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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-21, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-21/DCIT-13(3)(1)/IT373/2015-16 dated 25.07.2016. The Assessment was framed by the Dy. Commissioner of Income Tax- Circle 13(3)(1), Mumbai (in short DCIT/ AO) for the assessment year 2007-08 order dated 30.08.2017 under section 143(3) read with section 254 of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty was levied by ACIT, Circle 9(3), Mumbai vide order dated 30.03.2010 under section 271(1)(c) of the Act.
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in levying the penalty under section 271(1)(c) of the Act on disallowance of expenses for non- deduction of TDS thereby invoking the provisions of section 40(a)(ia) of the Act. For this assessee has raised the following grounds: -
“1. The learned CIT(A)-21 erred in holding that the assessing officer was justified in levying penalty uls.271(1)(c) of the Act at Rs.42,43,390/-. It is prayed that the penalty so levied be directed to be deleted.
2. The learned CIT(A) erred in substantially overlooking and thereby ignoring the written submissions, factual aspects and binding case law cited in the course of the appeal hearing while upholding the levy of penalty u/s.271(1)(c) of the Act at Rs.42,43,390/-. It is prayed that the penalty so levied be directed to be deleted.”
Briefly stated facts are that the assessee company is carrying on the business of manufacturing of rigid films/ sheets, PVC floorings, leather cloths of cushions and vinyl flooring etc. The AO during the course of assessment proceedings noticed from the audit report that there are several instances of deposit of TDS in the government account beyond time prescribed under section 200(1) of the Act and he detailed out the gross amount of payment under section 194C, 194J, 194H and 194Aof the Act and also the TDS deducted, due dates of deduction of TDS and TDS paid actually in the Government account. In view of these facts, he observed that there is delay in deposit of TDS and hence, the expenses claimed are to be disallowed under section 40(a)(ia) of the Act. The AO also observed that out of the total amount of expenses claimed of ₹ 3,39,68,049/-, the assessee suo moto disallowed and added back to the total income of the assessee at ₹ 2,23,71,710/- under section 40(a)(ia) of the Act. There remain balance amount of Rs. 1,15,96,339/-. Accordingly, the AO disallowed the balance amount of ₹ 1,15,96,339/- and added back to the returned income of the assessee for late payment of TDS by invoking the provisions of section 40(a)(ia) of the Act. The assessee has accepted this addition in quantum and no further appeal was preferred. The AO initiated the penalty proceedings and levied the penalty for furnishing of inaccurate particulars of income. Aggrieved, assessee preferred the appeal before CIT(A), who also confirmed the action of the Assessing Officer. Aggrieved, now Assessee is in second appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find on the perusal of the details of tax deducted at source as appearing in the tax audit report, that the AO recomputed the disallowance under section 40(a)(ia) of the Act, so as to held that any additional disallowance suo moto by the assessee under this head, a further sum of ₹ 1,15,96,339/- is required to be disallowed. This disallowance was not at all disputed in appeal. Now before us, the assessee’s contention was that this is merely disallowance by invoking the provisions of section 40(a)(ia) of the Act and expenses are not held to be non-genuine.
We observe that the genuineness of the claim of the assessee has not been disputed by the Revenue. Therefore, it cannot be said that assessee has claimed expenses which are false or not genuine. Assessee has furnished all the relevant facts concerning the claim made by it in the return filed. AO has levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s.40(a)(ia) of the Act as assessee failed to deduct TDS thereon. The Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts P.Ltd., 322 ITR 158 (SC) has held that a mere making of the claim which is not sustainable in the law, by itself will not amount to furnishing inaccurate particulars of income. In the present case, admittedly, assessee made a claim but the same was rejected and disallowed not for the reason that the claim was not genuine or was fabricated but in view of provisions of law that assessee did not deduct TDS thereon. We are of the considered view that the ratio of judgment of Hon’ble Apex Court in the case of Reliance Petroproducts Ltd (supra) squarely applies to the facts of the case before us and, therefore, levy of penalty is not justified. We also observe that similar issue has also been considered by ITAT Ahmedabad in the case of ACIT vs. Mazda Ltd (2012) 33 CCH 047 (Ahd Trib) wherein, levy of penalty u/s.271(1)(c) of the Act was cancelled which was levied on account of disallowance of claim for deduction of royalty and technical knowhow as per section 40(a)(ia) of the Act., as the assessee failed to deduct TDS on above payments. The ratio of the said case also applies squarely to the case before us.
In view of above, we hold that levy of penalty, in the facts and circumstances of the case, is not in accordance with law and same is deleted by allowing ground of appeal
taken by assessee.
7. In the result, the appeal assessee is allowed. Order pronounced in the open court on 11-07-2018.