KOTHARI PHARMA,MUMBAI vs. ITO 21(3)(3), MUMBAI

O R D E R आदेश आदेश आदेश Per Pawan Singh , Judicial Member: 1. This appeal by assessee is under section 253 of Income-tax Act (Áct’) is directed against the order of Commissioner (Appeals)-32 Mumbai, dated 3rd June 2014 for assessment year 2008-09, which in turn arises from the order of penalty levied by assessing officer vide its order dated 19th March 2013 under section 271 (1)(c) of the Act. The assessee has raised as many as four grounds of appeal

. However, as per our considered view the only substantial ground of appeal in the present appeal is “whether the learned Commissioner (Appeals) erred in confirming the penalty of Rs. Kothari Pharma 15, 50298/- levied by assessing officer under section 271(1)(c) of the Act.

2. Brief facts of the case are that the assessee filed its return of income for relevant assessment year on 29th September 2008 declaring total income at Rs. 6,92,285/-. The assessment was selected for scrutiny. The assessing officer while passing the assessment order, besides the other addition/disallowance made addition of Rs. 48,94,979/- on account of short-term capital gain on transfer of block of asset, addition of Rs. 15,000 on account of advertisement expenses and addition under section 40 a(ia) due to non-deduction of tax on payment of Rs. 38,500/- and Rs.68,666/- on account of legal and professional fees and commission payment. The assessing officer levied the penalty on all three additions/ disallowances. The assessing officer worked out the penalty at Rs. 15,50,298/- being 100% of tax sought to be evaded, vide its order dated 19 March 2013. On appeal before Commissioner (Appeals) the action of assessing officer was confirmed. Therefore, further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.

3. We have heard learned AR of the assessee and learned DR for the revenue and perused the material available on record. The learned AR of the assessee submits that the assessee filed appeal before the Tribunal in quantum assessment, wherein the addition on account of short-term 2 Kothari Pharma capital gain on transfer of capital asset of Rs. 48,94,979/- was restricted to Rs. 2,18,397/-. However, no appeal was filed against the addition on account of advertisement expenses and disallowances under section 40 a(ia). The learned AR submits that once the addition on account of transfer of block of asset was restricted to Rs. 2,18,397/- by Tribunal in its order dated 29 July 2016 in ITA No.1593/M/2012. Therefore, no penalty on such addition is leviable. The learned AR further submits that addition on account of advertisement expenses not challenged because of smallness of amount. Further on disallowance under section 40 a (ia) the learned AR submits that no penalties leviable on such notional disallowances. The learned AR prayed for deleting the entire penalty.

4. On the other hand the learned DR for the revenue supported the order of lower authorities. The learned DR further submits that assessee has furnished inaccurate particulars of income, which has been appreciated by learned Commissioner (Appeals) in para 3.4 of its order while confirming the penalty order.

5. We have considered the rival submission of the parties and have gone through the orders of authorities below. There is no dispute that the addition on account of capital gain on transfer of capital asset was restricted to Rs. 2,18,397/- by Tribunal in its order dated 29 July 2016 in ITA No.1593/M/2012. It is a matter of fact that the revenue has not challenged the order of Tribunal before the Jurisdictional High Court; 3 Kothari Pharma therefore, the order of Tribunal attains finality. Therefore, in our considered view no penalty is leviable on such addition on account of capital gain on transfer of asset.

6. The second disallowance on which penalty was levied relates to disallowance on account of advertisement expenses of Rs.15000/-. The assessing officer while making addition concluded that the bill was not proper and not recorded in the year of concern; therefore, the amount was added back to the income of assessee. The learned Commissioner (Appeals) confirmed the penalty qua addition of Rs. 15,000/- holding that the assessee has not said anything with regard to the addition made by assessing officer. In our view the claim of advertisement expenses in the year consideration was not proved, to the satisfaction of the assessing officer, thus the assessing officer levied the penalty. The assessing officer has not recorded a satisfaction that the assessee intentionally and deliberately claimed false expenses to evade the tax. Therefore in our view, merely the assessee failed to substantiate the expenses on account of advertisement, would not ipso facto attract the penalty.

7. Similarly for the disallowances under section 40 a(ia) the assessing officer levied the penalty holding that the assessee has not preferred appeal against the disallowances. The learned Commissioner (Appeals) confirmed the action of assessing officer on his observation that the assessee has not made any submission. 4