TaxTMI 
TaxTMI 
2018 (10) TMI 920
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....lty after observing as under:- 5. I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 6. Ground No. 1 to 4 relates to levy of penalty of Rs. 27,00,000/- u/s 271(1)(c) of the IT Act, 1961. During the course of assessment proceedings, the AO disallowed expenses of Rs. 86,65,690/-for the reason that there was no business activity carried out during the year. Consequently, the total income was determined at a positive figure of Rs. 1,26,620/-. In view of disallowance of expenses made in the assessment, the AO imposed penalty for furnishing incurred particulars of its income to the extent of Rs. 27,00,000/-. 6.1 During the course of assessment proceedings, the AO has observed that the appellant had not carried out any business activity and the only income credited to the P&L A/c was interest on Income-tax Refund amounting to Rs. 1,26,617/-. The appellant had, however, claimed deduction of the following expenditure and thereby computed loss of Rs. 85,39,073/-. The major heads debited to P&L A/c are - (a) Employee benefit ....
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..... 2012-13. 6.5 I have carefully considered the rival submissions. The AO has raised two issues during the penalty proceedings. One is that disallowance of expenses of Rs. 85,39,073/- made by the AO during the course of assessment proceedings as the appellant has not carried out any business during the year. The second issue raised was that expenses claimed by the appellant are of personal nature. 6.6 As regards the first issue is concerned the facts is that the appellant has not earned income except the interest on Income-tax Refund of Rs. 1,26,617/-, whereas the appellant claimed expenses of Rs. 86,65,690/-and claimed loss of Rs. 85,39,073/-. The AO has disallowed the entire expenses treating that there was no business activity carried out during the year. The AO has treated the expenses as personal in nature and therefore the appellant has knowingly made wrong claim and thereby furnished inaccurate particulars of its income. 6.7 During the course of appeal proceeding the AR reiterated its stand taken before the AO and also submitted the details of expenses incurred during the financial year. Perusal of detail clearly indicates that the expenses incurred....
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....at AO has written the order sheet stating therein that, "It is seen that the assessee has not done any business activities during the year. Hence expenses claimed are mainly for personal purposes and not for business purposes." It seems that the AO has obtained the signature of the appellant in a routine manner and however did not point out the nature of personal expenses. 6.11 Perusal of the details of the expenses claimed the appellant did not indicate any personal expenses debited to the P&L A/c. The AO's presumption that the expenses incurred by the appellant company are for personal nature on the ground that the same is admitted by the authorized representative at the time of personal hearing is not sufficient to arrive at the conclusion that nature of expense became personal. Nowhere in any submission made by the appellant company or by the authorized representative himself for and on behalf of the appellant company before the AO during the course of assessment proceedings has stated that the expenses incurred by the appellant company during the year under consideration are not incurred for business purpose and are in personal in nature. Further....
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.... certain legal obligations and for that purpose it is necessary to appoint clerical staff and secretary or accountant and incur incidental expenses." 6.15 In the case of Mokul Finance (P) Ltd. [2007] no TTJ Delhi 445, ITATDelhi Bench held that:- "We find that the whole cause of action of disallowance of expenses is in the background of AO's observation that the assessee did not carry out any business transactions which at best was AO's finding about an activity of business not being functional in the relevant previous year. In our opinion, not carrying on business activity in a particular period cannot be equate with closure of business as it takes an unsustainably narrow view of the scope of cessation of a business. 6.16 The Hon'ble Delhi High Court in the case of CIT vs. Integrated Technologies Ltd. has held that:- "In our opinion, no substantial question of law arises from the decision of the Tribunal. It has been found as a fact by the Tribunal that the assessee had not closed its business and had every intention to revive the same. The basis for this funding is the fact that the assessee had kept its establishment alive by paying....
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....to its client. Return of Income for the Assessment Year 2012-13 was filed on 30/09/2012 showing total income at Rs. Nil and current loss at Rs. (85,39,073)/- computed under the normal provisions of the Act. During the course of assessment proceedings the AO disallowed business expenses of Rs. 86,65,690/- on the ground that there is no income earned during the year under consideration and thus, the said expenses are personal expense not incurred for the purpose of business. The AO initiated penalty u/s. 271(1)(c) for showing inaccurate particulars of income. 6. From the record we found that the expenses disallowed of Rs. 86,65,690/- are incurred for business purpose only and are not personal in nature. Further, we observe that the company is engaged in the business of financial services for its clients and during the year under consideration the company was not able to get fruitful results for its clients and hence, no fees were earned by the company during the year under consideration. However, since, the expenses are of fixed and administrative nature, they had to be incurred by the company during the year under consideration. Thus, there was no case of concealment of income no....