M/S. OCEANIC INFRASTRUCTURE PARK PVT. LTD.,CHENNAI vs. ITO, CIRCLE-1,, CHENNAI

आदेश / O R D E R

PER AMITABH SHUKLA, A.M :

2.0 The assesse has raised grounds of appeal including additional ground of appeal contesting imposition of penalty u/s 271(1)(c) of the Act. All the grounds of appeal are on the single issue of imposition of penalty and hence adjudicated together. 3.0 Brief factual matrix of the case is that the assesse is the Private Limited Company whose business had not commenced during the previous year under consideration and had filed a return of loss of Rs.68,940/-. The Ld.AO noted that the assesse had debited an expenditure of Rs.46,60,519/- as sales promotion expenses. Holding that the genuineness of the expenditure is doubtful as also that the same were personal in nature, the Ld.AO proceeded to add the same to the returned loss of the assesse as inadmissible u/s 37(1) of the Act. The assesse had argued before the AO that it had on its own added back the impugned expenses and hence the addition was unwarranted. Assesse’s appeal before the first appellate authority was answered in the negative. The Ld.AO proceeded to levy penalty u/s 271(1)(c), inter-alia, holding that the assesse has not provided him satisfactory details to defend its case. 4.0 Before us Ld.Councel for the assesse argued that the penalty levied by the Ld.AO and confirmed by the Ld.CIT(A) is totally unwarranted. It has been submitted that once the returned income and assessed income is same there cannot be case of any concealment of income leading rise to an additional tax upon which penalty can be levied. The assesse reiterated its arguments made before the lower authorities that it had on its own added back the impugned expenses in the computation of the income and hence the addition was unwarranted and the assesse cannot be held guilty of filing inaccurate particulars of income warranting initiation of penalty u/s 271(1)( c). Through the additional ground the assesse further contended that satisfaction of the Ld.AO for imposing penalty is necessary to be clearly spelt out in the assessment order and as the same has been conspicuously missing in the order. It was argued that there exists a plethora judgements postulating that no penalty can be levied unless Ld.AO satisfaction is vividly recorded in the order. 5.0 The Ld.DR relied upon the order of the authorities below. 6.0 We have heard the rival submissions and considered the case in the light of material available on records. It is an undisputed fact of the case that order u/s 143(3) was passed by the Ld.AO on 29.12.2018 at the returned loss of Rs.68,940/-. The Ld.AO made an addition of Rs.46,60,519/- pertaining to sales promotion expenses u/s 37(1). Page 21 of the paper book filed by the assesse clearly shows that in the computation of income the assesse had clearly added back Rs.46,60,519/- shown as business development expenses u/s 37(1). The order of the Ld.AO does not categorically exhibits recording of any satisfaction to initiate penalty u/s 271(1) (c) qua the impugned addition of Rs.46,60,519/- pertaining to sales promotion expenses u/s 37(1) made by him. Thus it is clear that no addition was made to the returned income. In fact both the assesse as well as the Ld.AO have invoked section 37(1) for the impugned disallowance. Section 271(1) (c) of the Act postulates that an assesse found guilty of any concealment of income or furnishing of inaccurate particulars of income would be liable to payment of penalty of 100 – 300% calculated on the basis of tax which was sought to be evaded. Accordingly, we hold that in the instant case no tax has been sought to be evaded by the assesse so as to attract provisions of section 271(1) (c) upon him and therefore direct the Ld.AO to delete the penalty imposed upon the assesse vide order dated 28.03.2022. The order of the Ld.CIT(A) confirming the action of the Ld.AO stands set aside. Accordingly all the grounds raised by the assesse including the additional ground are allowed. 7.0 In the result, the appeal is allowed.

Order pronounced on 9th August, 2024 at Chennai.