DEPUTY COMMISSIONER OF INCOME-TAX vs. ATLAS COPCO (INDIA) LTD.,, PUNE

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal by the Revenue is directed against the order passed by the Commissioner of Income-tax (Appeals) on 21-01-2015 deleting the penalty of Rs.5,22,06,833/- imposed by the Assessing Officer (AO) u/s.271(1)(c) of the Income-tax Act, 1961 (hereinafter called ‘the Act’) in relation to the assessment year 2003-04.

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order in this case was passed u/s 144 of the Act on 31-07-2006

determining total income at Rs.73,02,28,900/- as against the

declared income of Rs.54,64,90,594/-. Thereafter, the AO imposed

penalty with reference to certain additions. The assessee challenged

the same before the ld. CIT(A), who preferred to delete the penalty.

The Revenue is aggrieved by the deletion of penalty. Challenge to

the deletion of the penalty is in respect of certain items of

additions/disallowances, which we will take up for consideration

and decision.

increase in share capital after amalgamation u/s.35DD of the Act.

He also made an addition on account of disallowance of warranty

claim. He further made an addition u/s.35DDA of the Act. Penalty

was imposed w.r.t. such additions, which came to be deleted in the

first appeal.

assessee as well as the Revenue for the year under consideration

came up for adjudication before the Tribunal in ITA

No.1676/PUN/2011 and ITA No.54/PUN/2012. Vide order dated

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18-07-2019, the Tribunal has deleted the above three additions.

Since the very foundation for the imposition of penalty, being the

additions made in the assessment, ceases to exist, there can be no

question of imposition of any penalty thereon. We, therefore,

accord our imprimatur to the view taken by the ld. CIT(A) on the

above issue.

disallowance out of certain Miscellaneous Expenses. The assessee

claimed deduction of Rs.8,91,41,639/- under the head

“Miscellaneous Expenses”. The AO made disallowance at 50% of

such expenses. The ld. CIT(A) confirmed the addition in respect of

expenses on warranty provision, expenses on gifts, donations and

fees for handling shares in entirety. For the remaining expenses, he

restricted the disallowance to 25% as against 50% made by the AO.

This matter came up for consideration before the Tribunal. The

deduction in respect of warranty expenses has been held to have

been rightly sustained. Similar is the position regarding expenses

on gifts and donations. However, deduction on account of share

handling expenses has been allowed by the Tribunal. Out of the

remaining additions sustained by the ld. CIT(A) at 25%, the

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Tribunal restricted such disallowance to 15%. From the above

narration of facts, it is clear that the authorities below have made

disallowance primarily on ad hoc basis. Even in respect of certain

specific expenses for which the ld. CIT(A) and the Tribunal

sustained the disallowances, the reason is not the concealment by

the assessee or furnishing of any inaccurate particulars by the

assessee, but non-availability of relevant evidence to substantiate

the claims. In such circumstances, we are satisfied that no fault can

be found with the ld. CIT(A) in deleting the penalty on addition

towards disallowance out of Miscellaneous expenses.

the AO is the claim made by the assessee for reduction in sale price

of shares by Rs. 7.50 crore lodged in revised return thereby

reducing the amount of capital gain already shown from the transfer

of shares in the original return. Pursuant to the sale of shares, some

dispute arose between the assessee and the buyer on the sale price of

shares. Accordingly, reduction in sale price of shares came to be

accepted by the assessee in a succeeding year by means of an

agreement. Pursuant to such proceedings taking place in a later year

when the assessment proceedings for the current year were going

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on, the assessee filed a revised return claiming reduction in capital

gain in the year under consideration. The AO did not allow claim.

It is a matter of record that such deduction was allowed by the AO

in the assessment for A.Y. 2005-06 when agreement for reduction in

sale price was finalized. Thus, it is overt that though the assessee

reduced the amount of sale consideration of shares during the course

of assessment proceedings by means of a revised return, however,

the fact was appropriately brought to the notice of the Department.

It is not the case of the Revenue that the assessee lodged a false

claim or attempted to revise its income in a frivolous manner.

Rather, the assessee agreed for reduced sale price of shares in a

succeeding year by means of an agreement, for which deduction

has been admittedly granted by the AO himself in such a later year.

This manifests that the assessee cannot be considered to have either

concealed its income or furnished inaccurate particulars of its

income on this item. As such, we are satisfied that the ld. CIT(A)

was justified in deleting the penalty on this score.

disallowance of legal expenses for want of necessary evidence. The

assessee claimed deduction of Rs.15,11,694/- and Rs.7,11,325/-

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towards legal charges paid to Crawford Bayley, Advocates and

Solicitors. The assessee was required to produce the bills in respect

of the aforesaid payments. The assessee could produce the bill for

Rs.15,11,694/-. Since the remaining bill of Rs.7,11,325/- could not

be produced, the AO made the addition. This led to the imposition

of penalty on such disallowance. The ld. CIT(A) deleted the

penalty.

material on record, it is found as an admitted position that the

assessee did make payment of Rs.7,11,325/- to Crawford Bayley by

cheque. Simply because the relevant bill could not be produced,

may be a ground for making disallowance, but cannot constitute

bedrock for the imposition of penalty. We, therefore, hold that the

ld. CIT(A) was justified in deleting the penalty on this count.

mutual funds units, treated by the AO as `Income from other

sources’. The AO noticed that the claim of the assessee for capital

gain was not reconciling with profit from redemption of mutual

fund units. He, therefore, added the differential amount of Rs. 7.98

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lakh. This was visited with penalty, which came to be deleted by the

ld. CIT(A) in the first appeal.

deleting the penalty. The addition was made simply because of

non-reconciliation of the amount of capital gain. It is not a case as

if the assessee fraudulently lowered the amount of capital gain for

the purpose of taxation. In such circumstances, we uphold the

impugned order in deleting the penalty.

Order pronounced in the Open Court on 19th July, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 19th July, 2019 सतीश

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आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-I, Nashik 4. The CIT-V, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “सी” / DR ‘C’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 19-07-2019 Sr.PS 2. Draft placed before author 19-07-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *