No concealment penalty for claiming capital expenditure as revenue when there is no conscious and deliberate attempt by assessee to evade tax.
In the instant case, the assessee had challenged the order passed by the CIT(A) confirming penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act) imposed by the Assessing Officer (AO) on account of claiming capital expenditure as revenue.
ABCAUS Case Law Citation
ABCAUS 3525 (2021) (07) ITAT
During the scrutiny assessment under section 143(3) of the Act, the AO noted that the assessee had treated share capital expenditure as revenue and debited the same to the profit & loss account.
According to the AO this expenditure was not allowable as per the provisions of law, as the same was capital in nature.
The AO completed the assessment by making addition inter alia on this count. This addition was confirmed by the CIT(A).
The AO initiated penalty u/s 271(1)(c) of the Act qua the share capital expenditure, for furnishing inaccurate particulars of income and imposed a penalty being 100% of tax sought to be evaded.
The penalty was confirmed by the first appellate authority by holding that the assessee has made patently a wrong claim, which could not be said to be a bona fide mistake.
The Tribunal noted that the assessee had given all the material facts to the computation of total income, and furnished details and explanation with regard to the claim of expenditure incurred for increase of share capital, and nothing was concealed or furnished inaccurate.
No concealment penalty for claiming capital expenditure as revenue
The Tribunal stated that it is settled law that merely because assessee claimed expenditure as revenue, which was held as capital by the Assessing Officer, penalty for concealment could not be imposed, more so when there is no finding by the Revenue authorities that there is a conscious and deliberate attempt by the assessee either by concealment of income or by furnishing inaccurate particulars of income for evading taxes.
The Tribunal stated that the details and explanation given by the assessee was bona fide, but was not appreciated by the Revenue authorities.
The Tribunal opined that simply because a particular amount of expenditure is not allowable, the same cannot be said that inaccurate particulars had been filed so as to visit the provisions of section 271(1)(c) of the Act. No mala fide can be attributable to the assessee in treating the impugned expenditure as revenue instead of capital in nature.
Accordingly, the Tribunal deleted the impugned penalty, and allowed the appeal in the favour of the assessee.
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