AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 44
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...., Circle 3(1), Mumbai) has erred in levying penalty of Rs. 13,07,785/- u/s 271(1)(c) of the Income Tax Act, 1961 and further the Learned Commissioner of Income Tax (Appeals)-5 has also erred in confirming the penalty levied by the Assessing Officer." 2. During the course of hearing, arguments were made by Shri B.P. Agarwal, Authorised Representatives (AR) on behalf of the Assessee and by Shri M.V. Rajguru, Departmental Representative (CIT-DR) on behalf of the Revenue. 3. The brief background is that the assessee company was incorporated for carrying out the business as operators of carriers, transport vehicles, agricultural vehicles and other vehicles. During the course of assessment proceedings, it was noted by the AO that profit and lo....
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....therefore entire expenses were disallowed. The assessee had filed return at loss of Rs. 36,63,262/- which was converted into nil by the AO by disallowing entire expenses claimed in the Profit & Loss Account. The matter reached up to Tribunal where the disallowance made by the AO was confirmed. 3.2. Subsequently, the penalty proceeding were initiated by the AO u/s 271(1)(c). The assessee was asked to justify, why penalty should not be levied. In response the assessee explained to the AO vide its letter dated 23.01.2013 as under: "(a) The assessee company was incorporated in February, 2005. The necessary infrastructure was put in place by acquiring off ice premises, staff , furniture and fittings etc. A whole time Director was also appointe....
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....he case of Reliance Petroproducts Pvt. Ltd." 3.3. But, the AO was not satisfied with the submissions of the assessee. It was observed by him that entire facts and circumstances of the case suggest that neither the business of the assessee was set up nor it was commenced. Thus, the assessee was not justified in claiming the expenses, therefore, the expenses claimed by the assessee cannot said to be for the purpose of business of the assessee, therefore, the assessee was wrong in claiming the impugned expenses under the head of business. It was held by him that under these circumstances, it cannot be said that the assessee made legal or bonafide claim. Under these circumstances, penalty was levied by him @ 100% of the 'tax sought to be evad....
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.... penalty. 4.5. During the course of hearing before us, Ld. Counsel vehemently opposed the levy of penalty. He reiterated the submissions made before the Ld. CIT(A) in detail. Our attention was also drawn on the evidences enclosed in the paper book comprising of Board Resolution for appointment of managing director of the company and Form No.16 issued to the managing director who was employee of the company. Our attention was also drawn upon the list containing names and particulars of employees who were appointed in the impugned year as well as in the subsequent year. Our attention was also drawn on the facts that company had earned income in all the subsequent years. It was submitted that the claim was made by the assessee in bonafide man....
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.... F.Y. ending 31.03.2005 (i.e. A.Y. 2005-06), but in absence of any order from the customers, no revenue could be earned. The claim of the assessee cannot be said to be without any basis. Under these circumstances, the view adopted by the assessee that its business was set up cannot be said to be devoid of any bonafide belief. As per AO, assessee's claim of set up of business in A.Y. 2005-06 remained unsubstantiated therefore, it was rejected by him. But, it is noted that the AO was also not able to disprove the claim of the assessee. The possibility of the claim of the assessee being correct cannot be totally ruled out. Under these circumstances, it can certainly be said that the claim of the assessee was not disproved by the AO. Further, i....