MANGESH JAYWANT BORSE,MUMBAI vs. ITO WD 20(2)(2), MUMBAI

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ITA 635/MUM/2012Status: DisposedITAT Mumbai25 January 2017AY 2001-028 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 penalty was not sustainable as the assessee had explained that records were destroyed due to a flood and the initial assessment did not find fault with the books of accounts. Reliance was placed on Supreme Court and High Court judgments regarding concealment of particulars.

What were the facts?

The assessee claimed advertisement expenses, but failed to produce supporting vouchers and evidence. The Assessing Officer disallowed a portion of these expenses, and subsequently levied a penalty under Section 271(1)(c). The CIT(A) confirmed this penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee fails to produce evidence for expenses due to circumstances beyond their control and the initial assessment was accepted.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 263,Section 133(6)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM

For Appellant: Shri Reepal Tralshawala
Hearing: 17.10.2016

Assessee by: Shri Reepal Tralshawala Department by: Shri Pradeep Kumar Singh सुनवाईकीतारीख / Date of Hearing:17.10.2016 घोषणाकीतारीख /Date of Pronouncement:.25.01.2017 आदेश / O R D E R

PER AMARJIT SINGH, JM:

1.

The assessee has filed the present appeal against the order dated 07.12.2011 passed by the Commissioner of Income Tax (Appeals)-31, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2001-02.

2.

The assessee has raised the following grounds:-

A.Y. 2001

02. The learned Commissioner of Income Tax (Appeals)erred in confirming the penalty under section 271(1)(c) of the Income Tax Act, levied by the assessing officer on disallowance of advertisement expenses due to non- production of individual labour contractors being third parties to the transaction during the re-assessment proceedings u/s.143(3) r.w.s. 263 of the I.T.Act., disregarding the fact that the appellant has his business activity in the same nature. The learned Commissioner of Income Tax (Appeals) erred in confirming the penalty disregarding the fact that all labour contractors cannot be produced, since they are not normally found at the same place after five years. The learned Commissioner of Income Tax (Appeal) erred in confirming the penalty levied on the entire additions disregarding the fact that penalty were initiated only on the confirmed addition of Rs.23,64,359/- out of total addition of Rs.40,28,359/- relating thereto. The learned Commissioner of Income Tax (Appeal) erred in confirming the penalty disregarding the fact that the A.O. has not recorded any finding adverse to the return and explanation made by the appellant and has also accepted the books of accounts even in the re-assessment u/s.143(3) r.w.s. 263 of the I.T.Act.

3. The brief facts of the case are that the assessment of the assessee was completed u/s.143(3) of the Income Tax Act, 1961( in short “the Act”) on 13.05.2003 determining total income to the tune of Rs.10,32,390/- as against the returned income of Rs.9,49,170/-. The said order was set aside by the CIT(A) by virtue of order dated 18.02.2004 passed u/s.263 of the Act. Thereafter, further assessment was completed u/s.143(3) r.w.s.263 of the Act on 31.01.2006 A.Y. 2001-02 determining total income to the tune of Rs.53,69,550/-. Thereafter, the penalty proceedings was initiated u/s.271(1)(c) of the Act by virtue of order dated 31.01.2006. However, penalty proceedings was kept abeyance as the assessee preferred an appeal against the said order. During the course of assessment proceedings, assessee claimed the advertising expenses and repair expenses but failed to justify the claim properly, therefore an amount of Rs.26,31,490 was disallowed on account of advertising expenses and disallowed an amount of Rs.2,63,150/- on account advertisement expenses / commission etc. and an amount of Rs.5,650/- on account of unexplained expenses and an amount of Rs.40,000/- on account of repair expenses. Thereafter, the assessee filed the appeal before the CIT(A) who confirmed the addition to the tune of Rs.26,31,490/- on account of advertisement expenses and an amount of Rs.3,90,669/- which was not substantiated and the assessee did not prefer an appeal against the addition of Rs.40,000/- made under the head repairs, therefore, the notice was sent to the assessee and after getting the reply the penalty to the tune of Rs.9,25,408/- was levied which was confirmed by the CIT(A), hence the present appeal has been filed before us.

4.

We have heard the arguments advanced by the learned representative of the parties and perused the record. The above said issues only leads to the contention that the CIT(A) has wrongly confirmed the penalty levied by the Assessing Officer by virtue of A.Y. 2001-02 order dated 25.03.2009. In the instant case the assessment u/s.143 of the Act was completed on 13.05.2003 determining total income to the tune of Rs.10,32,390/- as against the returned income of Rs.9,49,170/- This order was set aside by the CIT(A) by virtue of order dated 18.02.2004 passed u/s.263 of the Act. Thereafter, further assessment was completed u/s.143(3) r.w.s.263 of the Act on 31.01.2006 determining total income to the tune of Rs.53,69,550/-. Before proceeding further, it is necessary to write down the reasons under which the CIT(A) invoked the provision u/s.263 of the Act. “(i) You have paid to a related concerns hit by provisions of Sec.40A(2)(b) advertising expenses of Rs.5,20,000/- and painting expenses of Rs.59,000/-. However, it is seen from the record that the Assessing Officer has not made any study of fair market value of the services rendered by this concerns M/s.Symbosis Advertising nor examined the same during the scrutiny proceedings. (ii) It is seen that an amount of Rs.62,407/- by way of service tax has not been paid however the Assessing Officer has not made any enquiry regarding the same with reference to the disallowance u/s.43B. (iii) The Assessing Officer has not cross verified in any manner the expenses claimed by you. A.Y. 2001-02

5.

While completing the said assessment, these issues were not touched. However, the assessment was completed by adding the amount of Rs.23,64,359/- on account of other advertisement expenses as the assessee failed to produce the evidence in this regard. The assessee also failed to justify the claim on account of advertisement expenses, commission etc. to the tune of Rs.2,63,150/- on account advertisement expenses / commission etc. and an amount of Rs.5,650/- on account of unexplained expenses. Therefore, the said addition was made. On account of repair expenses, the assessee failed to justify the claim for repair expenses to the tune of Rs.40,000/-, therefore, the same was added to the income of the assessee. On appraisal of the record, no doubt the reasons have been mentioned different while completing the assessment whereas the CIT(A) has invoked the provision u/s.263 on account of the reasons which has been mentioned above. Anyhow, the assessment is not under challenged. It is the penalty order which is challenged by the assessee. It is not in dispute that firstly the assessment was completed u/s.143(3) of the Act on 13.05.2003 determining total income to the tune of Rs.10,32,390/- against return of income of Rs.9,49,170/-. The contention of the assessee is that the assessee was running a business in the ground floor of its office and on account of flood in the year of 2005 the concerned vouchers and relevant record have been destroyed whereas the account book maintained by the assessee has not been discredited by the Assessing Officer at the time of earlier assessment. A.Y. 2001-02

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