of the assessee, the returned loss was Rs. 2,86,58,220/- while the loss determined by the Assessing Officer after disallowance of certain expenditure was Rs. 12,09,190/-. The assessee has filed the return of income late for the year under consideration. Therefore, it is not entitled to carry forward....