TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1027
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 1,63,76,759 being expenditure incurred after set up of business without giving proper justifications for the same. The Ld. CIT(A) erred in failing to pass a speaking order without giving proper reasoning for upholding the disallowance and summarily rejecting the contentions of the Appellant. 3. That the Ld. CIT(A) has erred both on facts and in law in wrongly placing reliance on the decision of the Hon'ble Delhi Tribunal in the case of Akzo Nobel Refinishes India (P) Ltd. (2008) 25 SOT 226 while sustaining the disallowance on account of pre-commencement expenditure. 4. That the Ld. CIT(A) has erred on facts and in law in sustaining the disallowance of an ad-hoc amount of Rs. 41,00,000 out of salaries paid to employees. The Ld. CITA) has erred in ignoring the relevant evidence filed by the Appellant in support of the genuineness of the expenditure. 5. The Ld. CIT(A) has erred on facts and in law in upholding the disallowance of Rs. 3,09,565 on account of the appellant's contribution to Provident Fund Trust even though the said Trust was approved by Commissioner of Income Tax. 6. That the Ld. CIT(A) has erred on facts and in law in upholding the disallowance of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....screpancies from the statutory audit report filed along with return and referred the case for audit u/s 142(2A) of the Income Tax Act and subsequently disallowed all the expenses in the assessment proceedings. The ld. CIT (A) has confirmed the disallowance of salaries, recruitment & relocation, rent, travelling & conveyance, legal & professional charges and common services expenses on the grounds that the expenses are not allowable as they have been incurred before commencement of the business. 5. During the hearing, before us, the ld. AR argued that company was incorporated on July 6, 2000. The company has set up infrastructure for software development services on 08.01.2001 and employees for these activities have been appointed on 09.01.2001. Hence, it can be said that the business has already set up and all the expenses are to be allowed. He relied on the following judicial precedence: * CIT v. Modi Industries Ltd. (No. 3) 200 ITR 341 (Delhi HC) * Standard Refinery and Distillery Ltd. v.CIT (1971) 79 ITR 589 (SC) * Satebganj Sugar Mills Ltd. V CIT (1961) 41 TR 272 (SC) * CIT v. Prithvi Insurance Co. Limited (1967) 63 ITR 632 (SC) * B.R. Limited v. Gupta (V.P.) CIT (19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss activities have not been commenced. Hence, it can be conveniently held that the expenditure not incurred wholly for the purpose of the business can be disallowed. We also find that the relevant bills & vouchers for the expenses have not been produced before the Assessing Officer in order to prove that the genuineness and allowability of the expenses. Thus, the expenditure incurred before commencement of business have been rightly segregated by the ld. CIT (A) under the head salaries, recruitment & relocation, common services, travelling & conveyance, legal & professional charges as pre-commencement expenditure which are hereby confirmed. Further, regarding the expenses of business promotion, sales commission, communication, travel & conveyance, repair & maintenance, legal & professional fee, contribution to PF, the assessee could not submit any voucher before the assessing authorities. It is the primary duty of the assessee to produce the basic evidences in relation to the expenses claimed, so as to allow the expenses u/s 37 of the Income Tax Act. Since, no details could be produced as to the expenses claimed, no allowance can be given by the revenue. Reliance is placed on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1961 ('Act'). 2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that sufficient opportunity of being heard was provided by the learned AO before levy of penalty without considering the submission of the Appellant and without making any enquiry in this regard. 3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in failing to pass a speaking order without giving proper reasoning for upholding the levy of penalty and summarily rejecting the contentions of the Appellant." 13. The relevant part of the submission of the assessee before the ld. CIT (A) and the reasoning of the ld. CIT (A) in confirming the penalty u/s 271(1)(c) of the Act is as under: "7. The appellant has argued that this is a case of their claims not being found acceptable and there was no concealment as there was full disclosure of facts in their return. In the penalty order, the A.O. has pointed out that the onus lies on the assessee to prove the genuineness and allowability of the claims made by it on which amount the penalty proceedings had been initiated. However, the assessee failed to give any reasons or substantiate its cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c). If one takes the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bona fide while making a Claim of this nature, that would give a licence to the unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they Would be assessed on the basis or self-assessment under section 143(1) and even if their case is selected for Scrutiny, they can get away merely by paying the tax, which, in any case, was payable by them. The consequence could be that the persons, who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them, would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in th....