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Income Tax Appellate Tribunal, DELHI BENCHES : “C” : NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A. PILLAI
Assessment Years: 2012-13 Globe Cast India Private Ltd. Vs. DCIT Circle- 10(1) 601, 6th Floor, DLF South Court C.R. Building, New Saket, New Delhi Delhi PAN: AACCG0015C (Appellant) (Respondent) Assessee By : Sh. R. Raghunath, CA Department By : Sh. S.L. Anuragi, Sr. DR Date of Hearing : 04.06.2018 Date of Pronouncement : 05.06.2018 ORDER PER R.S. SYAL, VP: This appeal by the assessee is directed against the order passed by the CIT(A) on 14.7.2016 confirming the penalty of Rs. 8,53,353/- imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred also called the Act) in relation to the assessment year 2012-13.
Briefly stated facts of the case are that the assessee is engaged in the business of technical and professional services relating to news /events fields etc. A sum of Rs. 30,03,000/- was debited to the Profit and loss account under the head `Legal and professional charges’. This amount was paid to M/s GIV Marketing Pvt. Limited for conducting market research survey to increase its customer base in India. The Assessing Officer held that the assessee was likely to get enduring having from such expenditure. He capitalized this amount and allowed depreciation @ 25%, which led to addition of Rs. 22,52,250/-. In addition, the Assessing Officer found that the assessee did not deduct tax at source in respect of three payments under section 194C and 194J of the Act. Invoking the provisions of section 40(a)(ia), he made an addition at Rs. 2,73,061/-. Thereafter, penalty was imposed with a reference to the above additions, which came to be affirmed in the first appeal.
We have heard both the sides and perused the relevant material on record. It is observed that the assessee claimed deduction in respect of market research expenses, which was otherwise deductible in full in the year its incurring. It is an altogether different matter that the Assessing Officer 2
allowed such deduction by spreading it over four years which the assessee did not challenge as its deduction was not denied, but simply spread over. By no standard, the disallowance of remaining 3/4th in this year can be construed as falling within the mischief of section 271(1)(c). Similar is a position regarding other disallowances made under section 40(a)(ia) of the Act. It is not the case that the expenses were not genuinely incurred. The assessee entertained a bona fide belief that no deduction of tax at source was required from such payments. Merely because the Assessing Officer has made disallowance under section 40(a)(ia) in respect of such expenses, the same cannot be considered as covered under section 271(1)(c) of the Act.
The Hon'ble Supreme Court in the case CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC) has held that simply for the reason that the Assessing Officer did not find the claim of the assessee to be sustainable in law up to a certain extent, cannot be a case for penalty u/s. 271(1)(c), more so, when the particulars furnished by the assessee were not inaccurate. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was not justified in sustaining the penalty imposed by the AO u/s 271(1)(c) in respect of disallowance of above expenses. The impugned order is set aside and the penalty is directed to be deleted.
In the result, the appeal is allowed.
The order pronounced in the open court on 05th June, 2018.