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Facts
The Revenue appealed against the deletion of a penalty amounting to ₹.1,95,46,595/-, levied under section 271(1)(c) of the Income-tax Act, 1961. The penalty was based on an addition of ₹.5,75,06,899/- made during the assessment, which the Ld. CIT(A) had deleted. The assessee had acquired land that was encumbered and had to bear costs for pending labor and provident fund dues, which were claimed as revenue expenditure.
Held
The Tribunal held that when expenses are genuine and allowable, but disallowed only due to a dispute regarding the year of allowability, it is not a fit case for levying penalty. The authorities below did not allege misrepresentation or bogus expenses, and the payments pertained to statutory dues.
Key Issues
Whether the deletion of penalty under Section 271(1)(c) by the Ld. CIT(A) was justified when the expenses were statutory dues and the dispute was only about the year of allowability.
Sections Cited
271(1)(c), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLEShri Madhur Agrawal Shri Mirza Azhar Beig
O R D E R PER NARENDRA KUMAR BILLAIYA (AM)
This appeal by the revenue is preferred against order dated 30.11.2023 by National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] pertaining to A.Y. 2012-13.
(A.Y: 2012-13) Ashajyot Mercantile Private Limited 2. The solitary grievance of the revenue is that the Ld. CIT(A) erred in deleting the Penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (in short “Act”) amounting to ₹.1,95,46,595/-.
The roots for the levy of Penalty lie in the assessment order dated 05.02.2015 framed under section 143(3) of the Act by which returned loss of ₹.7,85,46,031/- was assessed at loss of ₹.2,10,39,130/-. The loss was reduced by making an addition of ₹.5,75,06,899/-. The addition was deleted by the Ld. CIT(A) but the appeal of the revenue before this Tribunal was allowed since the assessee did not press the appeal.
The additions made in the assessment under section 143(3) of the Act are as under:
1 Labors Dues Rs.2,17,76,881 2. ESIC Ppayments RS.23,72,812 3. EPF Payments Rs. 2,95,96,150 4. Electricity Dues Rs. 30,00,000 5. Land Compensation RS.,716,056
The underlying facts are that the assessee had acquired certain land from IFCI which had acquired these lands under SARFAESI Act from M/s. Punjab Fibers Ltd., Ropar Unit. The assessee was under Page No. 2
(A.Y: 2012-13) Ashajyot Mercantile Private Limited impression that the said land would be free of encumbrances which was not true and the assessee had to bear costs of pending laboutr / Provident Fund dues as mentioned hereinabove. These expenses were claimed as revenue expenditure which was disallowed by the Assessing Officer. Subsequently allowed by the Ld. CIT(A) and because the assessee was not going to lose anything if these expenses are treated as capital expenditure it did not contest the appeal of the revenue before this Tribunal.
In our considered opinion when the expenses are otherwise genuine and allowable but disallowed only due to dispute with respect to year of allowability of the claim then in such circumstances it is not a fit case for the levy of Penalty under section 271(1)(c) of the Act.
A perusal of the orders of the authorities below show that neither in the assessment order nor the Penalty order have alleged any misrepresentation / illegal claim or bogus expenses on part of the assessee. All the payments pertain to the statutory dues. If these statutory expenses are taken to be part of stock-in-trade and were to be debited on sale of such stock, even then these expenses were to be allowed. If these statutory expenses are considered as capital
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(A.Y: 2012-13) Ashajyot Mercantile Private Limited expenditure, then the assessee would be eligible to claim it as and when the capital assets are sold. Therefore, the only dispute was the year in which these expenses should have been allowed. Considering the facts of the case in totality, we do not find any reason to interfere with the findings of the Ld. CIT(A). Appeal of the revenue is accordingly dismissed.
In the result, appeal filed by the revenue is dismissed.
Order pronounced in the open court on 22nd May, 2024.