THE THE MAHALAKSHMI GLASS WORKS P.LTD,MUMBAI vs. ACIT CIR 6(3), MUMBAI

PDF · subscribers
ITA 6730/MUM/2013Status: DisposedITAT Mumbai06 June 2016AY 2008-093 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 held that the assessee's claim under Section 37(1) was a bonafide mistake, as the tax auditor did not advise claiming under Section 35DD. The excess claim would not have made a difference given the company's reported loss. Therefore, the penalty was deleted.

What were the facts?

The assessee claimed amalgamation expenses as a deduction under Section 37(1). The Assessing Officer (AO) allowed a portion of the claim under Section 35DD and disallowed the rest, subsequently levying a penalty. The CIT(A) confirmed the penalty.

What were the issues?

Whether a penalty under Section 271(1)(c) is leviable when the assessee makes a bonafide mistake in claiming an expenditure under the wrong section, especially when the tax auditor did not guide otherwise.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 35DD,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “B” Bench, Mumbai

For Respondent: Shri Sanjeev Jain
Hearing: 6.6.2016Pronounced: 6.6.2016

O R D E R Per B.R. Baskaran, AM :-

The assessee has filed this appeal challenging the order dated 08-10- 2013 passed by Ld CIT(A)-12, Mumbai confirming the penalty of Rs.2,13,220/- levied by the assessing officer u/s 271(1)(c) of the Act.

2.

None appeared on behalf of the assessee and hence we proceed to dispose of the appeal ex-parte, without the presence of the assessee.

3.

We heard Ld D.R and perused the record. We notice that the assessee has incurred a sum of Rs.8,88,418/- towards amalgamation expenses in connection with amalgamation of a company with it. The assessee claimed the same as deduction u/s 37(1) of the Act. The AO, during the course of assessment proceedings, pointed out that the same is allowable in five equal annual installments in terms of sec. 35DD of the Act. The assessee agreed to the same and accordingly the AO allowed a sum of Rs.1,77,684/- and disallowed the 2 The Mahalakshmi Glass Works Ltd.

remaining amount. The AO levied the penalty u/s 271(1)(c) of the Act in respect of the amount so disallowed by him and the Ld CIT(A) also confirmed the same.

4.

We heard Ld D.R and perused the record. The Ld D.R submitted that the Ld CIT(A) has upheld the levy of penalty by following the decision rendered by Hon’ble Delhi High Court in the case of Zoom Communications Pvt Ltd (233 CTR 465) and CIT Vs. Escorts Ltd (328 ITR 44). He submitted that the assessee should not have claimed deduction u/s 37(1) when the provisions of sec. 35DD provides for specific deduction of expenditure in connection with amalgamation or demerger of undertakings.

5.

We have noticed earlier that the assessee has claimed deduction u/s 37(1) of the Act. The Ld CIT(A) has referred to the tax audit report filed by the assessee, page 5 of his order. He has pointed out that the tax auditor has reported that the amounts admissible as deduction u/s 35DD as NIL; capital expenditure debited to Profit and Loss account as NIL and Penalty for violation of law as NIL. Thus, we notice that the tax auditor has not advised the assessee to claim the deduction u/s 35DD of the Act. Further, we notice that the assessee has reported a loss of Rs.3.35 crores and the excess claim of Rs.7.10 lakhs would not have made any difference. We further notice that the assessee is a running company and hence whether the amalgamation expenses is a capital expenditure or revenue expenditure was a debatable issue, but for specific provisions of sec. 35DD of the Act. Under these circumstances, we are of the view that the explanation of the assessee that there was a bonafide mistake on its part in not claiming the above expenditure in terms of provisions of sec. 35DD of the Act is required to be accepted. The decision rendered by Hon’ble Delhi High Court in the case of Escorts Ltd was in respect of deduction allowable u/s 35D of the Act and the decision rendered in the case of Zoom Communications Ltd was in respect of altogether wrong claim. The facts

3 The Mahalakshmi Glass Works Ltd. prevailing in the instant case are different and accordingly, we are of the view that the above said case law shall not apply to the instant case. Accordingly, we are of the view that the assessee cannot be charged with furnishing of inaccurate particulars of income. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete the impugned penalty.

6.

In the result, the appeal filed by the assessee is allowed. Order has been pronounced in the Open Court on 6.6.2016.

More judgments on Section 37(1)

All 6,995 judgments and leading authorities on Section 37(1) →

Recent GST High Court judgments

Search GST case law →