ROHDE & SCHWARZ INDIA PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

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ITA 4570/DEL/2014Status: DisposedITAT Delhi14 November 2017AY 2007-085 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal ordered pro tanto deletion of penalty related to two additions that were already deleted by the Tribunal. For the remaining addition, the penalty matter was remitted back to the Assessing Officer for fresh adjudication.

What were the facts?

The assessee's appeal against a penalty order for AY 2007-08 was delayed by 11 days, which was condoned. The penalty was imposed based on three additions made by the Assessing Officer.

What were the issues?

Whether penalty can be sustained when the underlying additions are deleted or remitted. The issue of penalty on a commission and warranty provision where the quantum was remitted to the AO.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 40(a)(i)

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Income Tax Appellate Tribunal, DELHI BENCHES : F : NEW DELHI

Before: SHRI R.S. SYAL & SMT BEENA PILLAI

For Appellant: Shri S. Srinivasan, CA
For Respondent: Shri Gaurav Dodeja, Sr. DR
Hearing: 13.11.2017Pronounced: 14.11.2017

Rohde & Schwarz India Pvt. Ltd., Vs. DCIT, A-27, First Floor, Circle-15(1), Mohan Cooperative Industrial New Delhi. Estate, Mathura Road, New Delhi. PAN: AAACR3267P (Appellant) (Respondent) Assessee By : Shri S. Srinivasan, CA Department By : Shri Gaurav Dodeja, Sr. DR Date of Hearing : 13.11.2017 Date of Pronouncement : 14.11.2017 ORDER PER R.S. SYAL, VP: This appeal filed by the assessee is directed against the order 10.06.2014 passed by the CIT(A) upholding penalty of Rs.24,15,500/- imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2007-08.

2.

The appeal is time barred by 11 days. The ld. AR explained the reasons for the delay in presenting the instant appeal. We are satisfied with the same. The delay is, accordingly, condoned and the appeal is admitted for hearing.

3.

We have heard the rival submissions and perused the relevant material on record. It is observed that the instant penalty was imposed with reference to three additions viz., Rs.49,51,382/- towards repair expenses incurred of let out premises; Rs.10,58,630/- being, the amount of commission received but not accounted for; and Rs.11,66,152/- being, the disallowance made u/s 40(a)(i) on account of non-deduction of tax at source. In so far as the first disallowance of Rs.49,51,382/- and the third disallowance of Rs.11,66,152/- are concerned, the Tribunal, vide its order dated 30.03.2016, has deleted these additions. Since no cause of action survives in respect of penalty on these two scores, we order for the pro tanto deletion of penalty.

4.

With regard to the only other addition of Rs.10,58,630/-, we find that the assessee claimed deduction @ 8% towards expenses incurred on account of warranty services. The Assessing Officer, while considering the past data, arrived at the conclusion that such provision should have been at 6.4%. This led to the making of addition of the above sum. The Tribunal remitted the matter to the file of Assessing Officer to recompute income received by the assessee on account of commission and service including warranty obligation in pursuance of its findings.

Since the matter in quantum proceedings has been restored to the file of the Assessing Officer, we are of the considered opinion that it would be in the fitness of things if the matter concerning the penalty on such amount is also sent back to be decided in conformity with the view taken by the Assessing Officer in the proceedings pursuant to the directions given by the Tribunal. Our view in restoring the penalty to the AO is fortified by the judgment of the Hon’ble Supreme Court in the case of Mohd. Mohatram Farooqui vs. CIT (SC) 2010-TIOL-23-SC-IT in which it has been held that if addition is restored to the AO, then penalty should also be restored. The Hon’ble jurisdictional High Court in Sanjay 3 Gupta vs. CIT (2014) 366 ITR 18 (Del) has also held that where the quantum has been remanded to the AO, the question of penalty on account of the said amount being treated as undisclosed income, should also be remanded to the AO. We, therefore, set aside the impugned order and remit the matter to the file of the AO for determining the question of imposition or otherwise of the penalty on this issue, after the passing of a fresh assessment order on this count. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in this regard.

5.

In the result, the appeal is partly allowed.

The order pronounced in the open court on 14.11.2017.

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