TaxTMI 
TaxTMI 
2017 (11) TMI 373
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....2017 under the head 'renewals and replacement', out of which Rs. 20,34,723/- has been disallowed by the Assessing Officer on account of capitalization of repair and maintenance expenses and on further scrutiny of accounts, the Assessing Officer disallowed on account of expenses on payments made on behalf of the foreignship owners of Rs. 41,06,565/- on estimated basis of 2% of the total expenses of Rs. 20,53,28,258/-. On the above two additions, the ITAT confirmed the additions. Thereafter, the Assessing Officer imposed 100% penalty of Rs. 20,87,424/-. The ld. CIT(A), after considering the orders, deleted the penalty. Aggrieved by the deletion of penalty, the Revenue is in appeal before the ITAT. 3. The ld. DR submitted that the ITAT has confirmed the above two conditions, therefore, imposition of penalty is justified. The assessee had wrongly claimed capital expenditures to the profit and loss account which are not allowable as per the law in force. The assessee company internally claimed these expenses to avoid the tax liability. At the time of filing of return, the assessee is required to furnish correct particulars of income. He relied on the order of the Assessing Officer. ....
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.... The role of the Explanation, it was pointed out, was only to place the burden of proof squarely on the taxpayer. It is however observed that the Explanation has been often overworked by the Assessing officers, so as to justify penalty in each and every case of difference, even where an addition was merely on estimated basis of for bona fide omissions. 6.2 Additions disputed on interpretation of law were also invariably subjected to penalty by relying on the Explanation. The various High Courts in the country understood the effect of the Explanation differently often leading to conflicting decisions. In this context two landmark judgments were given by Apex Court in Dilip N. Shroff Vs Joint CIT (2007) 291 ITR 519 (SC) and T. Ashok Pai Vs CIT (2007) 292 ITR 11 (SC), which spell out mainly the following rules for the purpose of penalty imposable: (i) Both the expressions "concealment of income" and "furnishing of inaccurate particulars" indicate some deliberation on the part of the assessee, though the word "deliberately" and the word "willfully" are no longer part of the statue. (ii) Mere omission or negligence would not constitute a deliberate act of suppres....
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....eme Court has come out with the ruling in 2 different case of CIT Vs Atul Mohan Bindal (2009) (317 ITR1) and UOI Vs Rajasthan Spinning & Weaving Mills (2010) (1GSTR66) (SC) and have given a finding that "that for applicability of Section 271(1)(c) the conditions stated therein must exist." Even in the recent, decision in the case of CIT(LTU) Vs. MTNL, ITA No.626/2011 dated 10.10.2011, the jurisdictional Delhi High Court has upheld the same view. 6.5 Thus from this it is very clear that for imposing penalty under Section 271(l)(c), the AO have to be satisfied that: (a) assessee has concealed the particulars of income or (b) assessee has furnished inaccurate particulars of such income. Thus in view of the above discussion and in view of the Hon'ble Supreme Court in Reliance Petroproducts (supra) it is clear that the legislature did not intend to impose penalty on every assessee whose claim was rejected by the assessing officer. What is sought to be covered under Section 271{l)(c) is concealment of "particulars of income" or furnishing of" inaccurate particulars of income" and not making of an untenable claim. 6.6 From the various judic....
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....bservation, preferred to make disallowance on estimated basis @2% of expenditure claimed on account of 3rd party, shows that the allegation of inaccurate particulars cannot be proved by the AO. Moreover, in view of the settled law, no penalty could be levied where the additions/disallowance is made on estimate basis, as such errors of estimation itself reflect the absence of any clinching evidence suggesting 'inaccurate filing of particulars'. In view of this, no penalty on this ground could be levied. 6.9 Regarding the first ground of addition relating to the action of the AO on holding certain repairs and maintenance expenses as capital in nature, I find that the Hon'ble ITAT has, in the light of the decision in the case of Modi Spinning and Weaving Mills Vs CIT 160 ITR 656, in which it was held that marbling of floor cannot be said as current repairs, which may give benefit of enduring nature, There is no doubt that the premises on which such repairs were conducted were hired premises and not owned by the appellant company or its Directors. As the Hon'ble ITAT, which is the final fact finding authority has held the repair expenses as capital in nature, n....