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Income Tax Appellate Tribunal, “E” Bench, Mumbai
O R D E R Per Bench :- These Assessee appeals are against the respective order of learned CIT(A), conferring following levy of penalty u/s 271(1)(c) of the I.T.Act, 1961.
Sr.No. Assessment Year Penalty (Rs.) 1 2009-10 6,10,000 2 2010-11 4,50,000 3 2011-12 6,50,000 4 2012-13 22,75,000 5 2013-14 9,00,000 6 2014-15 6,75,000
Since facts are identical, we refer to order of AY 2009-10 of authorities below.
2 Transcon Sheth Creators Pvt.Ltd.
The brief facts of the case leading to the disallowances with refer to which penalty is levied is as under:-
“During the assessment proceedings, it was found that the assessee company has claimed expenses pertaining to Orelem Project amounting to Rs.19,50,000/- as professional fee under Work In Progress(WIP) of the company. However, the transaction was not found to be wholly and exclusively not connected to the business and which was found to be non-genuine, and accordingly, the same was disallowed u/s 37(1) and added to the WIP.
On the above disallowances from the work in progress penalty u/s 271(1)(c) was levied. While levying penalty, the AO did not discuss the decision of CIT vs Reliance Petroproduct Pvt.Ltd. [322 ITR 158] (SC) referred by assessee. He referred to Hon’ble Supreme Court decision in Union of India v Dharmendra Textile Processors(2006) 306 ITR 277 and Hon’ble Delhi High Court decision in Zoom Communication(2010) 327 ITR 510. Upon assessee’s appeal Ld.CIT(A) confirmed the penalty.
Against this order assessee is in appeal before us.
We have heard the Ld. DR and perused the record and Ld. DR supported the order of authorities below. He further pointed out that assessee in quantum addition has gone for settlement of dispute under Vivad Se Vishwas Scheme.
Upon careful consideration, we find that the penalty is with reference to disallowance of expenses, which resulting in decrease in closing work in progress. There is no impact on the income shown for the year. Moreover, the disallowances of an expense ipso facto cannot lead to rigours of penalty u/s 271(1)(c), as held by Hon’ble Supreme Court in the case of Reliance Petroproduct Pvt.Ltd. [322 ITR 158].
3 Transcon Sheth Creators Pvt.Ltd.
In this regard, we are draw the support from the decision of a larger bench of the Hon’ble Supreme Court in the case of the State of Orissa 82 ITR 26 wherein it was held that the authority may not levy the penalty, if the conduct of the assessee is not found to be contumacious.
We are further of the opinion that mere assessee going for settlement of dispute under Vivad Se Vishwas Scheme in quantum addition cannot be reason to sustain the penalty. Penalty is to be levied under provision section 271(1)(c). Here, we have already found that the assessee does not deserve to be visited with the rigours of penalty u/s. 271(1)(c). Moreover, the reduction work in progress for the year has not affected the income for the year, as it is an incomplete project. Hence, the levy of penalty with reference to the income sought to be evaded has not been properly dealt with in the penalty order.
Accordingly, in the background of aforesaid discussion and precedent, we set aside the order of the authorities below and delete the penalty.
In the result, all assessee’s appeals are allowed.
Pronounced in the open court on 01.07.2021