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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: HON’BLE JUSTICE(R) SHRI P.P.BHATT & G.S. PANNU
The captioned appeal filed by the Assessee pertaining to Assessment Year 2005-06 is directed against an order passed by CIT(A)-32, Mumbai dated 28.2.2017, which in turn arises out of an order passed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) dated 28.3.2013.
2. The assessee has raised the following grounds of appeal:
1. On the facts of the case the AO erred in levying and ld CIT(A) in confirming on a sum of Rs.16,97,627/- which was addition on account of non-deduction of tax under section 40(a)(ia) and such addition was procedural in nature.
2 2909/Mum/2017 A.Y. 2005-06
2. On the facts of the case, the AO erred in levying and ld CIT(A) in confirming on a sum of Rs.7,64,520/- on account of undisclosed sales on the basis of Form 26AS.”
3. Briefly stated the facts of the case are that the assessee is in the business of ad films and release of same in media. The Assessing Officer completed the assessment u/s.143(3) of the I.T.Act, inter alia, making various additions/disallowances. On appeal, the CIT(A) partly allowed the appeal of the assessee by upholding the additions made under section 40(a)(ia) of the Act of Rs.16,97,627/- and on account of discrepancy in sales made with M/s Hindustan Lever Ltd., on the basis of 26AS of Rs.7,64,520/-.
4. The Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act for concealment of income by furnishing inaccurate particulars of income and required the assessee to show cause as to why penalty should not be imposed for furnishing inaccurate particulars of income. Since, there was no compliance from the assessee, the Assessing Officer levied penalty of Rs.16,97,627/- for the disallowance u/s.40(a)(ia) of the Act and Rs.7,64,520/- for the disallowance of Rs.7,64,520/-. 5. On appeal, the CIT(A) confirmed the levy of penalty of Rs.16,97,627/- on the ground that the assessee has admitted the disallowance, which itself proves that the assessee has made incorrect claim of expenses. As regards penalty of Rs.7,64,520/-, the CIT(A) observed that the assessee has not furnished any evidence from M/s. Hindustan Unilever Ltd.,/M/s. Berger Paints Ltd., to confirm the nature of discrepancy and, hence, the penalty was confirmed. 6. Being aggrieved by the penalty order, the assessee is in appeal before us. 7. At the time of hearing, ld A.R. of the assessee submitted that the addition on account of non-deduction of tax u/s.40(a)(ia) of the Act are procedural in nature and under no circumstances represents
3 2909/Mum/2017 A.Y. 2005-06 concealment of income or furnishing of inaccurate particulars. He submitted that the tax was paid in the year 2012-13 and was claimed as expenses in that year. With regard to addition on account of undisclosed sales as reflected in Form 26AS, ld A.R. submitted that in the case of M/s. Berger Paints Ltd.,., said amount was accounted for in financial year 2003-04 and in case of M/s. Hindustan Unilever Ltd., on such amount erroneously. Ld A.R. also submitted that the penalty proceedings are separate from the assessment proceedings and all additions are not liable for penalty. Ld A.R. also referred the following decisions for the proposition that if there is disallowance u/s.40(a)(ia), no penalty u/s.271(1)(c) can be levied. “1 Atul Shamji Bharani HUF Dt 12.04.2017 (Mumbai A Bench)
Ramkrishna Shetty Vs ACIT Dt 11.12.2013 (Mumbai D Bench
Tanushri Basu Vs ACIT Mumbai- Dt 22.05.2013 E- Bench, Mumbai
ACIT Circle 13(1) New Delhi Vs National Project Constructions and corporation Ltd- DeL/2013 and CO No. 133/Del/2014 Dt 15.02.2016 E Bench Delhi.
ACIT Vs Madversity online Ltd 2012 27 Taxmann.com 109 Hyderabad dt 23.11.2012.
Syndicate Labels Vs ACIT Circle 38(1) New Delhi SMC New Delhi.
Devpras Institute Vs ITO Ward 2(2) Baroda, Dt 23.11.2012.
On the other hand, ld D.R. supported the order of the CIT(A).
We have considered submissions of ld representatives of parties and perused orders of authorities below. We find that the assessee has come in appeal against the penalty u/s.271(1)(c), which has been confirmed by the CIT(A) on two issues i.e. (i) addition made
4 2909/Mum/2017 A.Y. 2005-06 u/s.40(a)(ia) of the Act and on account of undisclosed sales as reflected in 26AS statement. With regard to the penalty made for the addition u/s.40(a)(ia) of the Act, we find that the Assessing Officer has levied penalty u/s.271(1)(c) of the Act as the assessee failed to deduct TDS. In this case, the tax was paid in the year 2012-13 and was claimed as expenses in that year only. We observe that the genuineness of the claim of the assessee has not been disputed by the department. Therefore, it cannot be said that assessee has claimed expenses which are false or not genuine. The assessee has furnished all the relevant facts concerning the claim made by it in the return filed. The AO has levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s.40(a)(ia) of the Act as assessee failed to deduct TDS thereon.
Similarly, as regards to penalty made on account of undisclosed sales as reflected in Form 26AS, it is the contention of the assessee that in the case of Berger Paints ltd., said income was accounted for in financial year 2003-04 and in the case of Hindustan Unilever Ltd., the amount was written off as discount and tax was deducted on such amount erroneously.
The Apex Court in the case of Reliance Petroproducts Ltd (supra) has held that a mere making of the claim which is not sustainable in the law, by itself will not amount to furnishing inaccurate particulars of income. In the present case, admittedly, assessee made a claim but the same was rejected and disallowed not for the reason that the claim was not genuine or was fabricated but in view of provisions of law that assessee did not deduct TDS thereon. We are of the considered that view that the ratio of judgment of Hon’ble Apex Court in the case of Reliance Petroproducts Ltd (supra) squarely applies to the facts of the case before us and, therefore, levy of penalty is not justified. We also find that the decisions relied on by the assessee with regard to 5 2909/Mum/2017 A.Y. 2005-06 penalty imposed for the disallowance u/s.40(a)(ia) of the Act support the stand of the assessee. We also find that the Hon’ble P&H High Court in the case of PCIT Vs. Torque Pharmaceuticals (2016) 389 ITR 46 (P&H), wherein, the Hon’ble High court has observed as under:
"4. The primary challenge in this appeal is to the cancellation of penalty on addition made on account of disallowance of expenditure under Section 40(a)(ia) of the Act. The assessee had made a claim of deduction in the return of income. No finding has been recorded by the authorities below that the claim made by the assessee is malafide. It has been categorically recorded by the Tribunal after examining the entire material on record that the CIT(A) had rightly cancelled the penalty against the assessee. It was further recorded that the assessee made a bonafide claim of deduction of the expenditure and even though it was not acceptable to the revenue would not lead to the conclusion that the assessee had concealed the particulars of income or filed inaccurate particulars of income.”
As regards to the penalty made u/s.271(1)(c) for the unaccounted sales reflected in Form 26AS, we find that in the case of Berger Paints ltd., said income was accounted for in financial year 2003-04 and in the case of Hindustan Unilever Ltd., the amount was written off as discount and tax was deducted on such amount erroneously. Therefore, in our view, the assessee has explained the above difference in the receipts as per the details submitted before the authorities below and the details noted in 26AS. It is well settled law that quantum and penalty proceedings are independent and distinct proceedings. Even if the addition is agreed by the assessee and if the assessee is able to explain the addition, then, penalty may not be leviable in the facts and circumstances of the case. The above facts clearly indicate that the explanation of assessee at the penalty stage was factually correct based on the material on record and assessee successfully explained the addition so made which is the basis for levy of the penalty. Since the difference is reconciled and claim of assessee have not been doubted or rejected, therefore, Ld. CIT(A) was not 6 2909/Mum/2017 A.Y. 2005-06 justified in confirming the levy of penalty. Considering the totality of the facts and circumstances of the case, we are of the view that since the assessee explained the above addition, therefore, penalty need not be imposed in the facts and circumstances of the case.
In view of foregoing discussion, and respectfully following the decisions relied upon by the assessee before us, we set aside the order of the CIT(A) confirming the levy of penalty u/s.271(1)(c) of the Act and allow the appeal of the assessee.
In the result, appeal of the assessee is allowed.
Pronounced on 31/05/2019