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Income Tax Appellate Tribunal, “F” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& Shri Pawan Singh (JM)
O R D E R Per B.R. Baskaran (AM) :-
The assessee has filed this appeal challenging the order dated 11-03-2013 passed by Ld CIT(A)-9, Mumbai confirming the penalty of Rs.84,33,835/- levied by the AO u/s 271(1)(c) of the Act for assessment year 2009-10.
The AO levied penalty on the additions made u/s 14A, 40(a)(ia) and disallowance of legal and professional fee. The assessee accepted the additions and hence did not prefer appeal. The AO took the view that the assessee has furnished inaccurate particulars of income and accordingly levied penalty u/s 271(1)(c) of the Act and the Ld CIT(A) also confirmed the same.
We heard the parties and perused the record. The first issue on which penalty was levied relate to the disallowance made u/s 14A of the Act. The assessee computed the disallowance u/s 14A of the Act at Rs.7,57,430/-. In computing the disallowance, the assessee did not consider investments on which 2 Suremi Trading Pvt. Ltd.
exempt income was not received. The AO did not accept the view of the assessee and accordingly computed the disallowance at Rs.2.35 crores. The contention of the Ld A.R is that the view taken by the assessee is supported by various decisions, some of which are Cheminvest Ltd Vs. CIT (378 ITR 33)(Delhi), J.M. Financial Limited Vs. ACIT (ITA No.4521/Mum/2012)(Mum- ITAT). Accordingly the Ld A.R submitted that this issue is a debatable one and hence the penalty u/s 271(1)(c) is not exigible on this addition.
We heard Ld D.R and perused the record. Since the view taken by the assessee is supported by various decisions, we find merit in the contentions of the assessee that the addition made by the AO u/s 14A of the Act is debatable one. Accordingly we are of the view that the penalty u/s 271(1)(c) will not lie on this addition.
The next issue on which penalty was levied relates to disallowance made u/s 40(a)(ia) of the Act for non-deduction of tax at source on salary expenses reimbursed by the assessee to M/s Mafatlal Industries Ltd. The assessee had availed services of an employee belonging to M/s Mafatlal Industries Ltd. The said company continued to pay the salaries to the above said employee and the salary expenses were reimbursed by the assessee to M/s Mafatlal Industries Ltd. The AO took the view that the assessee should have deducted tax at source on the above said payment. However, the assessee submitted that the TDS has been deducted by M/s Mafatlal Industries Ltd on the salary paid to the employee and hence it did not deduct TDS on the reimbursements made by it. The AO did not agree with the contentions of the assessee and accordingly disallowed a sum of Rs.7,34,269/- u/s 40(a)(ia) of the Act. The AO also levied penalty on the above said addition and the Ld CIT(A) also confirmed the same.
3 Suremi Trading Pvt. Ltd.
We have heard parties on this issue and perused the record. We have heard the rival contentions and perused the record. We noticed that an identical issue with regard to levying of penalty u/s. 271(1)(c) for disallowance made u/s 40(a)(ia) was considered by the Coordinate Bench in the case of Rushi Builders and Developers Vs. ACIT (ITA No. 6684/Mum/2012 dated 4.3.2015) and the Tribunal has decided the issue in favour of the assessee with following observations :-
"4. We have heard the rival contentions and have also gone through the records. In this case, the penalty has been levied for disallowance of expenditure u/s.40(a)(ia) of the Act. It is not a case of furnishing of inaccurate particulars of income or concealment of income. The failure to deduct the TDS on the part of the assessee has resulted in disallowance of expenditure. The assessee had not furnished any inaccurate particulars of income or expenditure. The assessee has already faced the consequences by way of disallowance of expenditure for non-deduction of TDS as per the provisions of section 194C of the Act. It is not the case of the Revenue that the assessee had not incurred the expenditure claimed or that the claim of expenditure was bogus or incorrect. The disallowance of expenditure was attracted due to non-deduction of TDS and it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars of income. The levy of penalty u/s.271(1)(c) of the Act is not attracted in this case and the same is accordingly ordered to be deleted."
We notice that the co-ordinate bench of Tribunal has considered an identical issue in the case of ITO Vs. M/s. Western Outdoor Media Technologies Pvt. Ltd. (ITA No. 5400/Mum/2014 dated 20.7.2016), wherein also the penalty was deleted on identical reasoning. Following the decisions referred above, we set aside the order passed by Ld CIT(A) on this issue and direct the Assessing Officer to delete the penalty levied on the disallowances made for non deduction of tax u/s. 40(a)(ia) of the Act.
The last issue on which penalty was levied relate to disallowance made out of legal and professional fees claimed by the assessee. The assessee had paid
4 Suremi Trading Pvt. Ltd. legal and professional fee of Rs.12,81,450/-, which was incurred in connection with sale of shares. The assessee claimed the same as business expenditure. Since the sale of shares were assessed under the head Capital gains, the AO disallowed the claim while computing business income and allowed the same while computing Capital gain. On the disallowance made while computing business income, the AO levied penalty u/s 271(1)(c) of the Act. The Ld CIT(A) also confirmed the same.
We heard the parties on this issue. We notice that the claim made by the assessee has been shifted from the head “”Income from Business” to “Income from Capital gains”. The Ld A.R submitted that the assessee is engaged in the business of trading and investments, i.e., dealing in investment is also part of its business activities. Accordingly it was submitted that the assessee could have also claimed as business expenditure, but the AO preferred to allow the same against Capital gains. Accordingly she submitted that the change of head would not result in furnishing of inaccurate particulars of income. In our view, there is merit in the contentions of Ld A.R. The AO, in the instant case, has not doubted the genuineness of expenditure, but only allowed the same under different head of income. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the penalty levied on this addition.