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Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Ravish Sood (JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal filed by the assessee is directed against the order dated 1.12.2011 passed by the learned CIT(A)-37, Mumbai confirming the penalty levied u/s. 271(1)(c) of the I.T. Act for A.Y. 2005-06 on the following disallowances :- a) Disallowance of expenses claimed towards operation and maintenance. b) Disallowance of business promotion expenses.
We have heard the parties and perused the record. The assessee claimed a sum of ` 87,12,863/- as operation and maintenance expenses in the statement of total income i.e. without recording expenses in the books of account. The Assessing Officer disallowed the said claim on the ground that the assessee did not substantiate the same with evidences. The said disallowance was also confirmed by the appellate authorities. The assessee
2 M/s. Rochem Separation Systems (I) Pvt. Ltd. has also claimed a sum of ` 5,99,985/-, being hotel expenses incurred at Grant Hyatt Hotel. The assessee claimed the same as expenses incurred towards the business party conducted for business associates. The Assessing Officer noticed that the marriage of son of one of the directors had taken place and the above said party was given in that connection. Accordingly, he disallowed the claim and the same was also confirmed by the appellate authorities. The Assessing Officer levied penalty u/s. 271(1)(c) of the Act on both the disallowances and the same was also confirmed by the learned CIT(A).
We heard the parties and perused the record. With regard to disallowance of operation and maintenance expenses, we noticed that the assessee had not accounted for the same in the books of account and claimed the same only in the statement of total income on the basis of information received from various sites. Learned AR submitted that these expenses were incurred prior to 31.3.2005, but concerned staff failed to report the same to the head office prior to finalization of the account. Accordingly, he submitted that the assessee had made claim in the statement of total income with bonafide intention but the same would be allowed by the Assessing Officer. He submitted that the above said claim was not accepted even though the assessee furnished affidavit from one of its senior employees. He submitted that mere disallowance of the claim made by the assessee would not give rise to furnishing of inaccurate particulars of income.
On the contrary, learned Departmental Representative placed reliance on the order passed by the learned CIT(A) on this issue.
Having heard the rival contentions on this issue, we find merit in the submission made by learned AR. In the instant case, the assessee has made the claim only in the Statement of total income, since the details thereof were received after finalization of accounts. The Statement of total income also clearly mentions this fact. The Assessing Officer has made disallowance for want of documentary evidences even though the assessee filed an affidavit
3 M/s. Rochem Separation Systems (I) Pvt. Ltd. obtained from one of the senior employees. Thus, we notice that the assessee has made the impugned claim with bonafide belief in the statement of total income only. Hence, we are of the view that the disallowance of the claim so made by the assessee would not give rise to furnishing of inaccurate particulars of income. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete the penalty levied on the above said expenses.
With regard to disallowance of business promotion expenses, we noticed that the assessee could not conclusively prove that the same was not incurred in connection with the marriage of Mr. Prerak Goel, son of Mr. K. K. Goel, director of the assessee company. The tax authorities have disallowed the claim by holding the same as non-business expenses, which, in our view, would lead to a case of furnishing inaccurate particulars of income. Accordingly, we confirm the order passed by the learned CIT(A) on this addition.
The Ld A.R also raised contentions on certain legal issues, but did not pursue the same when the bench expressed its view on the above said lines. Hence we do not find it necessary to deal with the legal contentions.
In the result, appeal filed by the assessee is partly allowed.
Order has been pronounced in the Court on 4.1.2017.