By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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8. 2013-TIOL-265-ITAT-MUM
Silver Land Developers Pvt. Ltd. vs. ITO
ITA No. 8444/Mum/2010
Assessment Year: 2005-06.
Date of Order: 08-03-2013
Section 271(1)(c) – Penalty cannot be levied when the dispute is not about the genuineness of the expenditure or the bonafides of the claim but only about the year of its allowability.
Facts The assessee company was engaged in the business of development of land and construction of buildings. In the course of assessment proceedings the assessee was confronted with certain expenses claimed by it in the return of income which were incurred in relation to projects which have not yet commenced and not in relation to the project whose income was offered for taxation. Upon being so confronted the assessee revised its return of income, though the revision was beyond the time limit prescribed in section 139, and disallowed a sum of Rs. 31,58,467. The AO, however, further found certain other expenses amounting to Rs. 6,47,000 which were not related to the project of the assessee in respect of which profits were offered for taxation but were relating to a project which had not yet commenced. The AO, disallowed Rs. 6,47,000 on account of expenses relating to project not yet commenced. He also initiated penalty proceedings. The CIT(A) confirmed the disallowance in quantum proceedings. The AO levied penalty in respect of total disallowance of Rs. 38,05,470 made on account of expenses relating to projects yet to be commenced by holding that the assessee has furnished inaccurate particulars of income.
Aggrieved, the assessee preferred an appeal to CIT(A) who confirmed the levy of penalty.
Aggrieved, the assessee preferred an appeal to the Tribunal.
Held The Tribunal noted that the genuineness of the expenditure was not doubted by the AO and there was nothing in the orders of the lower authorities to doubt the bonafides of the assessee in claiming the said expenses as per the practice consistently followed. All the material particulars relating to the claim were furnished by the assessee and there was no allegation by the AO that such particulars were found to be incorrect or inaccurate. The Tribunal noted that the Supreme Court has in the case of Reliance Petro Products Ltd. observed that mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and merely because the assessee’s claim has not been accepted, penalty cannot be attracted specially when there is no allegation that any particulars filed by the assessee in relation to his claim were found to be incorrect or inaccurate. The Tribunal noted that the dispute was only relating to the year in which the said expenses are allowable and not about the very deductibility of the expenses as the genuineness was not doubted at any stage. Considering all these facts, the Tribunal held that the penalty cannot be levied. The Tribunal cancelled the penalty levied by the AO and confirmed by the CIT(A).
The appeal filed by the assessee was allowed.
