This case review provides an in-depth analysis of the appeal filed by Boutique Hotels India Pvt. Ltd. against the order of the CIT(A), New Delhi, concerning the assessment year 2012-13. The appeal, lodged under ITA No. 1012/DEL/2020, was heard by the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’ on June 23, 2022.
Boutique Hotels India Pvt. Ltd., the appellant, challenged the order dated July 23, 2019, issued by the Commissioner of Income Tax (Appeals), New Delhi. The central issue of the appeal was the imposition of a penalty under section 271(1)(c) of the Income Tax Act.
The appeal was filed with a delay of 16 days. The appellant submitted a separate application requesting the condonation of this delay. After considering the facts presented, the Tribunal condoned the delay, allowing the appeal to be heard on its merits.
During the relevant assessment year, the assessee claimed revenue expenditure amounting to Rs. 81,20,388 on account of building repair and maintenance. The Assessing Officer (AO) disallowed a sum of Rs. 45,09,274, treating it as capital expenditure. Consequently, the AO initiated penalty proceedings under section 271(1)(c) and imposed a penalty of Rs. 13,93,365.
The CIT(A) upheld the penalty imposed by the AO, leading the assessee to appeal before the Tribunal.
During the hearing, the appellant, represented by Shri Rohit Golecha, CA, contended that the case did not involve concealment of income or the furnishing of inaccurate particulars of income. The expenditure was claimed in good faith as revenue expenditure. However, the AO, on the basis of some items providing enduring benefits, reclassified part of the expenditure as capital in nature.
The Department, represented by Shri Sanjay Kumar, Senior DR, supported the findings of the CIT(A).
After considering the rival contentions and examining the records, the Tribunal concluded that the disallowance made by the AO was not due to any concealment of income or inaccurate particulars furnished by the assessee. The expenditure was claimed based on a bona fide belief, and the reclassification by the AO did not imply that the particulars provided were inaccurate or concealed.
In light of the above findings, the Tribunal quashed the penalty imposed under section 271(1)(c), ruling it unjustified. The appeal filed by Boutique Hotels India Pvt. Ltd. was allowed, and the penalty order was set aside.
This decision underscores the importance of distinguishing between bona fide claims and actual concealment or furnishing of inaccurate particulars. It highlights that penalties under section 271(1)(c) should not be imposed when the disallowance arises from a bona fide difference in the interpretation of the nature of expenditure.
The order was pronounced in the open court on June 23, 2022, by Shri Sanjay Garg, Judicial Member of the Delhi Bench ‘SMC’ of the Income Tax Appellate Tribunal.
In the result, the appeal of the assessee stands allowed.
The final decision of the Tribunal in ITA No. 1012/DEL/2020 provides significant guidance on handling similar cases where the nature of expenditure is disputed. It emphasizes the need for assessing officers to carefully evaluate whether there is a genuine concealment of income or simply a difference in the interpretation of tax laws.
This case sets a precedent for future appeals involving the reclassification of expenditures and the subsequent imposition of penalties, reinforcing the principles of fair assessment and just imposition of penalties.
ITA 1012/DEL/2020: Boutique Hotels India Pvt. Ltd. vs ACIT Circle-5(1), New Delhi for AY 2012-13
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