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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
सुनवाई क" तार"ख /Date of Hearing : 07-11-2016 घोषणा क" तार"ख /Date of Pronouncement : 19-12-2016 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being 12th December, 2013 passed by learned Commissioner of Income Tax (Appeals)- 5, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2006-07, the appellate proceedings before the learned CIT(A) arising from the penalty order dated 30th March, 2012 passed by learned assessing officer (hereinafter called “the AO”) u/s 271(1)(c) of the Income-tax Act,1961 (Hereinafter called “the Act”).
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The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“Being aggrieved by the order passed by the Commissioner of Income tax (Appeals) 5, Mumbai the Appellant submits the following grounds of appeal for your sympathetic consideration.
1. The learned CIT(A) erred in not accepting the contention of the Appellant that since the quantum appeal was pending before the Tribunal disposal of the appeal against impugned order levying penalty be suitably postponed;
2. Without prejudice to the above, on the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the order passed by the Assessing officer u/s 271(1)(c) of the Act levying penalty of Rs. 48,06,751. The reasons adduced by the learned CIT(A) while confirming the penalty are not warranted both on facts and in law. The order levying penalty be canceled
3. Further, without prejudice to the above, the Honorable Tribunal vide its order dated 21/2/2014 having set aside for fresh adjudication the issue of allowability of said expenses in the quantum appeal (ITA No. 1143/Mum/2011, the order levying penalty needs to be also set aside for fresh adjudication.”
3. The brief facts of the case are that the assessee in this case is aggrieved by the levy of penalty u/s 271(1)(c) of the Act which was imposed by the A.O. vide penalty order dated 30th March, 2012 , wherein the issue involved was regarding provisions made by the assessee amounting to Rs. 1,60,22,503/- for various expenses by following accrual system of accounting. The assessee contended that the assessee is following accrual system of accounting and the assessee had made provisions for expenses actually incurred but for which bills/vouchers were not received by the year end. The assessee has produced the ledger accounts of the next financial year to prove that the payments were ITA 1801/Mum/2014 3 in-fact made against the said provisions for expenses to the tune of Rs. 1,60,22,503/- made by the assessee in its books of accounts. The assessee contended that as per Accounting Standard-1 (AS-1) which is notified by CBDT, the provisions are to be made for all known losses and liabilities even if their amounts could not be determined with certainty and could be determined only on estimated basis. The contention raised by the assessee was not acceptable to the A.O. and the AO in penalty proceedings held as under:-
“The assessee’s submission is considered carefully. The assessee has reiterated his previous submission and has not brought any new facts in their support. The assessee has debated on unascertained liability which is not allowable. Therefore, on the assessee’s contention that disallowance/additions does not amount to concealment or furnishing of inaccurate particulars, I am convinced that the decision of Delhi High Court in the case of Zoom Communication (P) Ltd. 40 DTR 249 (2010) is aptly applicable in this case whereby the Hon'ble High Court has clearly stated that the "assessee claimed that due to oversight, these amount were not added back in the computation of income - if one takes the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would be liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a license to unscrupulous assesses to make wholly untenable and unsustainable claims without there being any basis for making them - assessee did not explain either to the IT authorities or to the Tribunal as to in what circumstances and on account of whose mistake, the amounts claimed as deductions were not added while computing the income of the assessee company - if the claim besides being incorrect in law is mala fide, Expln. 1 to s. 271 (1) would come into play", and further the Delhi HC has also distinguished the verdict given in CIT vs. Reliance Petro Products (P) Ltd. (20 I 0 322 ITR 158 (SC).
From the above discussion, it is clear that the assessee is not entitled to claim Loan and Advances in the P&L account. Therefore, I am satisfied that this is a fit case for imposition of penalty u/s. 271(1)(c) of the I.T. Act, 1961. Thus, the amount of penalty is quantified as under:
Amount of addition confirmed: Rs. 1 ,60,22,503/- Tax sought to be avoided: Rs. 48,06,751/- Minimum Penalty @100% thereof: Rs. 48,06,751/- Maximum Penalty @300% thereof: Rs. 1,44,20,253/- ITA 1801/Mum/2014 4 Considering the facts of the case, I consider it fit to impose penalty of Rs. 48,06,7511- (Rupees forty eighty lacs six thousand seven hundred fifty one) in this case, which represents the minimum penalty imposable as per law.” The A.O. accordingly levied penalty of Rs. 48,06,751/- u/s 271(1)(c) of the Act vide orders dated 30-03-2012 and on first appeal filed by the assessee with learned CIT(A), the said penalty was confirmed by the ld. CIT(A) vide his appellate order dated 12th December, 2013.
4. Aggrieved by the appellate orders dated 12.12.2013 passed by the ld. CIT(A), the assessee is in appeal before the Tribunal.
The ld. Counsel for the assessee, at the very outset, submitted that the appeal in quantum assessment filed by the assessee has been decided by the Tribunal , wherein the additions of 1,60,22,503/- made by the A.O. with respect to the provision of various expenditure on estimated basis claimed in the profit and loss account were challenged by the assessee , and the Tribunal vide its order in for the impugned assessment year 2006-07 vide its orders dated 21st February, 2014 has set aside and restored the matter back to the file of A.O. for de novo determination of the issue on merits. The learned counsel for the assessee submitted that in the above scenario, penalty order u/s 271(1)(c) of the Act cannot be sustained and needs to be set aside and restored to the file of the AO for de-novo adjudication of the penalty u/s 271(1)(c) of the Act after the quantum assessment is finalized by the AO in de-novo proceedings in second round of litigation as directed by the tribunal vide afore-stated orders dated 21-02-2014 in ITA no 1143/Mum/2011.
The ld. D.R. supported the order of the ld. CIT(A) and stated that in view of the order of the tribunal in quantum assessment in ITA no ITA 1801/Mum/2014 5 1143/Mum/2011, this matter can also be restored to the file of the AO for denovo adjudication of the penalty by the AO on merits after finalization of quantum assessment in de-novo proceedings by the AO in second round of litigation as directed by the tribunal vide its orders dated 21-02-2014.
7. We have considered the rival contentions and also perused the material available on record including the afore-stated Tribunal order. We find that quantum additions of Rs.1,60,22,503/- towards provisions for expenditure as provided on estimated basis by the assessee in its books of accounts by following accrual system of accounting, which were made by the A.O. in the assessment order and was later confirmed by learned CIT(A) in first appeal , was challenged by the assessee before the Tribunal and the Tribunal in for the assessment year 2006-07 vide orders dated 21st February, 2014 has set aside and restored the matter back to the file of A.O. for de novo determination of the issue on merits. The order of the tribunal dated 21-02-2014 is placed in the file. Since the quantum addition has been set aside and restored by the tribunal to the file of the A.O. for de novo determination of the issue afresh on merits in quantum assessment, the penalty levied by the A.O. u/s 271(1)(c) of the Act cannot be sustained under the above stated circumstances. Thus, we remit and restore the issue of penalty u/s 271(1)(c) of the Act to the file of the A.O. for fresh determination of the issue of levying of penalty u/s 271(1)(c) of the Act on merits after adjudication of quantum assessment in de-novo proceedings by the AO as directed by the tribunal in ITA No 1143/Mum/2011 vide its orders dated 21-02-2014. Hence, the penalty so levied u/s 271(1)(c) of the Act is hereby deleted as indicated above.We order accordingly.
In the result, appeal filed by the assessee in 2006-07 is allowed for statistical purposes.
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