DILAWARBHAI HUSSAINBHAI KALIWALA,BHAVNAGAR vs. THE DCIT, CIRLCE-1, BHAVNAGAR

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ITA 1424/AHD/2019Status: DisposedITAT Ahmedabad21 October 2022AY 2015-164 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition on account of director's remuneration was a change in the head of income by the AO and not concealment. Similarly, advances without interest were a business decision. Therefore, the penalty under Section 271(1)(c) was not sustainable.

What were the facts?

The assessee filed a return declaring a loss. The Assessing Officer made additions for director's remuneration and interest-free advances, and imposed a penalty under Section 271(1)(c). The CIT(A) partly allowed the appeal.

What were the issues?

Whether the penalty under Section 271(1)(c) was rightly imposed when the additions were based on a difference in the head of income and business exigencies, rather than concealment or furnishing inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD

Before: SMT.ANNAPURNA GUPTA & MS. SUCHITRA KAMBLE

For Appellant: Shri Shri Hiren J. Trivedi, CA
Hearing: 28/09/2022Pronounced: 21/10/2022

O R D E R

PER MS.SUCHITRA KAMBLE, JUDICIAL MEMBER

1.

This appeal is filed by the Assessee against the order dated 26/06/2019 passed by the Commissioner of Income-tax (Appeals)-6, Ahmedabad [“CIT(A)” in short] for Assessment Year 2015-16.

2.

The Grounds of appeal

are as under :-

1. The learned CIT(A) has erred both in law and on the facts in dismissing the appeal of the appellant.

2. The learned CIT(A) has erred both in law and on the facts in not adjudicating on one of the grounds taken by the appellant that notice issues u/s.271(1)(c) r.w.s.274 of the Income Tax Act, as issued by the Ld.AO was invalid ab-initio. Dilawarbhai Hussainbhai Kaliwala vs. DCIT AY 2015-16 2

3. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.

4. The Ld.CIT(A) has erred on law and facts by not accepting the fact similar appeal filed by the appellant for the AY 2014-15, on the similar facts and grounds and of the exactly similar amount, was allowed by the then Ld.CIT(A), without elaborating the facts and reasons as to how he has arrived at his decision which is totally contrary to one as passed by his predecessor.

5. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO in imposing penalty u/s.271D of the act of Rs.2,75,000/-.

3. The return of income was filed by the assessee on 30.09.2015 declaring total income of Rs. (-) 42,76,708/-. The Assessment Order u/s 143(3) was passed on 12.12.2017 determining the taxable income at Rs. 25,97,418/- by making addition on account of Director’s remuneration amounting to Rs.24,00,000/-, addition on account of advances without interest amounting to Rs. 1,97,418/-. The Assessing Officer initiated the penalty proceedings u/s 271(1)(c) of the Act. The assessing Officer imposed penalty of Rs.6,22,353/- for willfully furnishing inaccurate particulars of income u/s 271(1)(c) vide order dated 28.06.2018.

4.

Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. AR submitted that in A.Y. 2014-15, the penalty u/s 271(1)(c) of the Act was deleted by the CIT(A) and no further appeal was filed by the revenue. In the said assessment year also addition was on account of Dilawarbhai Hussainbhai Kaliwala vs. DCIT AY 2015-16 3 Director’s remuneration. The Ld. AR further submitted that there is no furnishing of inaccurate particulars of income on part of the assessee as the assessee has given the details of the remuneration of Director as income from other sources. Merely the opinion of the Assessing Officer has changed that the said amounts to salary income. Therefore, the same cannot be treated as furnishing of inaccurate particulars of income. Besides this, relating to addition on account of advances without interest cannot be said as furnishing of inaccurate particulars of income as well. Therefore, the Ld. AR submitted that the penalty under Section 271(1)(c) of the act is not just and proper and the same may be deleted.

6.

The Ld. DR relied upon the Assessment Order, Penalty order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the addition on account of director’s remuneration was related to the change of head by the Assessing Officer by not treating the same as income from other sources but as salary income. This cannot be treated as concealment of income or furnishing of inaccurate particulars of income under Section 271(1)(c) of the Income Tax Act. 1961. It is merely the view of the Assessing Officer which is different than the assessee while applying the treatment of head of income for particulars of income. Therefore, the Assessing Officer as well as the CIT(A) was not right in imposing the penalty under Section 271(1)(c) of the Act. As regards to addition on account of advances without interest, it is the prerogative of the assessee while giving the advances to the parties with or without interest as per the need of the business exigencies. This again Dilawarbhai Hussainbhai Kaliwala vs. DCIT AY 2015-16 cannot be treated as furnishing of inaccurate particulars of income or concealment of income under Section 271(1)(c) of the Act. Hence, the penalty imposed by the Assessing Officer does not sustain. The appeal of the assessee is allowed.

8.

In result, appeal of the assessee is allowed.

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