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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 22.09.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
The only issue raised by the assessee is against the confirmation of penalty of Rs.5,69,600/- as levied by the AO under section 271(1)(c) of the Act.
The facts in brief are that the assessment was framed in the case of assessee under section 143(3) on 28.02.2014
2 M/s. Apex Engineers Bright Petrol Pump determining the total income at Rs.25,40,180/- as against the return of income of Rs.6,41,860/- and accordingly notice under section 271(1)(c) of the Act was issued on 28.02.2014 in respect of the two additions namely non payment of service tax of Rs.15,38,294/- and non deduction of TDS from the payment of Rs.3,04,780/-. The AO observed from the tax audit report that assessee has not paid service tax to the government exchequer on or before the due date as per the provisions of section 43B of the Act to the tune of Rs.15,38,294/- and also that assessee has not deducted the tax on hiring charges of Rs.3,04,830/- as per the provisions of the Act and accordingly held that it is a fit case for levy of penalty under section 271(1)(c) of the Act within the meaning of the Explanation-1 of section 271(1)(c) of the Act and ultimately levied a penalty of Rs.5,69,600/- if the 100% of the tax sought to be evaded vide order dated 26.08.2014.
The Ld. CIT(A) confirmed the penalty by holding that Explanation-1 of section 271(1)(c) is clearly attracted . The assessee is aggrieved by the order of Ld. CIT(A) and hence is in appeal before us.
We have heard the rival submissions of both the parties and perused the material on record including the decisions cited by the Ld. A.R. We find merit in the contention of the Ld. A.R. that service tax was not claimed at all in the profit & loss account as deduction and therefore the same is not liable for penalty under section 271(1)(c) of the Act. Similarly, as regards non deduction of tax, the Ld. A.R. submitted that 3 M/s. Apex Engineers Bright Petrol Pump assessee has fully disclosed this fact in the tax audit report which was filed before the AO and therefore mere making an addition u/s 40(a)(ia) of the Act resulting from the non deduction of TDS from particular payment (hire charges in the present case) did not attract the rigorous of penalty proceedings. In the case of CIT vs. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) it has been held that mere making of a claim which is not sustainable in the law by itself will not amount to furnishing of inaccurate particulars of income. In the present case before us the penalty has been levied for non payment of service tax which was never claimed by the assessee as deduction in the profit & loss account and was picked up by the AO from the tax audit report and the secondly on account of disallowance of hire charges for non deduction of TDS under section 40(a)(ia). We, therefore, are of the considered view that in both the above cases, non payment of service tax of Rs.15,38,294/- within the due time as specified by section 43B of the Act and non deduction of tax from hire charges of Rs.3,04,830/- would not attract the penal action under section 271(1)(c) of the Act. In that first case, the service tax was not claimed at all as it was not charged in the profit & loss account and in the second case the full discloser was made by the assessee and it is mere a wrong claim and therefore squarely covered by the ratio laid down in the case of CIT vs. Petroproducts (P.) Ltd. (supra). We, therefore, set aside the order of Ld. CIT(A) and direct the AO to delete the addition.
Order pronounced in the open court on 12.09.2018.