IN INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI, BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER . I.T.A.Nos.1581 & 1582 Mds. 2015 Assessment year : 2007-08 M s.Raj Video Vision, Vs. Commissioner of Income 703,Anna Salai, Tax,Chennai-34. Thousand Lights, Chennai. [PAN AAAFR 5226 M ] ( Appellant) ( Respondent) Appellant by : Mr.R.Padmanabhan,C.A Respondent by : Mr.R.Duraipandian,Sr.AR Date of Hearing : 21-09-2016 Date of Pronouncement : 21-09-2016 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER These two appeals of assessee are directed against order of Commissioner of Income-tax (Appeals)-4,Chennai dated 30.03.2015pertaining to assessment year 2007-08. ITA No.1581 Mds. 2015 2. first ground in this appeal is with regard to non-serving of notice u s.147 of Act as per procedure laid down under :- 2 -: ITA No. 1581,1582 Mds. 2015 Act. Since this ground is not pressed by Counsel of assessee, accordingly, is dismissed. 3. next ground is with regard to disallowance u s.40(a)(ia) of Act and consequent levy of interest u s.234B & 234C of Act. 4. In this case, disallowance of `32 lakhs paid towards different Rights purchase by assessee without deducting TDS u s.194J(1)(c). 5. We have heard both parties and perused material on record. Similar issue came up for consideration before this Tribunal in case of Shri N.Palanivelu Vs. ITO reported in [2015] 40 ITR (Trib) 325 [Chennai] vide order dated 29.04.2015 wherein held that:- 4. We have heard both sides and perused material on record. We find that Special Bench of Tribunal in case of Merilyn Shipping and Transports v. Addl. CIT [2012] 16 ITR (Trib) 1 (Visakhapatnam) [SB] and judgment of Gujarat High Court in case of CIT v. Vector Shipping Services (P.) Ltd. in I. T. A. Nos. 122 of 2013 dated July 9, 2013 [2013] 357 ITR 642 (All) held that section 40(a)(ia) is not applicable when there is no outstanding balance at end of close of year relevant to assessment year in respect of these payments. However, assessee has not brought on record, details of outstanding expenses or schedule of sundry creditors showing whether impugned amount is outstanding at end of close of previous :- 3 -: ITA No. 1581,1582 Mds. 2015 year relevant to assessment year either in name of party or outstanding expenses. Hence, in interest of justice, we are remitting issue back to file of Assessing Officer with direction to verify claim of assessee and assessee shall place necessary evidence in support of his claim. 5. Further, we make it clear that if impugned amount is not outstanding at end of close of assessment year in respect of expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed. This ground is remitted back to Assessing Officer for fresh consideration. In view of this, disallowance under section 40(a)(ia) is only applicable to those payments which are outstanding at end of close of financial year relevant to assessment year in respect of these payments. Accordingly, issue is remitted to file of AO in light of above order of Tribunal cited supra. 6. In result, appeal of assessee is partly allowed for statistical purposes. ITA No.1582 Mds. 2015 7. In this appeal, assessee challenges levy of penalty u s.271(1)(c) of Act at `4,53,296 -. :- 4 -: ITA No. 1581,1582 Mds. 2015 8. facts of issue are that ld. Assessing Officer completed assessment u s.143(3) of Act on 26.11.2009 raising demand of `6,42,110 -. AO found that assessee had manipulated entries in books of accounts in such manner that income has got concealed as revenue expenditure instead of capital expenditure, penalty proceedings u s.271(1)(c) of Act was initiated and penalty of `4,53,296 - was levied. Aggrieved, assessee carried appeal before Ld.CIT(A). On appeal, Ld.CIT(A) observed that since assessee has not furnished any evidence rebutting conclusions drawn by AO, penalty was confirmed by Ld.CIT(A). Against this, assessee is in appeal before us. 9. We have heard both parties and perused material on record. main contention of ld.D.R is that assessee claimed capital expenditure as revenue expenditure. On other hand, contention of ld.A.R is that assessee incurred such expenditure towards interior design and civil exterior work for Mount Road showroom demolition work including chipping, breaking existing exterior and laying white marble and tiles does not give any enduring benefit. According to him, there is cleavage of opinion regarding treatment of expenditure as revenue or capital and mistake is bona fide, which does not warrant levy of penalty. In our opinion, expenditure in dispute which was claimed as revenue expenditure, :- 5 -: ITA No. 1581,1582 Mds. 2015 which is being bona fide mistake as stated by ld.A.R. It cannot be said that assessee has concealed any particulars of income or furnishing any inaccurate particulars, only because of difference in opinion in treating expenditure as capital, or revenue, it was claimed as Revenue expenditure. claim of assessee may not be allowed while computing income of assessee, but that itself not lead to conclusion that assessee has furnished inaccurate particulars and concealment of income to levy of penalty u s.271(1)(c) of Act. In our opinion, judgement of Supreme Court in case of CIT Vs. RELIANCE PETROPRODUCTS PVT. LTD. reported in [2010] 322 ITR 158 (SC) wherein held that:- 12. - - -- We do not agree, as assessee had furnished all details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part. It was up to authorities to accept its claim in return or not. Merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to Revenue, that by itself would not, in our opinion, attract penalty under section 271(1)(c). If we accept contention of Revenue then in case of every return where claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty under section 271(1)(c). That is clearly not intendment of Legislature. :- 6 -: ITA No. 1581,1582 Mds. 2015 Accordingly, levy of penalty u s.271(1)(c) of Act is unwarranted and penalty is deleted. 10. In result, appeal of assessee in ITA No.1582 Mds. 15 is allowed. 11. In result, appeal of assessee ITA No.1581 Mds. 15 is partly allowed for statistical purposes appeal of assessee in ITA No.1582 Mds. 15 is allowed Order pronounced in open heart at time of hearing on 21st September, 2016, at Chennai. Sd - Sd - (G.PAVAN KUMAR) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated: 21st September, 2016 K S Sundaram Copy to: 1. Appellant 3. ( ) CIT(A) 5. DR 2. Respondent 4. CIT 6. GF M/s. Raj Video Vision v. Commissioner of Income-tax, Chennai