ITO 13(3)(3), MUMBAI vs. VIDYASAGAR ENTERPRISES LLP, MUMBAI

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ITA 4943/MUM/2016Status: DisposedITAT Mumbai12 May 2017AY 2010-114 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the payment in question was not for a work contract but for clearing property title, thus Section 40(a)(ia) was not attracted. Following the principle that penalty cannot survive if the additions on which it was based are deleted, the CIT(A)'s order was upheld.

What were the facts?

The Assessing Officer disallowed Rs. 75,00,000/- under Section 40(a)(ia) and subsequently levied a penalty of Rs. 23,61,270/- under Section 271(1)(c). The CIT(A) deleted the penalty, following the ITAT's decision in the quantum proceedings.

What were the issues?

Whether penalty under Section 271(1)(c) is sustainable when the underlying addition under Section 40(a)(ia) has been deleted by the Tribunal.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “J” MUMBAI

Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN

For Appellant: Mr. Haridas Bhat, AR
For Respondent: Ms. Anju Goradia, DR, Mr. Haridas Bhat, AR
Hearing: 10/04/2017Pronounced: 12/05/2017

ORDER

PER N.K. PRADHAN, AM

1.

This is an appeal filed by the revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner (Appeals) – 21, Mumbai and arises out of order u/s 271(1)(c) of the Income Tax Act, 1961 (the ‘Act’).

2.

The ground of appeal filed by the revenue reads as under:

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s 271(1)(c) of the Act levied by the A.O. without appreciating the fact that the assessee has failed to comply with the provision of Section 40(a)(ia) of the Income Tax Act, 1961?

3.

Briefly stated, the facts of the case are that the assessee filed its return of income for the impugned assessment year on 27.08.2010 showing income of Rs. 3,40,540/- and book profit u/s 115JB of Rs. 29,99,719/-. In the assessment order u/s 143(3) dated 01.03.2013, the Assessing Officer (A.O.) disallowed Rs. 75,00,000/- u/s 40(a)(ia). In appeal, the above disallowance was confirmed by the learned CIT(A). Subsequent to the order of the learned CIT(A), the A.O. levied penalty of Rs. 23,61,270/- u/s 271(1)(c) of the Act. Aggrieved by the order of the A.O., the assessee filed an appeal before the learned CIT(A). We find that the learned CIT(A) has followed the order of the ITAT in quantum proceedings and deleted the penalty levied by the A.O.

4.

Before us the learned DR relied on the order of the A.O. On the other hand the learned counsel of the assessee relied on the order of the Tribunal in the case of the assessee in respect of quantum proceedings for the impugned assessment year (ITA No. 6764/Mum/2013).

5.

We have heard the rival submissions and perused the relevant material on record. The issue before the Tribunal in quantum proceedings was the addition of Rs. 75,00,000/- made by the A.O. representing settlement amount paid by a third party, on behalf of the assessee considering the same as covered u/s 40a(ia) of the Act. The Tribunal held as under:

“7. In our considered opinion, the payment in question, as available from the above facts, was not in consequence of any work carried out by the contractor for the assessee, but it was agreed payment to get the title of the property cleared, by way of out of court settlement of the suit filed by the contractor. Thus, the assessee was correct in not making TDS on the amount paid by the purchaser, M/s Silverline Enterprises, directly to the contractor, M/s Sarovar Developer, on behalf of the assessee. As such, the provisions of section 40(a)(ia) of the Act do not get attracted. Therefore, the ld. CIT(A) has erred in applying the decisions of “Torque Pharmaceuticals Pvt. Ltd. vs. Addl. CIT”, 577 (2011) TIOL 577 (ITAT Chandigarh) and “ACIT vs. Grandprix Fab (P) Ltd.”, 34 DTR 248, ITAT , Delhi inasmuch as in the present case, the payment made was not qua any work contract but was made to get a clear title of the property.

8.

For the above discussion, the grievance of the assessee is found to be justified and is accepted as such. The addition of Rs. 75 lacs made by the A.O., as confirmed by the ld. CIT(A), is cancelled.” In K.C. Builders Vs. ACIT (2004) 265 ITR 562, 569 (SC), it 6. has been held that where the additions made in the assessment orders, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a cases no such penalty can survive and the same is liable to be cancelled.

7.

In view of the foregoing reasons, we uphold the order of the learned CIT(A) and dismiss the appeal filed by the revenue.

Order pronounced in the open Court on 12/05/2017

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