DCIT 1(3), MUMBAI vs. UNILIVER INDUSTRIES P. LTD, MUMBAI

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ITA 7590/MUM/2010Status: DisposedITAT Mumbai17 August 2016AY 2003-043 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the additions on which the penalty was based were subsequently deleted by the Tribunal in quantum proceedings, the basis for the penalty no longer existed. Therefore, the deletion of the penalty by the CIT(A) was upheld.

What were the facts?

The Assessing Officer levied a penalty under Section 271(1)(c) on the assessee for AY 2003-04 based on additions made for treating expenditure as capital and for understating the arm's length price of international transactions. The CIT(A) deleted this penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained when the additions forming the basis of the penalty have been deleted in quantum appeal.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “K”, MUMBAI

Before: SHRI G.S. PANNU & SHRI RAVISH SOOD

For Appellant: Shri Nishant Thakkar &, Ms. Jasmin Amalsadvala
For Respondent: Shri N.K. Chand
Hearing: 03/08/2016Pronounced: 17/08/2016

The captioned appeal by the assessee is directed against the order of CIT(A)-15, Mumbai dated 04.08.2010, pertaining to the Assessment Year 2003-04, which in turn has arisen from the order passed by the Assessing Officer dated 28.03.2008 under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).

2.

In this appeal, the solitary issue is with regard to penalty of Rs.55,06,597/- imposed by the Assessing Officer u/s 271(1)(c) of the Act.

2 M/s. Unilever Industries Pvt. Ltd.

3.

Briefly put, the relevant facts are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, inter alia, engaged in the business of provision of research services to third parties. For Assessment Year 2003-04, it filed return of income declaring total income of Rs.8,31,59,860/- which was subject to scrutiny assessment u/s 143(3) of the Act dated 24.3.2006 whereby income was assessed at Rs.9,83,94,180/-. Subsequently, the Assessing Officer held the assessee guilty of furnishing of inaccurate particulars of income within the meaning of Sec. 271(1)(c) of the Act qua two additions made to the returned income; firstly, the claim of the assessee to treat the expenditure of Rs.1,30,43,938/- on account of purchased services as revenue expenditure was denied and instead it was treated as a capital expenditure; secondly, the arms length price of international transaction of rendering research services to its associated enterprises was determined at a figure higher than the stated value of such transactions entered in the account books by an amount of Rs.19,40,000/-. The Assessing Officer levied penalty u/s 271(1)(c) of the Act @ 100% of the tax sought to be evaded on the aforesaid incomes thereby resulting in levy of penalty of Rs.55,06,597/-. The CIT(A) has since deleted the penalty for the reasons advanced in the impugned order. The Revenue is in appeal before us challenging the aforesaid decision of the CIT(A).

4.

At the time of hearing, the learned representative for the respondent-assessee submitted at the outset that the additions on the basis of which penalty has been levied, had since been deleted by the 3 M/s. Unilever Industries Pvt. Ltd.

Tribunal while adjudicating assessee’s appeal in the quantum proceedings vide dated 8.1.2016, a copy of such order was placed on record. It is also pointed out that the said decision of the Tribunal continues to hold the field as it has not been altered by any higher authority.

5.

In view of the aforesaid, it is clear that the very basis on which the penalty was imposed by the Assessing Officer no longer survives and, therefore, the ultimate conclusion of the CIT(A) in deleting the penalty is liable to be upheld, albeit on a different ground. We hold so.

6.

In the result, appeal of the Revenue is dismissed, as above.

Order pronounced in the open court on 17th August, 2016.

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