M/S. ANABOND LTD.,CHENNAI vs. DCIT, CHENNAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that since it was the first year of FBT introduction, there was a possibility of genuine mistakes due to misunderstanding of the provisions. The assessee accepted the additions and paid the taxes, indicating a bona fide error.
What were the facts?
The assessee filed Fringe Benefits Tax (FBT) returns for AY 2006-07. The Assessing Officer made additions to the FBT declared and initiated penalty proceedings under Section 271(1)(d). The assessee argued that it was the first year of FBT introduction and the mistakes were due to misunderstanding.
What were the issues?
Whether penalty under Section 271(1)(d) is leviable when the assessee commits a bona fide mistake in computing FBT due to misunderstanding of newly introduced provisions.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S.SUNDER SINGH
आदेश / O R D E R
PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the Order dated 22.06.2016 of Commissioner of Income Tax (Appeals)-1, Chennai, in (New No.ITA.102/CIT(A)-1/2009-10) for the AY 2006- 07.
ITA No.2603/Mds/2016 :- 2 -:
2.0 All the grounds of the appeal are related to the penalty levied u/s.271(1)(d) of Income tax act. During the assessment proceedings, the Assessing Officer (in short ‘AO’) found that the assessee has filed Fringe Benefits Tax (in short ‘FBT’) Returns for the AY 2006-07 disclosing the fringe benefits at Rs.39,90,960/-. The assessment was completed u/s.115 WE(3) of the Act on 08.12.2008 and while completing the assessment, the AO made the following items as addition towards the Fringe Benefits and raised the demand of Rs.5,07,734/- as under:
Travelling expenses Rs. 38,54,959.00 Sales Promotion Rs. 33,52,261.00 Sales Meet Expenses Rs. 3,34,838.00 Total Rs. 75,42,088.00 The AO also initiated penalty u/s.271(1)(d) of income tax act.
The AO called for the explanation of the assessee. The assessee filed the explanation stating there was no intention to conceal or understate the Fringe benefits and further stated that the provisions of FBT were not understood correctly, since it was introduced with effect from the subject assessment year. Not being convinced with the explanation of the assessee, the AO has levied penalty of Rs.5,07,734/- which is 100% of tax sought to be evaded.
3.0 Aggrieved by the order of the AO, the assessee went on appeal before the Commissioner of Income Tax(Appeals) (in short ‘Ld.CIT(A)’) and the Ld.CIT(A) confirmed the order of the AO stating that the ignorance of law is inexcusable and in view of clear and unambiguous provisions of the act the CIT(A) held that the assessee has furnished the ITA No.2603/Mds/2016 :- 3 -: inaccurate particulars and fit case for penalty. Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before us.
4.0 During the appeal hearing, Learned Authorized Representative (in short ‘Ld.AR’) argued that the AY 2006-07 is the first year of introduction of FBT and there were lot of anomalies and complexities which could not be understood by the assessee. No sooner the mistakes were brought to the notice of the assessee at the time of assessment, the assessee has accepted the addition and paid the taxes. The Ld. A.R. argued that there was no intention to evade the taxes or conceal the Fringe benefits.
Therefore, the Ld.AR requested to cancel the Penalty imposed by the lower authorities. The Ld.AR also relied on the decision of Hon’ble ITAT Delhi Bench in Hindustan Coca Cola Marketing Pvt. Ltd. V. DCIT, New Delhi [2014] 49 taxmann.com 61 (Delhi Trib.).
4.0 We heard the rival submissions and perused the material placed before us.
The AY 2006-07 was the first year of introduction of Fringe Benefits Tax and there was a possibility of committing mistakes in computing the fringe benefits due to misunderstanding of the provision. The AO detected the mistakes in the fringe benefits computed by the assessee, which was accepted by the assessee and paid the taxes and no further appeal was filed by the assessee. In response to the penalty notice, the assessee has brought to the notice of the AO as well as the Ld.CIT(A) that it was genuine mistake due to ignorance and not understanding the complexities of computation of FBT. The assessee also relied on the decision of ITA No.2603/Mds/2016 :- 4 -:
Hindustan Coca Cola Marketing Pvt. Ltd. V. DCIT, New Delhi [2014] 49 taxmann.com 61 (Delhi Trib.) wherein it was held that • On appeal, the assessee contended that the said calculation mistake was done bona fidely in calculating the value for the purpose of FBT and the same was a casual mistake which was not committed deliberately or fraudulently for concealing particulars of FBT and further since the assessee offered impugned amount suo moto for taxation, penalty should not be levied upon it.
5.0 In the instant case, the assessee filed the return of Fringe Benefits and the assessing officer brought certain items of expenses relating to taxation of FBT which were omitted to be included in the FBT Return. The assessee accepted the proposal of the AO and paid the taxes. As rightly stated by the Ld.A.R it was the first year of introduction of FBT and there was some confusion among the tax payers with regard to the expenses coming under the scope of FBT. Hence we are of the opinion that the mistake committed by the assessee is bona fide mistake in computing the FBT return and the case is squarely covered by the decision of the Hon’ble ITAT Supra. Therefore we hold that there is no case for imposing penalty u/s 271(1)(d) and accordingly we cancel the Penalty Orders of the lower authorities and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 26th May, 2017, at Chennai.
More judgments on Section 271(1)(d)
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- Lakshmi Vatika Limited, Delhi vs ITO Ward 4 (3), New DelhiITA 1447/DEL/2026[2006-07]Status: Disposed17 Jul 2026AY 2006-07
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