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Facts
The assessee incurred expenses for maintaining a factory garden, claiming they were mandatory as per Pollution Control Board norms. The Assessing Officer disallowed these expenses, holding they were not exclusively for business purposes, and initiated penalty proceedings. The CIT(A) upheld the disallowance and the penalty.
Held
The Tribunal held that the penalty under section 271(1)(c) cannot be levied merely because a claim is rejected, especially when the assessee provided documentary evidence and explanations. The Tribunal noted that the expenses were incurred under Pollution Control Board norms, as evidenced by a circular.
Key Issues
Whether the penalty levied under section 271(1)(c) is sustainable when the expenses were incurred due to Pollution Control Board norms and the assessee provided all necessary details, even if the claim was disallowed?
Sections Cited
271(1)(c), 274, 271
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT, AM & SHRI RAHUL CHAUDHARY, JM
The assessee has filed all the details of the expenses during the assessment preceding, which have not been disputed by the AO. The ld. A.O. has not brought on record that any was erroneous. The only issue is that according to the ld. A.O., the said expenses had not been incurred wholly and exclusively for the purpose of the business of the assessee. But the expenses were incurred under the requirement of the Pollution Control norms. Before us, the counsel for the assessee referred to the Circular issued by the Pollution Control Board. The said Circular is reproduced as under:
30/06/2016.
CIRCULAR Sub.:- Circular regarding tree p plantation on remaining open land of 33% of open space reserved by e plantation & green belt development. Ref.:- 1) State Govt.'s decision dtd. 31/05/2016 regarding planting two crore trees on occasion of World Environment Day. 2) Board's Circular regarding tree plantation dtd. 02/06/2016 Hon'ble Environment Minister, GoM in a meeting held on 31/05/2016 has decided to plant two crore trees in the state on occasion of the World Environment Day. To implement State Govt's this decision, Board has issued Circular in this regard and directed all the Regional Officers to form a district level committee, to Identify open spaces, to engage private organizations/ NGOs/ Industries so as to achieve district level target of plantation of 1.5 lakh trees. Board grants Consent to Operate to industries with the condition to bring minimum 33% of the available open land under green coverage/ plantation. Also, they are instructed to submit a yearly statement by 30th September every year on available open plot area, number of trees surviving as on 31 March of the year and number of trees planted by September end. In line with the State Govt.'s above decision of two crore tree plantation, it has been decided by the Board to direct all the industries in the State to plant trees on remaining space of the 33% of open land, if any space is left without tree plantation. Therefore, all the Regional Officers and Sub-Regional Officers are directed to Immediately obtain area of remaining space of the 33% of open land, if any space is left without tree plantation, of all the industries of their jurisdiction and instruct them to plant fruit bearing trees, Banyan trees, Peepal trees, Neem trees etc. on the remaining space. Also, they are requested to encourage the industry, if any industry is willing to plant additional trees beyond 33% of open land of the industry. Sd/- (P.K. Mirashe) Member Secretary)
In our opinion, there is no dispute that the said expenses were incurred by the assessee and all the information at the time of quantum addition have been provided by the Act cannot be levied merely for the rejection of the claim of the assessee as held by the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (supra).
Respectfully following the same, we are of the opinion that the penalty levied by the ld. A.O. and upheld by the ld. CIT(A) is not sustainable. Accordingly, we set aside the order of the lower authorities on the issue in dispute and cancel the penalty levied by the ld. A.O. The ground of appeal of the assessee is accordingly allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 21.11.2024.