The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that mere disallowance of expenditure claimed in the return would not amount to ‘concealment of income’ for the purpose of imposing penalty under section 271(1)(C) of the income tax act.
During the assessment proceedings, the assessee claimed deduction of deferred revenue expenditure of Rs. 2950195/– and said that the above expenditure has been incurred by the assessee for exploring the future business opportunities.
However, the Assessing Officer found that the assessee failed to prove that the expenditure is wholly and exclusively laid out or expended for the purposes of the business and therefore, imposed penalty.
On appeal, the first appellate authority confirmed the addition by holding that the assessee is merely exploring to start new business in South Africa and therefore, these expenditure cannot be allowed as a deduction as incurred exclusively for the purposes of the business.
Quashing the penalty proceedings, the Tribunal held that “on the basis of the above facts it is apparent that the expenditure incurred by the assessee could not be established by the assessee before the learned lower authorities that those expenditure have been incurred by the assessee wholly and exclusively for the purposes of the business. However, the lower authorities have not reached to a conclusion that assessee has furnished any inaccurate particulars of the income or has concealed any income on that score. In view of this we are of the view that mere disallowance of the expenditure claimed by the assessee cannot result into concealment of income. In view of this, we reverse the finding of the lower authorities and direct the learned assessing officer to delete the penalty levied on this sum.”
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