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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-52 [in short ‘CIT(A)’], Mumbai and arises out of penalty u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
read as under:
1. On facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the views of the Assessing Officer (AO) in respect of penalty levied amounting to Rs13,84,539/- u/s 271(1)(c) of the Income Haware Infotech Ltd. 2 6694/Mum/2016 Tax Act by holding submissions of the appellant as cooked up story without any concrete rational rebuttal as also without applying the mind to the details submitted. The penalty levied of Rs.13,84,539/- should be cancelled.
2. On facts and circumstances of the case, the order of penalty u/s 271(1)(c) of the Act is bad in law and void ab initio, as the notice issued u/s 274 r.w.s. 271 is not in accordance with law. From the notice, it is not discernible as to why penalty is initiated, whether the penalty is initialed for furnishing of inaccurate particulars of income or for concealment of income, etc. Consequently, the penalty proceedings are wholly unsustainable in law and void ab initio, and the penalty deserves to be cancelled.
3. In a nutshell, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2009-10 on 15.10.2010 declaring total income of Rs.4,47,990/-. The AO completed the assessment u/s 143(3) on 11.02.2013 making an addition of Rs.44,80,711/-, thus arriving at an assessed income of Rs.49,28,700/-. The genesis of the above addition is that the AO, during the course of assessment proceedings, found from a perusal of a profit and loss account that the assessee-company had incurred Rs.54,85,348/- as advertisement expenses and out of this, Rs.44,80,711/- was incurred for Project Vashi-39/3-30A, which is shown as Work-In-Progress (WIP). He held that during the year under consideration, the assessee-company had incurred advertisement expenditure of Rs.44,80,711/- for the Project Vashi-39/3-30A, which is shown under WIP. Therefore, he held that the expenditures incurred on account of the said project should be debited to WIP instead of profit and loss account. Thus he made an Haware Infotech Ltd. 3 6694/Mum/2016 addition of Rs.44,80,711/- Thereafter, the AO levied a minimum penalty of Rs.13,84,539/- u/s 271(1)(c) on the above addition of Rs.41,53,617/-.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) agreed with the reasons given by the AO and upheld the penalty of Rs.13,84,539/-.
Before us, the Ld. counsel of the assessee submits that the issue in the instant case has been addressed by the Hon’ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 148 (SC) and the Hon’ble Bombay High Court in CIT v. S.M. Construction (2015) 60 taxmann.com 135 (Bom).
On the other hand, the Ld. DR relies on the order of the Ld. CIT(A) and submits that no bonafide explanation was offered by the assessee. As the assessee had debited expenditure of Rs.44,80,711/- to the profit and loss account instead of debiting it to WIP, the Ld. DR submits that the assessee had furnished inaccurate particulars of income and therefore, the order of the Ld. CIT(A) be confirmed.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In Reliance Petroproducts Pvt. Ltd. (supra), the Hon’ble Supreme Court has held that “a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars”.