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Before: SHRI MAHAVIR SINGH & SHRI ASHWANI TANEJA
Date of hearing 07.03.2017 Date of order 09.03.2017
O R D E R Per Ashwani Taneja, AM:- This appeal has been filed by the assessee against the order passed by Commissioner of Income-tax (Appeals)-15, Mumbai [hereinafter called CIT(A)] dated 13.12.2013 passed against the penalty order of the AO u/s 271(1)(c) of the Act dated 14.02.2013 for assessment year 2003-04 on the following grounds:- “Based on the facts and circumstances of the case, M/s Mattel Private Limited(hereinafter referred to as “The Appellant”) is 2 Mattel 1665/Mum/2014 aggrieved by the order dated 13th December,2013(received on 9th January,2014) passed by the Commissioner of Income-tax(Appeals)- 15, Mumbai[‘CIT(A)’] under section 250 of the Income-tax Act, 1961(‘Act’) on the following grounds:
1. The order of the learned CIT(A) has failed to appreciate that the order of the learned Assessing Officer(“AO”) is contrary to the principles of equity and natural justice, not based on a proper understanding of the facts and circumstances of the case, violate the provisions of the Income Tax Act, are against well settled principles of law, and are liable to be struck down.
2. The learned CIT(A) erred in confirming the penalty of Rs. 1,92,01,263/- under Section 271(1)(c) of the Act on the Appeal for the relevant assessment year.
3. The Learned CIT(A) erred in considering the additions made to the total income of the Appellant as furnishing of inaccurate particulars and thereby confirming the levy of penalty under section 271(1)(c) of the Act. a) Prior period expenses of Rs. 11,34,779. b)Sundry creditors of Rs. 35,64,988. c)Travelling expenses for sales team of Rs. 11,62,250 d)Expenses disallowed of Rs. 47,78,416 e)Travelling and conveyance(inter-state) expenses of Rs. 1,37,866 f) Transfer pricing adjustment of Rs. 4,40,82,451 g) Depreciation on closed plant.
4. The learned CIT(A) has erred in not appreciating that the learned Assessing Officer has failed to record the requisite satisfaction that the appellant company has furnished inaccurate particulars of his income on which penalty is initiated and hence levying penalty is invalid and bad in law.
5. The learned CIT(A) has erred in not appreciating that levy of penalty is not an automatic consequence, when the appellant’s claim for deduction is rejected by the learned AO.
3 Mattel 1665/Mum/2014 6. The learned CIT(A) has erred in not appreciating that the Appellant had engaged a reputed firm of Chartered Accountants and maintained a detailed transfer Pricing documentation and computed the arm’s length price of its international transactions n accordance with the provisions of section 92C of the Act and in the manner prescribed in that section, in good faith and with due diligence, and hence does not warranty a penalty for furnishing in accurate particulars.
The learned CIT(A) failed to consider that a similar penalty under section271 of the Act was deleted by the Mumbai of the Honourable Income Tax Appellate Tribunal(ITA 6390/2011) for the preceding AY 2002-03 vide order dated July 10,2013.
8. Each one of the above grounds of appeal
are distinct and separate and without prejudice to the other.
9. The Appellant reserves the right to amend, add, alter or delete any or all of the above grounds of appeal, at any time before or at the time of appeal hearing.”
2. During the course of hearing, it was brought to our notice by the Ld. Counsel for assessee that in the quantum appeal, the Tribunal has remanded back to the AO all the grounds except ground No.5, against which penalty was levied by the AO. Thus, penalty order does not survive as on date on these issues and it may be set aside. With regard to ground No.5, penalty was levied towards disallowance of travelling & conveyance of Rs. 1,37,866/-; it was submitted that penalty is not leviable on the said disallowance.
3. Per contra Ld. DR fairly submitted that since most of the issues have been remanded back to the AO, the penalty order does not survive as on date. With regard to penalty on disallowance of travel and conveyance allowance, it was submitted that since this issue was not pressed before the ITAT in quantum appeal, penalty should be confirmed.
4 Mattel 1665/Mum/2014 4. We have gone through the order passed by the lower authorities and by the Tribunal in the quantum appeal. It has been found that all the issues have been remanded back by the Tribunal to the AO, therefore, on these issues penalty order does not survive as on date. The AO shall be free to levy the penalty as and when fresh assessment order is passed, as per law.
With regard to penalty on disallowance of travel conveyance expenses of Rs. 1,37,866/-, it is noted by us that disallowance was made by the AO on the ground that assessee had made claim on account of mere provision and no documentary evidence were furnished in support of the same. It is noted by us that neither AO nor Ld. CIT(A) found the expenses to be bogus or false. As per assessee, learned CIT(A) had agreed with the claim made by the assessee, whereas as per AO, it was merely a provision and no supporting evidence was furnished. In our opinion, nothing has been bought on record to show if there was any concealment or furnishing of any particulars of income by the assessee.
The findings recorded by the Learned CIT(A) against disallowance made by the AO are reproduced hereunder:-
"I have considered the facts of the case. Submissions of the assessee as against the observations findings of the AO in the assessment order. The provisions of the funds which are not determined based on the some reliable estimates or made without estimates and for which the liability for the expenses have not been accrued during the year cannot be allowed as expense. As the facts emanating from the AO’s finding and submission of the appellant that there is net provision of Rs. 1,37,866/- after the provisions written back during the year, which needs to be disallowed, instead of the whole amount reflected in such provision. Accordingly the disallowance to the extent of Rs. 1,37,866/- is confirmed and remaining amount is directed to be deleted. Accordingly the appellant
5 Mattel 1665/Mum/2014 gets part relief in respect of this ground of appeal to the extent of Rs. 2,50,340/-“.
7. We have gone through the aforesaid observations made by the Ld. CIT(A) and find that it is not a fit case for levy of penalty, therefore, penalty levied on aforesaid disallowance is also deleted.
As a result appeal of the assessee is allowed in terms of order. Order was pronounced in the open court at the conclusion of hearing.