AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1202
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.... the business of providing manpower recruitment services and career advice to various clients in India had declared total loss of Rs. 23,79,32,221/- by filling its return of income on dated 29- 11-2012, which was selected for scrutiny and therefore statutory notices were issued to the assessee, whereby the assessee was asked to file certain details and documents. The assessee filed the relevant details as called for by the Assessing Officer (AO) who after considering the same and observing "that in the statement of computation of the income for assessment year under consideration the assessee company has claimed an expenditure to the tune of Rs. 2,16,88,667/- on account of expenditure incurred for leasehold improvements", show caused the assessee "as to why the said expenditure should be treated as revenue expenditure instead of capital expenditure". 2.1 The assessee before the AO claimed that during the assessment year under consideration the assessee had entered into leave and license agreements for use and occupation of the following premises: 1. Express Towers, Nariman Point, Mumbai 2. DLF Cyber City, DLF Phase II, Gurgaon 2.2 The assessee further claime....
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....y Hon'ble Apex Court in the case of Assam Bengal Cement Co. Ltd. vs. CIT, West Bengal (27 ITR 34) wherein the expenditure incurred for the enduring benefit of the business has been treated as capital expenditure instead of revenue expenditure. 3.1 The AO further observed that on verification of the expenses on rent of Rs. 3,66,44,045/- the assessee has also included a sum of Rs. 18,56,375/- being straight line of rent expenses. On being asked, the assessee explained that the same was only an adjustment entry. The AO considered the submission of the assessee, however, also disallowed the sum of Rs. 18,56,375/- under section 37(1) of the Act by holding that the said amount is not expenditure actually and only an adjustment entry and not being expended for the business of the assessee. 4. The AO in the assessment order, also recorded satisfaction for initiating the penalty proceedings under section 271(1)(c) of the Act for furnishing the inaccurate particulars of income qua the claims of expenditures of Rs. 2,16,88,667/- on account of leasehold improvements and the amount of Rs. 18,56,375/- on account of adjustment entry. The AO simultaneously, in para-No.9 of the assessment ord....
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....as levied penalty for the reason that "assessee concealed/furnished inaccurate particulars of income". Thus I find that the AO was not sure about the limb of the default while imposing the penalty. The appellant by relying on the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunath Cotton & Ginning Factory 35 taxmann.com 250 and the decision of Hon'ble Supreme Court of India in the case of Ashok Pai vs. CT (292 ITR 11) and decision of Hon Bombay High Court in the case of CIT vs. Samson Perinchery (392 ITR 4) and many other decisions, submitted that the penalty was initiated for furnishing inaccurate particulars of income but the penalty is levied invoking explanation 1 to section 271(1)(c), therefore requested to squash the penalty. The appellant has further on without prejudice basis submitted that the AO has given the effect to the order of LdCIT(A) to allow the depreciation and thus there is calculation error in imposing penalty. I have considered the facts of the case and submission made by the appellant. I find that the AO has not adhered to the satisfaction recorded for initiating the penal proceedings while imposing the penalty.....
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....ccurate particulars of income are two separate connotations and satisfaction of the AO qua only one of the breaches under section 271(1)(c) of the Act for initiation of penalty proceedings will not permit levy of penalty for other breach. Further, it is incumbent upon the AO to come to a positive finding as to whether there was concealment of income or furnishing of inaccurate particulars of income. In absence of such clear cut finding the penalty order is liable to be struck down. With regard to the judgment passed by the Hon'ble Bombay High Court in the case of Veena Estate (P) Ltd. vs. CIT (supra) the Ld. Counsel tried to justify its case by submitting that in the said case, the contention qua defective penalty notice was raised for the first time before the Hon'ble High Court i.e. after more than 20 years of passing of the Tribunal order. Further, no such contention qua defective notice was raised either before the AO/CIT/Tribunal/Hon'ble High Court, until the admission of the appeal. The Hon'ble High Court, in fact did not entertain the defective notice on the ground that the appellant never raised an objection from the very inception i.e. since the last 30 years and therefore....
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....Ld. Commissioner in appeal against the penalty order considered the said aspects vis-à-vis initiation of penalty proceedings for furnishing inaccurate particulars of income but levy of penalty for concealment of income /furnishing of inaccurate particulars of income and while relying on the judgments passed by the Hon'ble Karnataka High Court in the case of CIT vs. Manjunath Cotton & Ginning Factory 35 taxmann.com 250 and by the Hon'ble Apex Court in the case of T. Ashok Pai vs. CIT (292 ITR 11) and by Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery (392 ITR 4) and many other decisions and by observing "that the AO has not adhered to the satisfaction recorded for initiating the legal proceedings while imposing the penalty. The penalty was initiated for furnishing the inaccurate particulars of income but while imposing the penalty, the AO has applied both the limbs, which is incorrect approach", ultimately deleted the penalty imposed by the AO. 10.4 As we have observed above that admittedly the penalty proceedings qua two additions made by the AO, were initiated for furnishing of inaccurate particulars of income. However, the notice dated 31-03-2015 unde....