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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI OM PRAKASH KANTSHRI PAVAN KUMAR GADALE
O R D E R PER OM PRAKASH KANT, A.M.: These two appeals by the assessee are directed against the two separate orders both dated 18.06.2018 passed by Ld. Commissioner of Income Tax(Appeals)-1, Jabalpur [in short “Ld.CIT(A)”] for assessment years 2006-07 and 2007-08, in relation to penalty levied u/s 271(1)(d) of the Income Tax Act, 1961 (in short “the Act”) for concealment of income/inaccurate particulars of fringe benefit of tax (FBT). The issue involved in both the appeals is & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT common, therefore both the appeals were heard together and disposed off by way of this consolidated order for convenience.
Grounds are identical in both the appeals and for the sake of brevity, grounds in for the Assessment Year 2006-07 are reproduced as under:-
1) “That the Levy of Penalty/s 271(1)(d) of the Income tax act1961 is arbitrary, unreasonable and unjustified and bad in law. (2) That The Ld CIT(A) misunderstood and Misconstructrued the provision of sub clause(v) of the clause (D) of the3 section 115(WB)(i) providing levy of Fringe benefit tax. The Sub-section(2) cover 'expenditure on advertisement by way of sign, artwork painting banners, awning, direct mail, electric spectacular ,kiosks, hoardings, bill boards or way of such other media of advertisement and very well covers calendar and posters. (3) The assessee has filed the return with Audit report and had disclosed all the facts and in support thereof evidence which fringe benefit have been noted from such evidence by the learned assessing officer at page 2 or 3 of the assessment order, there was thus no conceding the particular of income or furnishing false or incorrect particulars. (4) The Ld CIT(A) and AO has over looked the basic concept of fringe benefit tax which is to tax the benefit provided to 2 | P a g e & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT employees directly or indirectly to the employees (in the matter of advertising no directly or indirectly benefit is provided to the employees by the assessee. (5) That the learned CIT(A) and AO overlooked that there was no mens rea in not offering for taxation advertisement exp. As it was a legal claim and no penalty is livable even if the claim is not accepted in assessment. The AO overlooked the settled position in law, that in penalty proceedings the finds in assessment are not to be taken as conclusive, but have to considered from the point of view of penalty provision afresh (6) The learned CIT(A) has accepted the legal contention that FBT is not livable in Calendar and posters payments are covered on advertisement under 115WB(2) (D), such expenses have been held allowable business expenses. (7) The appellant prays for leave to amend, add or omit any grounds of appeal to the hearing of the appeal.”
3. Briefly stated facts of the case are that the Assessing Officer (in short “AO”) in the assessment order of fringe benefit of tax for AY 2006-07 considered the sales promotion expenses amounting to Rs.41,13,726/- is liable for fringe benefit tax. On further appeal, Ld.CIT(A) deleted the entire addition. Similarly, for AY 2007-08, the AO treated the entire sales promotion expenses of Rs.39,27,236/- as liable for fringe benefit tax and accordingly, made addition to the value of fringe benefit. But the Ld.CIT(A) deleted the said addition.
ITA No.183 & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT On further appeal, the Tribunal vide its order in & 3/Jab/2011 dated 03.02.2012, directed that out of the sales promotion expenses, the assessee had incurred expenses on ‘calendar’ and ‘poster’ amounting to Rs.5,55,360/- in Assessment Year 2006-07 and Rs.5,11,040/- in Assessment Year 2007-08, which do not fall within the expenses to the sales and therefore, are to be recorded as sales promotion including publicity and liable for fringe benefit tax. In view of the addition of fringe benefit sustained by the Tribunal, the AO levied penalty vide order u/s 271(d) of the Act for Assessment Year 2006-07 amounting to Rs.1,86,934/- vide order dated 24.01.2013 and for Assessment Year 2007-08 vide order dated 24.01.2013 amounting to Rs.1,72,015/-. On further appeal, Ld.CIT(A) upheld the penalty for both the Assessment Years. The finding of Ld.CIT(A) are identical on both the Assessment Years. Therefore, for brevity, we are reproducing the findings of Ld.CIT(A) in Assessment Year 2006-07 as under:-
6.1.3 DECISION:“I have carefully considered the written submissions put forth by the counsel, perused the facts of the case including the finding of the AO in the impugned penalty order, relevant assessment order and other material brought on record. The AO has levied penalty of Rs.Rs.1,86,934/- as the AO has satisfied that the assessee has committed default u/s 271(1)(d) of Income Tax Act, for which penalty is leviable. The 4 | P a g e & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT minimum penalty in this case is worked out Rs.Rs.1,86,934/- and the maximum penalty Rs.5,16,045/-. After considering the facts & circumstances of the case the AO levied a penalty of Rs.Rs.1,86,934/- u/s 271(1)(d) of Income Tax Act, 1961. 6.1.4 The appellant has submitted that the quantum Appeal against the original assessment order has been allowed by the honble CIT (A) by order dt12-10-2010 Copy of order enclosed in Appeal of 2006-07.
In the light of the above facts there is no question of penalty U/S 271(1) (d) of the arises. 6.1.5 I have examined the facts of the case and have considered the submission of the appellant. I find that the AO in his penalty order has elaborately discussed the issue in detail and came to the conclusion that the appellant has committed the default and penalty is leviable as the order of the Ld CIT(A) has been reversed by the Hon'ble ITAT and sustained addition of Rs.5,55,360/-. In view of the above the AO has rightly calculated the minimum penalty u/s 271(1)(d) at Rs.1,86,934/- and levied the same. I therefore, confirm the penalty imposed by the AO atRs.1,86,934/-.”
Before us, Ld. Counsel for the assessee submitted that the AO in the penalty order has not recorded satisfaction whether the penalty has been levied for concealment of income or for furnishing of inaccurate particulars of fringe benefit . He further submitted that Ld.CIT(A) had deleted the addition whereas Tribunal has upheld it partly. Therefore, there is a divergence of the view and 5 | P a g e ITA No.183 & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT matter being debatable nature therefore, no penalty should be levied in such circumstances. Ld. Counsel for the assessee also relied on the decision of Hon’ble Supreme Court in the case of CIT vs Reliance Petro Products Pvt.Ltd. [2010] 322 ITR 158 (SC) and submitted that every claim of the assessee cannot be subject to penalty except if claim is blatantly wrong or malafide.
On the contrary, Ld. Sr. DR relied on the order of the lower authorities.
We have heard Ld. Authorized Representatives of the parties on the issue in dispute and perused the relevant material available on record. We find that the penalty u/s 271(1)(d) of the Act has been levied by the AO for the amount of expenditure incurred on ‘calendar’ and ‘poster’ has been part of the sales and promotion expenses liable for fringe benefit. But we find as far as the assessee is concerned, entire information was filed in the return of infringe benefit tax and no inaccurate particulars of fringe benefit have been filed. The claim of the assessee was accepted by Ld.CIT(A), however, part of the claim has not been accepted by the Tribunal. In our opinion, the claim of the assessee is not patently false and being debatable, therefore, following the decision of Hon’ble Supreme Court in Reliance Petro Products Pvt.Ltd. (supra), we set 6 | P a g e & 184/Jab/2018 J.P.Tobacco Products Pvt.Ltd. vs DCIT aside the order of Ld.CIT(A) and direct the AO to delete the penalty in both the assessment years. Thus, grounds raised by the assessee in both appeals are allowed.
In the result, both appeals filed by the assessee are allowed. Order pronounced in the open Court on 22/09/2023.