TaxTMI 
TaxTMI 
2014 (8) TMI 68
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....e as follows. The assessee in the present case is a leading film actor who derives income from profession of acting and advertisement assignments. The returns of income for both the years under consideration i.e assessment years 2003-04 & 2004-05 were filed by him on 28-11-2003 and 29-10-2004 declaring total income of Rs. 3,74,10,421/- and Rs. 4,32,19,821/- respectively. During the course of assessment proceedings, it was noticed by the A.O. that the assessee has claimed legal expenses of Rs. 12,90,000/- and Rs. 33,75,000/- in assessment years 2003-04 and 2004-05 respectively. He also found that the said expenses were incurred by the assessee for defending himself in various criminal proceedings pending in the court. According to the A.O., ....
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....otices were issued by the A.O. requiring the assessee to show cause as to why penalty u/s 271(1)(c) of the Act should not be imposed in respect of the said additions. In reply, it was explained by the assessee that the disallowance made on account of legal expenses was deleted by the ld. CIT(A) in both the years under consideration and the decision of the ld. CIT(A) on this issue was reversed by the Tribunal in the quantum proceedings purely on interpretation of law. It was contended that the confirmation by the Tribunal of the addition made on this issue not accepting the legal claim of the assessee thus did not represent concealment of particulars of his income by the assessee or furnishing of in-accurate particulars of such income to att....
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.... that the assessee was arrested by the local police and in order to get himself released, he had to engage some lawyers. He submitted that the criminal proceedings as a result of this case have continued thereafter and the assessee has been regularly incurring legal expenses to defend himself and obtain exemptions from the personal hearings from this case. He contended that if the assessee had not defended himself in the criminal proceedings and asked for personal exemptions, it would have resulted in his absence from all the movies/projects undertaken by him causing loss of revenue to him as well as to the producers of his films. He contended that it was thus necessary for him to incur the legal expenses during the years under consideratio....
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....en in the penalty order alleging any concealment of particulars of his income furnished by the assessee in respect of such legal claim, penalties imposed by the A.O. and confirmed by the ld. CIT(A) are liable to be cancelled. 5. The ld. D.R., on the other hand, strongly relied on the impugned orders of the ld. CIT(A) in support of the Revenue's case that penalties u/s 271(1)(c) of the Act for both the years are rightly imposed by the A.O. He submitted that the disallowance made by the A.O. on account of legal expenses has been finally confirmed by the Tribunal in the quantum proceedings holding that the said expenses claimed by the assessee representing his personal expenditure were not allowable in accordance with law. He contended that....
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....e fact that the claim of the assessee was accepted by the ld. CIT(A) on merit clearly shows that the said claim made by the assessee was based on a possible view of the matter. It also shows that the claim made by the assessee for deduction on account of legal expenses was a bonafide claim and as submitted by the ld. Counsel for the assessee at the time of hearing before us, the assessee has capitalized the similar legal expenses incurred in the subsequent years after having come to know about the disallowance made in the years under consideration which again goes to show the bonafide of the assessee. As further submitted by the ld. Counsel for the assessee, all the material particulars relevant to the claim made by the assessee were fully ....