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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI R. C. SHARMA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 25.01.2017 passed by the Commissioner of Income Tax (Appeals)-2, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2008-09 wherein the penalty levied by the AO has been ordered to be confirmed.
2. The assessee has raised the following grounds: - “ The Hon’ble CIT(A) has erred in confirming the penalty levied u/s 271(1)(c) of the Act, by the AO of Rs.5,97,203/- on account of treating claim of foreign exchange loss as ITA. No.2337/M/2017 A.Y. 2008-09 capital loss and disallowing certain expenses u/s 40(a)(ia) of the Act. On facts and circumstances of case and in law the penalty levied u/s 271(1)(c) of the Act ought to be deleted.
The appellant craves leave to add, alter, amend/or rescind any grounds of appeal during the course of the hearing.” The brief facts of the case are that the assessee filed its return of 3. income for the A.Y. 2008-09 on 29.09.2008 declaring income to the tune of Rs.5,34,63,900/-. Thereafter, the assessment u/s 143(3) of the Act was completed on 21.12.2010 determining the total income to the tune of Rs.6,60,95,170/-. The assessee is engaged in the business of Waterproofing, restoration and civil contract works. In the profit & loss account, the assessee has debited an amount of Rs.12,90,079/- as foreign exchange loss under the head administrative and selling expenses. On verification, the claim of the assessee was not found justifiable, therefore, the said claim to the tune of Rs.12,90,079/- was declined and added to the income of the assessee. The assessee was also asked to prove the claim of deduction u/s 40(a)(ia) of the Act but the assessee failed to prove the claim regarding expenses to the tune of Rs.3,65,841/-, therefore, the same was also declined and added to the income of the assessee. In connection with declining the claim on account of loss of foreign expenses and on account of non-payment of TDS, the penalty proceeding u/s 271(1)(c) of the Act was initiated and after the compliance of necessary provision, the penalty to the tune of Rs.5,97,203/- was levied. Feeling aggrieved, the assessee filed an ITA. No.2337/M/2017 A.Y. 2008-09 appeal before the CIT(A) who confirmed the order of the AO, therefore, the assessee has filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. We noticed that the AO has levied the penalty on account of disallowance of claim of loss on foreign exchange and on account of disallowance of claim u/s 40(a)(ia) of the Act to the tune of Rs.3,65,841/-. On account of addition of loss foreign exchange and disallowance of claim u/s 40(a)(ia) of the Act to the extent of Rs.3,65,841/-, the CIT(A) has confirmed the order of the AO. The Ld. Representative of the assessee has argued that the disallowance of the claim of the assessee on account of foreign fluctuation loss and on account of disallowance u/s 40(a)(ia) of the Act nowhere attract the penalty in view of the law settled in ACIT Vs. Seaways Shipping Ltd. (ITA. No. 80/H/2011 dated 17.06.2011) Hyderabad ITAT has held that “-
“In this case, penalty is levied for disallowance of expenditure u/s 40(a)(ia) of the Act. on deduction of TDS by the assessee was resulted in disallowance of expenditure u/s 40(a)(ia) of the Act that itself cannot be construed as furnishing inaccurate particulars of income or concealment of income. The assessee as failed to deduct TDS which resulted in disallowance concealment is not the case of concealment of income or it is not the case that the assessee has furnished any factual incorrect information and the assessee is not guilty of furnishing of inaccurate particulars of income. In our opinion, the conditions laid down in section 271(1)(c) of the Act, is not complied with. Being so, levy of penalty is not justify merely because the assessee has claimed certain expenditure that expenditure is not eligible in view of the provisions of section 40(a)(ia) of the Act and for that reason, expenditure is disallowed.
ITA. No.2337/M/2017 A.Y. 2008-09
Penalty cannot be levied for mere making of a claim of the expenditure which is not sustainable and deletion of penalty by the CIT(A) is justified. We place reliance on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd. (322 ITR 158) (SC). Accordingly, the ground raised by the revenue holds no merits.” In the case of ACIT Vs. Bhoruka Logistic (P) Ltd. (2010)
34. (II) ITCL 552) Mumbai Tribunal has held that “This is a case where the dispute acrose against the disallowance of expenditure in view of section 40(a)(ia) of the Act. The assessee had in fact paid TDS and it is not in dispute that the expenditure should be allowed in the subsequent year in which the TDS has been paid to the Gov. Treasury. The first appellate authority, in our considered opinion, has rightly relied upon the judgment of the Hon’ble Punjab & Harayana High Court in the case of CIT Vs. Ajain Singh & Co. (2002) 253 ITR 630, wherein it is held that mere disallowance of expenditure will not per se amount to furnishing of inaccurate particulars of income. At para 4 page 3 of his order, the first appellate authority rightly held as follows: Once the explanation of the assessee is not considered false and explanation has been given the penalty can only be levied if the explanation is not bona fide and full details for the computation of income has not been given by the appellant. It may be noted that Rajasthan High Court decision in (2001) 251 ITR 373 has enunciated the principle of bona fide, wherein it has been held that there is presumption that explanation given is bona fide unless proved to be otherwise.” The assessee also relied upon the following decisions.: CIT Vs. Reliance Petroproducts P. Ltd. (Arising out of SLP (C) No.27161 of 2008) “…..as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the revenue that by itself would not in our opinion, attract the penalty u/s 271(1)(c). If we accept the contention of the revenue
ITA. No.2337/M/2017 A.Y. 2008-09 then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the legislature. High Court of Punjab and Harayana in case of CIT Vs. Lakhani India Ltd. (2010) (324 ITR 73) Reliance is placed on the decision of High Court of Punjab and Harayana in case of CIT Vs. Lakhani India Ltd. (2010) (324 ITR 73) wherein it was held that the assessee during penalty proceedings claimed that there is no concealment and the additional’disallowances has been made on account of difference of opinion. It is pertinent to mention here that the decision of the Bombay High Court in the case of Ipca Laboratories Ltd. (supra) was in favour of the assessee when the return was filed. However, this decision was later on reversed by the Hon’ble Apex Court. In view of these facts, it cannot be said that the assessee concealed its particulars of income.”
By going through the material available on record, we noticed that undoubtedly the penalty was levied on account of disallowance of the claim of loss of foreign exchange and disallowance of claim u/s 40(a)(ia) of the Act. The assessee nowhere concealment the income or furnished the inaccurate particulars of income. In view of the above mentioned law disallowance of claim of the assessee nowhere attract the penalty. Therefore in the said circumstances and in view of the law relied by the Ld. Representative of the assessee, we set aside the finding of the CIT(A) on the issue and delete the penalty.
ITA. No.2337/M/2017 A.Y. 2008-09