M/S SNC JEWELS PVT LTD.,MUMBAI vs. DY CIT CIRCLE- 11 (2)(2), MUMBAI

The present appeal has been preferred by the Revenue against the order dated 19.11.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2015-16.

The only issue raised by the assessee in three grounds of appeal is against the imposition of penalty on three disallowances namely disallowance of travel expenses of Rs.48,170/-, shortfall in cessation of liability of Rs.11,236/- and lastly depreciation on motor vehicle Rs.5,70,750/-.

The facts in brief are that the assessment under section 143(3) of the Act was framed vide order dated 22.12.2017

In the appellant proceedings, the Ld. CIT(A) upheld the order of AO by holding that assessee has accepted the additions in the assessment and has not preferred any further appeal challenging the quantum additions. The Ld. CIT(A) while passing the order dismissing the appeal of the assessee also referred to explanation 1 to section 271(1)(c) of the Act to hold that assessee has failed to offer any explanation qua the said furnishing of inaccurate particulars of income or explanation of the assessee was found to be false by the AO and thus justified the invocation of provisions of section 271(1)(c) of the Act.

After hearing both the parties and perusing the material on record, we find that there are three disallowances/additions in 3 M/s. SNC Jewels Pvt. Ltd. respect of which the penalty under section 271(1)(c) of the Act has been levied by the AO. The first is against the disallowance of travelling expenses of Rs.48,170/- which was paid by the assessee through his credit card in respect of travelling and hotel stay of his wife and was wrongly claimed in the expenses. Similarly, the second item of the addition was in respect of shortfall in cessation of liability to the tune of Rs.11,236/- under section 41(1) of the Act which was offered during the course of assessment proceedings and third item of addition in respect of which the penalty was imposed was depreciation on motor vehicle which was purchased in the name of the director of the assessee company and was duly accounted for in the books of accounts which according to the AO was not correct and he disallowed the depreciation on the motor cars purchased by the assessee in the name of the director. Having considered these three items of additions, we are of the view that the penalty is not imposable in respect of these additions as assessee has not furnished any inaccurate particulars of income. So far as the disallowance of travel expenses of Rs.48,170/- and shortfall in cessation of liability of Rs.11,236/- are concerned, the assessee has made full disclosure in the books of accounts and return of income filed and therefore can not be held liable for furnishing of inaccurate particulars of income. The case of the assessee is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd.” [2010] 322 ITR 158 (SC) wherein the Hon’ble Supreme Court has held that if the assessee has made a claim which has been disclosed in the books of accounts no penalty is imposable under section 271(1)(c) of the Act even if the said claim is not acceptable to the 4 M/s. SNC Jewels Pvt. Ltd. Revenue. So far as the third addition of disallowance of motor car is concerned, we are of the view that same can not be held to be inaccurate particulars on the part of the assessee. The assessee should have been allowed depreciation on the motor car purchased in the name of the director of the assessee company. We are of the opinion that no penalty is imposable on this item of addition. In view of these facts and circumstances, we are inclined to set aside the order of the Ld. CIT(A) and direct the AO to delete the penalty.

In the result, the appeal of the assessee is allowed.