THE PR. COMMISSIONER OF INCOME TAX -7 vs. YUM RESTAURANT MARKETING PVT. LTD.

This appeal is directed against the order of the Income Tax Appellate Tribunal1 dated 23 June 2021 and posits the following questions of law for our consideration: - “2.1 Whether on the facts and circumstances of the case, the order of Ld. ITAT is perverse on Law, as it has considered that the assessee was correct in not considering the decision laid down by CIT(A) in assessee's case for AY 200 1-02?

The issue itself stands confined to whether the appellants were justified in invoking Section 271(1)(c) of the Income Tax Act, 19612 and imposing penalties on account of an alleged furnishing of inaccurate particulars. 3. Mr. Bhatia, learned counsel appearing for the appellant, has drawn our attention to the following findings on fact, which had come to be returned by the Assessing Officer3:- “In the assessment year under consideration, the assessee company has incurred excess of expenditure over the AMP contributions received of Rs.3,05,98,617/-. Whereas as per the agreements with holding company and franchisees, assessee company should booked the amount of Rs.3,05,98,617/- as Advertisement contribution and show the amount as receivable instead of reflected in Loans & Advances, since as per para 2(a) of Schedule 7 of significant accounting policies and notes to the accounts. All income and expenditure having material bearing on the financial statements are recognized on accrual basis which the assessee has followed to book the expenditure but failed to booked the revenue part. The assessee company is bound to follow a particular system of accounting in terms with the provision of Section 145 of the IT Act, 1961. Once it started following Mercantile System of Accounting and that a specific sum was receivable under an arrangement (Tripartite Agreement) then it has no discretion to claim it as an Excess of expenditure over contribution received is transferred to current assets, being amount receivable from franchisees and associates in forthcoming periods in accordance with the terms of agreements with the franchisees. Accordingly Rs.3,05,98,617/- is added to the income of the assessee. Since the assessee has furnished inaccurate particulars of his income on this ground, penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 has been initiated separately.”

It was in the aforesaid backdrop that learned counsel submitted that since the stand as taken was found to be wholly untenable, the imposition of penalty was clearly justified. 5. The Tribunal, as we had noted in our previous order, had however upheld the deletion of penalty bearing in mind the salient principles which had come to be enunciated by the Supreme Court in Commissioner of Income Tax, Ahmedabad vs. Reliance Petroproducts Private Ltd.4 6. While dealing with the question of the meaning liable to be ascribed to “inaccurate particulars”, the Supreme Court had pertinently observed as follows:- “17. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:-

We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.

We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee

Bearing in mind the legal position as enunciated above, we find no justification to interfere with the order of the Tribunal. 8. The appeal consequently fails and shall stand dismissed.