ASST CIT 11(3)(1), MUMBAI vs. TOTAL LUBRICANTS INDIA LTD, MUMBAI

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ITA 896/MUM/2015Status: DisposedITAT Mumbai30 July 2018AY 2006-074 pages
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What did the Tribunal hold?

The Tribunal held that since the issue of provision for schemes was remitted to the Assessing Officer, the penalty on this account should also be remitted. For the provision for employee cost, as the addition was deleted by the Tribunal, the penalty on this issue does not survive.

What were the facts?

The Revenue appealed the deletion of penalty levied under Section 271(1)(c) for provisions made for schemes and employee costs. The assessee had debited these provisions to the P&L account without actual payment, following the mercantile system.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the additions on which penalty was based were either remitted or deleted. The applicability of Supreme Court and Delhi High Court judgments on penalty levy.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM

For Appellant: Shri V. Justin, Shri Niraj Sheth
Hearing: 01.05.2018Pronounced: 30.07.2018

O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) dated 10.11.2014 and pertains to assessment year 2006-07.

2. The issue raised is that the ld. Commissioner of Income Tax (Appeals) erred in deleting the penalty levied in this case u/s. 271(1)(c) of the Act. The grounds raised

in this regard are as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting penalty of Rs.59,54,490/- levied u/s. 271(l)(c) of the Income Tax Act, 1961, without appreciating the fact that the assessee had debited to the Profit and Loss Account a sum of Rs.1,19,00,000/- being provision for schemes and Rs.57,50,000/- being provision for employees cost even though the assessee had actually not paid the same in the present year and hence was not entitled to the said deduction.

M/s. Total Lubricants India Ltd.

2. On the facts and in the circumstances of the case and in law, the Lt. CIT(A) erred in deleting the penalty levied u/s 271(l)(c) without appreciating the fact that the assessee had not actually paid the amount and had only created a provision, when the assessee was following mercantile system of accounting which thereby tantamount to filing of inaccurate particulars of its income within the meaning of Section 271(l)(c) of the IT. Act, 1961.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied u/s 271(l)(c), relying on the Supreme Court's Judgment in the case of CTT v/s Reliance Petro Products Pvt. Ltd.(322 ITR 158)(SC) without appreciating that the principles laid down by the Apex Court in the judgment cited Supra are not applicable to the facts of the case of the assessee.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. Zoom communications Pvt. Ltd.(327 ITR 510)(Del).

3.

In this case, the penalty has been levied for the two additions in this case which are as under:

1.

provision for a sum of Rs.1,19,00,000/- being the provision for schemes;

2.

provision for a sum of Rs.57,50,000/- being the provision for employees

cost. The penalty levied in this case has been deleted by the ld. Commissioner of Income Tax (Appeals).

4.

Against this order, the Revenue is in appeal before us.

5.

We have heard both the counsel and perused the records. The learned departmental representative relied upon the order’s of the assessing officer.

6.

Per Contra, the learned counsel of the assessee supported the order of the ld. Commissioner of Income Tax (Appeals). He further submitted that this ITAT in the quantum appeal has remitted the first issue being the provision for schemes for fresh consideration by the assessing officer with certain directions. He further submitted that M/s. Total Lubricants India Ltd. on the second issue of provision for employees cost, that addition has been duly deleted by the ITAT. Hence, the learned counsel of the assessee submitted that levy of penalty on this account does not survive.

7.

Upon careful consideration we find that since on the issue of provision of schemes for a sum of Rs.1,19,00,000/-, the issue has been remitted to the file of the assessing officer, the issue of penalty also deserves to be remitted to the file of the assessing officer. Accordingly, the issue of penalty on this account is remitted to the file of the assessing officer. The same shall be considered by the Assessing Officer upon the adjudication of the issue pursuant to the remand by the ITAT.

8.

As regards the levy of penalty with reference to the addition of Rs.57,50,000/- relating to provision for employee cost, since the concern addition has been duly deleted by the ITAT, the penalty on this issue does not survive. Hence, we uphold the deletion of penalty on this account.

9.

In the result, this appeal by the Revenue stands partly allowed.

Order pronounced in the open court on 30.07.2018

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