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Income Tax Appellate Tribunal, “F”, BENCH MUMBAI
Before: SHRI JASON P. BOAZ, AM & SHRI SANDEEP GOSAIN, JM
PER SANDEEP GOSAIN,JUDICIAL MEMBER:
The present appeal has been filed by the assessee against the order of the learned CIT (A)-2, Mumbai dated 04-06-2014 passed in appeal No.CIT(A)-2/IT-73/2010-11 for assessment year 2002-03 thereby cancelling the penalty levied u/s 271(1)(c) of the Act against the assessee on the grounds mentioned herein below:-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty of Rs.36,11,770/- u/s 271(1)(c) of the I.T. Act?”
The brief facts of the case are that the assessee company filed its return of income for A.Y. 2002-03 on 30.10.2002, declaring total income at Rs.5,00,63,130/-. The return of income was processed u/s 143(1) of the ACIT vs. M/s. Unilever Industries Pvt. Ltd.
I.T. Act, on 13.02.2003. the assessment was completed u/s 143(3) of the I.T. Act, 1961 on 28.03.2005, determining total income at Rs.6,27,50,030/-.
Penalty proceedings u/s 271(1)(c) of the Income Tax Act,1961 were initiated in respect of addition on account of purchased services charges (Treated as capital expenditure): Rs. 1,06,72,064/- which was made in the order u/s 143(3) dated 28/03/2005 by issuing notice u/s 271(1)(c) r.w.s. 274 of the I.T. Act. After seeking reply from the assessee AO passed order of penalty dated 28.03.2005 thereby levying the penalty u/s 271(1)(c) of the I.T. Act amounting to Rs.36,11,770/-. Aggrieved by the order of the AO the assessee carried the matter in appeal before the learned CIT (A) and the learned CIT (A) vide order dated 04.06.2014 cancelled the penalty levied u/s 271(1)(c) of the Income Tax Act and allowed the appeal filed by the assesee. Aggrieved by the order of the learned CIT (A), the revenue is now in appeal before us on the aforementioned ground.
The sole ground raised by revenue is that the ld. CIT(A) erred in deleting the penalty of Rs.36,11,770/- u/s 271(1)(c) of the I.T. Act. At the very outset, ld. AR appearing on behalf of assessee submitted before us that the ITAT vide order dated 27.08.2014 has already deleted the addition made on account of purchased service charges (treated as capital expenditure) of Rs.1,06,72,064/- and directed the AO to consider
ACIT vs. M/s. Unilever Industries Pvt. Ltd. the said ground as per the provision of law. The relevant portion of Hon’ble ITAT while deciding A.Y. 2002-03 are as under: “14. The following payments have been considered as capital in nature. “The Ld. CIT(A) failed to appreciate that the appellant during the normal course of business had made payments during the year to the following institutions for technical services rendered by them.
Indian Institute of Technology Rs.28,93,664/- Indian Institue of Sceince Rs.29,31,802/- University of Mumbai Rs.7,90,000/- All India Institute of Medical Rs.1,42,200/- Secience Madhurai Kamaraj University Rs.6,21,492/- NIMHANS Rs.7,00,000/- Sofia University Rs.10,02,917/- University of Agriculture Rs.2,59,900/-
Facts and issues being identical with that of ground No. 1 in for A.Y. 2000-01. Therefore, on similar lines and for similar reasons, this ground raised by the assessee is allowed for statistical purpose.
While deciding this issue afresh, the AO is also directed to consider the additional plea of the assessee u/s. 35(1)(ii) and Sec. 35(1)(iv) of the Act as per provisions of law. Ground No. 1 alongwith additional grounds are allowed for statistical purpose.”
And since the additions made by AO and upheld by CIT(A) has already been deleted and set aside by the order of ITAT with a direction to the AO for fresh decision. Therefore, penalty is not sustainable at this stage.
On the other hand, learned DR appearing on behalf of the Revenue admitted said factual and legal position.
ACIT vs. M/s. Unilever Industries Pvt. Ltd.
We have heard both the parties and have also perused the materials on record as well as the orders of the authorities below. After perusal of the impugned order we have noticed that the Hon’ble ITAT in for A.Y. 2002-03 has already directed the AO to consider the issue afresh vide its order dated 27.08.2014 and subsequently, the AO after considering the issue afresh has passed fresh order of assessment dated 08.01.2015 and while giving effect to the orders of Hon’ble ITAT had already allowed the expenses of Rs.1,06,72,064/- on account of knowhow (purchased services) as revenue expenditure. Therefore, the penalty proceeding initiated by the AO on the previous assessment order u/s 143(3) of the Income Tax Act dated 28.03.2005 is not sustainable in the eyes of law. Hence, considering the afore mentioned facts and circumstances we dismiss the appeal filed by the revenue on the limited ground that when once the additions made by AO in the original order of assessment have already been set aside then no penalty against the assessee on that basis is sustainable. Therefore, the ground raised by revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 11-05-2016.