TaxTMI 
TaxTMI 
2019 (10) TMI 251
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....Assessing Officer (AO) under s. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2007 08. 2. As per its grounds of appeal, the Revenue seeks to challenge the action of the CIT(A) whereby the penalty of Rs. 1,59,91,080/- imposed by the AO was reversed. 3. When the matter was called for hearing, the learned DR for the Revenue relied upon the penalty order passed by the AO and submitted in furtherance that the claim of the assessee towards certain expenditure on account of professional fees, travelling expenses and tender expenses aggregating to Rs. 4,75,07,667/- concerning new power projects were wrongfully claimed as revenue expenditure by the assessee. It was submitted that the expenditure so claimed was disallowed by the....
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....her reference was made to the decision rendered in CIT vs. Amtek Auto Ltd. [2013] 352 ITR 394 (Punjab & Haryana) wherein the aforesaid position has been reaffirmed that where the assessee has claimed expenditure as revenue, which was held as capital by AO, could not be the reason for imposition of penalty. 4.1 Adverting to the facts, the learned counsel submitted that the assessee is engaged in the business of development of power projects and operations and maintenance of power projects. The development of power projects being the business of assessee, the assessee initiated several projects. A detailed note of each project was placed before the AO showing its status and reason for creating the project as recorded in para 6 of the asses....
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.... in favour of the assessee as under: "5. I have perused the facts of the case as enumerated by A.O. I have perused the case laws relied on by A.O.. After careful consideration of facts, submission and contention of A.O. ground wise adjudication is as follows: All the grounds are interlinked and against the imposition/levy of penalty u/s. 271(1)(C) of the Act. The appellant raised grounds both on technical issue as well as on merit. There are certain undisputed facts, which requires consideration before adjudication, these are as follows: (i) The appellant during previous year debited in profit & loss account and claimed expenses of Rs, 4,75,07,667/- as revenue expenses. The A.O. after observing tax audit report in form no.....
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....urate particulars of income. (ii) Ld. CIT(A)-VI Ahmedabad vide order dt. 16/12/2010 against such order dt. 27/11/2009 u/s. 143(3) of the Act considered appellant's explanation that (a) As per tax audit report there is no change in the nature of business of the assessee as compared to earlier years. A copy of objective and memorandum of Association (OCMA) was submitted. (b) Hon'ble Gujarat High Court in the case of GMDC Ltd. 314 ITR 322 and Hon'ble Gauhati High Court in the case of Assam Aesbestos Ltd. 263 ITR 357 held such expenses as revenue expenses. (c) The appellant relied on (i) Kesoram Industries & Cotton Mills Ltd. Vs. CIT [1992] 196 ITR 845 (Cat) (ii) CIT vs. Priya Vi....
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....ssue, hence on this issue penalty is not exigible. I am inclined with appellant that on the facts & circumstances as that of appellants, the penalty u/s. 271(1)(C) of the Act is not exigible on many accounts duly supported by legal preposition. These are as follows: (i) The appellant claimed such expenses on the basis of audited accounts and tax audit report which has not brought out these expenditure as capital in nature. It is therefore the bonafide for the claim of such expenditure cannot be doubted or questioned. (ii) All the details & material facts were either disclosed or submitted before A.O. as and when asked for. None of these expenses were found bogus or excessive. These genuine expenses were disallowed....
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.... se. What is the subject matter of controversy is the nature of expenditure that is whether the expenditure incurred would acquire the character of capital expenditure or a revenue expenditure. The CIT(A) has demonstrated in its order that the issue is sufficiently debatable and there is sufficient room for entertaining a different view. Needless to say, the conclusion drawn in the quantum proceedings would not automatically apply to the penalty proceedings which are distinct in character. The assessee is entitled to demonstrate its bonafide towards claim of expenditure in penalty proceedings. It is trite that every disallowance of claim cannot lead to as an automatic consequence in the form of penalty. The confirmation of addition/di....