DORI WINERY PRIVATE LIMITED ,MUMBAI vs. INCOME TAX OFFICER 6(2)(1), MUMBAI

PDF · subscribers
ITA 1145/MUM/2024Status: DisposedITAT Mumbai19 April 2024AY 2014-15Bench: PRASHANT MAHARISHI (Accountant Member), SHRI SANDEEP SINGH KARHAIL (Judicial Member)9 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer's disallowance of 50% of expenses was ad hoc and lacked a specific finding of concealment or inaccurate particulars at the assessment stage. The penalty order invoked twin charges without proving both, making the levy improper.

What were the facts?

The assessee, Dori Winery Pvt. Ltd., filed its return of income for AY 2014-15 in response to a notice under section 148. The Assessing Officer disallowed 50% of certain expenses due to lack of substantiation and initiated penalty proceedings under section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on an ad hoc disallowance of expenses without a specific finding of concealment or inaccurate particulars. Whether the penalty notice and order were specific enough to sustain the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 37(1),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

For Appellant: Shri Haridas Bhatt
For Respondent: Smt. Smitha V. Nair (Sr. Ar.)
Hearing: 10.04.2024Pronounced: 19.04.2024
1.

ITA number 1145/M/2024 is filed by the assessee for assessment year 2014 – 15 against the appellate order passed by National faceless appeal Centre, Delhi (the learned CIT – A) for assessment year 2014 – 15 dated 25/1/2024 wherein the appeal filed by the assessee against the penalty order passed by the learned assessing officer i.e. ITO Ward 6 (2) (3), Mumbai on 26/6/2019 levying penalty under section 271 (1) ( C ) of the income tax act, 1961 (the act) of ₹ 877,980 is dismissed.

2.

The assessee is aggrieved with the same and has preferred an appeal against confirmation of that penalty.

”A. On the facts and circumstances of the case, Commissioner of Income–Tax Appeals (the CIT Appeals) erred in confirming the penalty of Rs. 8,77,980/- u/s 271(1)(c) of the Income tax Act 1961,.

B. The CIT Appeals erred in levying penalty ignoring the below explanations given by the Appellant. i. CIT appeals made adhoc additions @50% of expenses of Rs. 56,66,854/- resulting in addition of Rs. 28,33,427/-, Disallowance was in respect of the expenses towards salary, wages gravelling etc. ii. The AO has not brought any material evidence on records to establish that the assessee has concealed income or provided inaccurate particulars. iii. For imposing penalty under s. 271(1)(c), a definite finding about concealment is necessary. However, in the present appeal the addition is based on estimation.”

4.

Brief facts of the case shows that assessee is a company having the object of horticulture and agricultural produce and has earned income from business of running of winery and manufacturing wine from local Grapes. The assessee company filed its return of income for assessment year 2014 – 15 in response to notice under section 148 of the income tax act declaring a total loss of ₹ 22,096,921/–. It is fact that the company has not filed its return of income

5.

On verification of annual information return information it was found that assessee has received an amount of ₹ 7994/– as income in respect of units of non-resident. As the assessee is a non-filer notice under section 148 of the act was issued on 28/3/2018. In response to that the above referred return of income was filed. The assessee was given an opportunity however there was no compliance earlier. Subsequently on 17/10/2018 the assessee submitted the response.

6.

The learned assessing officer noted that assessee has claimed salary expenses to the tune of ₹ 3,189,921, repairs and maintenance expenditure of ₹ 68,386, sundry expenses of ₹ 455,836/– and travelling expenses and transportation expenditure totaling to ₹ 5,666,854. The assessee was asked to furnish the details of these expenses and justify the claim. The assessee merely filed the month wise details of the expenses however no supporting documents were filed to substantiate the claim therefore the learned assessing officer passed an assessment order disallowing 50% of ₹ 5,666,854/– under section 37 (1) of the act. It was further noted that during the year the assessee has received a sum of ₹ 7934/– on account of income in respect of units of nonresidents under section 196A. The assessee has not filed the return of income therefore the above receipt was also considered as the income.

8.

Assessee aggrieved with the same preferred an appeal before the learned CIT – A who passed the appellate order on 25/1/2024. The learned that CIT – A noted that assessee has been given 3 opportunities however the assessee has not furnished any documentary evidence and therefore the assessee is not interested in pursuing the matter. He held that the law saves those who are vigilant and not those who sleep over the rights. Accordingly he dismissed the appeal. On the merit also he found that the facts and circumstances stated by the assessing officer are correct and accordingly on the merits also he upheld the levy of the penalty.

10.

The learned departmental representative vehemently stated that addition has been made to the total income of the assessee for non-furnishing of the details. The return of income was filed only in response to notice under section 148 of the Act. The reasons for which the reopening has been made has already been added to the total income of the assessee and as reopening of the assessment allows the assessing officer to reassess the other income, the necessary details were called for by the learned assessing officer with respect to the several expenditure debited by the assessee in the books of accounts. The assessee failed to substantiate the amount of expenditure incurred therefore the learned assessing officer disallowed 50% of those expenditure. The assessee

11.

We have carefully considered the rival contention and perused the orders of the lower authorities. We find that during the course of the reassessment proceedings where the notice under section 148 of the income tax act was issued the assessee filed its return of income. The assessee did not file its original return of income. When the reassessment proceedings culminated into an assessment order, the addition was made with respect to the reasons for which reassessment proceedings were initiated and further the learned assessing officer asked about the details of the expenses incurred by the assessee and claimed as deduction under section 37 (1) of the act. The assessee merely submitted the month wise amount of the expenditure incurred under each of the head. The learned assessing officer stated that assessee has failed to substantiate the same with supporting evidence. Therefore the 50% of the expenditure were disallowed. At the time

12.

In the result ITA number 1145/M/2024 filed by the assessee is allowed.

Order pronounced in the open court on 19.04.2024.

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →