RANJITSINGH V. MAMKOO,MUMBAI vs. ITO 23(1)(1), MUMBAI

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ITA 6700/MUM/2013Status: DisposedITAT Mumbai19 August 2016AY 2007-085 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 noted that the disallowance under Section 40(a)(ia) had been restored to the AO for fresh examination. Since the addition on which the penalty was based no longer survived, the penalty was set aside.

What were the facts?

The assessee debited labour charges in his P&L account without deducting TDS. The AO disallowed this amount under Section 40(a)(ia), and the CIT(A) upheld it. Subsequently, a penalty under Section 271(1)(c) was imposed based on this disallowance.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the underlying addition on which it was based has been set aside for fresh examination.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN

For Appellant: Dr. D. Daniel
For Respondent: Shri Prakash R. Mane

Instant appeal by the assessee is directed against the order dated 1st August 2013, passed by the learned Commissioner (Appeals)–33, Mumbai, for the assessment year 2007–08.

2.

There is a delay of 17 days in filing the present appeal. The assessee has filed an application seeking condonation of delay supported by an affidavit. It has been stated by the assessee that due to pre–occupation with business tour in different places of Gujarat, he

2 Shri Ranjitsingh U. Mankoo was not able to instruct his Chartered Accountant for engaging an advocate to file the appeal against the order of the learned Commissioner (Appeals).

3.

Having heard the parties, we are of the view that the delay in filing the present appeal is due to bonafide reasons, hence, we condone the delay and admit the appeal for hearing on merit.

4.

Brief facts relating the issue raised in this appeal are assessee an individual is engaged in manufacturing of various types of Thermo Framing Moulds Dyes and also undertakes labour jobs through his proprietorship concern M/s. Mould Craft Industries. For the assessment year under consideration, assessee filed his return of income on 12th October 2007, declaring total income of ` 4,54,110. During the assessment proceedings, the Assessing Officer while verifying the Profit & Loss account filed by the assessee noticed that an amount of ` 36,96,363, was debited by way of labour charges. However, the assessee has not deducted tax at source on such payment. He, therefore, called upon the assessee to explain why the amount should not be disallowed in terms of section 40(a)(ia) of the Act. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the objection of the assessee disallowed an amount of ` 35,90,438, invoking provisions of section 40(a)(ia). Being

3 Shri Ranjitsingh U. Mankoo aggrieved of such disallowance assessee preferred appeal before the learned Commissioner (Appeals) who also sustained the disallowance made by the Assessing Officer. Against the order passed by the learned Commissioner (Appeals), assessee preferred appeal before the Tribunal. During the pendency of assessee’s appeal before the Tribunal, the Assessing Officer issued a show cause notice to the assessee seeking his explanation as to why penalty under section 271(1)(c) should not be imposed on the basis of addition made on account of disallowance under section 40(a)(ia). Though, the assessee submitted his explanation, objecting to the imposition of penalty, however, the Assessing Officer vide order dated 29th March 2012, imposed penalty of ` 11,52,441 under section 271(1)(c). Challenging the imposition of penalty assessee preferred appeal before the learned Commissioner (Appeals).

5.

The learned Commissioner (Appeals) upheld the imposition of penalty by dismissing the appeal of the assessee. Aggrieved, the assessee is in further appeal before the Tribunal.

6.

Learned Authorised Representative submitted, the Tribunal in the meanwhile has decided the appeal filed by the assessee challenging the disallowance made under section 40(a)(ia) and has restored the matter back to the file of the Assessing Officer to examine the nature

4 Shri Ranjitsingh U. Mankoo of payment made by the assessee. He, therefore, submitted as the demand no longer survives, the penalty imposed should be set aside.

7.

Learned Departmental Representative has agreed that the Tribunal has restored the issue relating to the addition made by the Assessing Officer for fresh examination.

8.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, penalty under section 271(1)(c) was imposed on the basis of addition made of ` 35,95,438 on account of disallowance under section 40(a)(ia). However, the Tribunal, while deciding assessee’s appeal against the aforesaid disallowance in ITA no.1622/Mum./2011 dated 21st July 2016, has restored the issue relating to disallowance made under section 40(a)(ia) for fresh examination by the Assessing Officer with regard to the nature of payment made by the assessee. Thus, as the very addition on the basis of which penalty was imposed no longer survives the impugned penalty will have no legs to stand. Accordingly, for the present, there cannot be any penalty under section 271(1)(c) against the assessee. We, therefore, set aside the impugned order of the learned Commissioner (Appeals) by deleting the penalty imposed.

5 Shri Ranjitsingh U. Mankoo

9.

In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 12.08.2016

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