ACIT 17(3), MUMBAI vs. YATRA ART FUND -II, MUMBAI

This is an appeal by the Revenue against order dated 11th March 2016, passed by the learned Commissioner (Appeals)–28, Mumbai, deleting the penalty of ` 18,09,832, imposed under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act") for the assessment year 2011–12.

2 Yatra Art Fund–II

3. Brief facts are, the assessee an Association of Person filed its return of income for the impugned assessment year on 17th September 2011, declaring loss of ` 1,53,13,156. During the assessment proceedings, on verifying the Profit & Loss Account the Assessing Officer found that the assessee debited the sum of ` 58,57,060, towards advisory fees. From the tax audit report and documents available on record, he found that the assessee has claimed to have paid such fee to Synergy Foundation Ltd. where the trustees are directors / shareholders. Therefore, the Assessing Officer called upon the assessee to furnish details of advisory fees and also the nature of service provided by the company. As observed by the Assessing Officer, in the absence of any explanation or details furnished by the assessee, the Assessing Officer treated the payment of advisory fees amounting to ` 58,57,060, to be not for the purpose of business and accordingly disallowed the same. On the basis of such addition, the 3 Yatra Art Fund–II Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income. In response to the show cause notice issued under section 274 of the Act, the assessee filed its explanation objecting to imposition of penalty. It was also submitted by the assessee that the advisory fees paid was in terms of the trust deed. The Assessing Officer, however, did not find the submissions of the assessee convincing and proceeded to impose penalty under section 271(1)(c) of the Act for an amount of ` 18,09,832. Being aggrieved of the penalty order passed, assessee preferred appeal before the first appellate authority.

4 Yatra Art Fund–II Ltd. as a commercial advisor. Further, calling for and verifying the confidential information memorandum of the assessee he found that it also provided that Synergy Art Foundation Ltd. would act as an advisor to the trustees. Therefore, he observed that though the payment of advisory fees was as per the terms of trust deed, however, the assessee was unable to prove the services rendered by Synergy for which it was disallowed. The learned Commissioner (Appeals) being of the view that it was an expenditure claimed by the assessee which was disallowed for lack of evidence, it will not lead to imposition of penalty in view of the ratio laid by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC). Accordingly, he deleted the penalty imposed.

5 Yatra Art Fund–II

2. We have heard the learned Departmental Representative and perused the material on record. As could be seen, the addition on the basis of which the Assessing Officer imposed penalty under section 271(1)(c) is the advisory fees paid to the Synergy Art. It is further evident the reason for disallowance of the aforesaid expenditure claimed was due to the fact that the assessee was unable to establish the services rendered by the payee. However, the learned Commissioner (Appeals) after examining materials on record has found that payment of advisory fees was provided under the trust deed as well as confidential information memorandum (CIM) of the assessee trust. Thus, as could be seen, the assessee made the payment as per the trust deed. It is another matter the assessee could not satisfy the developmental authorities about the necessity / requirement of the payment, which could be for various factors. Further, the acceptance of the addition by the assessee at a later stage cannot be a reason to conclude that the assessee has furnished inaccurate particulars of income. It is evident, the assessee has furnished full particulars of the advisory fees. For some reason the Assessing Officer did not find it allowable. The disallowance of a deduction claimed by the assessee by itself would not amount to furnishing of inaccurate particulars of income for which the Assessing Officer has imposed the penalty. In view of the aforesaid, we do not 6 Yatra Art Fund–II find any reason to interfere with the order of the learned Commissioner (Appeals) on the issue. Ground raised is dismissed.