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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMARJIT SINGH
PER D. KARUNAKARA RAO, AM: This appeal filed by the Revenue on 30.10.2013 is against the order of the CIT (A)-26, Mumbai dated 18.5.2011 for the assessment year 2007-2008. 2. The only issue involved in this appeal relates to the levy of penalty u/s 271(1)(c) of the Act. Before us, despite service of notice and the intimation to the assessee, none represented for the assessee. With the help of the Ld DR for the Revenue, we proceed to adjudicate the appeal on merits.
Ld DR for the Revenue briefly narrated the facts as well as merits of the case and stated the Revenue is aggrieved against the order of the CIT (A), who deleted the said penalty of Rs. 7,42,041/-. In the assessment, AO made addition of Rs. 22,04,604/- u/s 40(a)(ia) of the Act. Further, AO also made another addition on account of „interest‟ of Rs. 71,078/- on the debit balances in the partners‟ account of the firm. AO estimated the interest applying the flat rate of 12% on ad-hoc basis. Subsequently, AO initiated penalty proceedings and levied penalty of Rs. 7,42,071/-. On appeal, CIT (A) deleted the same vide his order dated 22.8.2013. While deleting
the said penalty, CIT (A) held that the penalty on the addition of Rs. 22,04,604/- made u/s 40(a)(ia) of the Act is not levyable in view of the order of the Tribunal in the case of Ms. Tanushree Basu in ITA No. 2922/M/2012, dated 22.5.2013 for the AY 2007-2008. Considering the huge amount of debate about the applicability of the provisions of section 40(a)(ia) read with TDS provisions of the Act, the Tribunal held that the penalty is not levyable. Accordingly, CIT (A) granted relief to the assessee on this issue vide discussion given in paras 3 to 3.2 of his order. For the sake of completeness of this order the said paras 3 to 3.2 of the CIT (A)‟s order are extracted as under:
“3. In this case, penalty u/s 271(1)(c) has been levied for disallowance made u/s 40(a)(ia) and on account debit balance in partners‟ account. The AO disallowed a sum of Rs. 22,04,604/- u/s 40(a)(ia) for TDS default and interest Rs. 71,078/- on account of debit balance of Rs. 4,34,515/- and Rs. 1,57,807/- in partners‟ account.
During appeal, Ld AR has filed a copy of order of ITAT in the case of Ms. Tanushree Basu in ITA No. 2922/M/2012 dated 22.5.2013 for AY 2007-2008, in support of the case that penalty u/s 271(1)(c) cannot be levied for disallowance u/s 40(a)(ia) of the Act.
The facts of the present case are also similar respectfully following the order of ITAT in Ms. Tanushree Basu in ITA No.2922/M/2012 dated 22.5.2013 for AY 2007-2008, penalty levied for disallowance u/s 40(a)(ia) is directed to be deleted.”
Considering the above, we are of the opinion that decision taken by the CIT (A) on the issue of penalty levied on the addition made u/s 40(a)(ia) is fair and reasonable and it does not call for any interference.
Regarding the penalty on the addition of „interest‟ of Rs. 71,078/-, CIT (A) held that the AO quantified interest applying the flat rate of 12% per annum on the debit balances and such penalty of Rs. 271(1)(c) of the Act on such additions constitutes ad-hoc additions without having any incriminating material to demonstrate the „concealment of income‟. Further, CIT (A) relied on the judgment of the Hon‟ble Bombay High Court in the case of Bannett coleman & Co. Ltd in ITA (Lod) No. 2117 of 2012. Para 4.1 of the CIT (A)‟s order is relevant in this regard. Considering the importance of the said para 4.1 of the CIT (A)‟s order, the same is extracted as under:- “4. 1. Reference at this stage is made to the order of the Bombay High Court in the case of Bannett Coleman & Co. Ltd ITA (Lod) No. 2118 of 2012. The facts of the present case regarding non-levy of penalty are much stronger than the facts in the Bannet Coleman & Co Ltd case of Bombay High Court. Therefore, respectfully following the decision of Bombay High Court in Bannett Coleman & Co. Ltd., the AO
is directed to delete the penalty in respect of disallowance of interest of Rs. 71,078/- also. Accordingly, penalty levied by the AO is directed to be deleted.”
Considering the above, we are of the opinion that the decision taken by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, Grounds raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 16th December, 2015. (AMARJIT SINGH) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 16/12/2015 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR,
ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रनत ////
आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt.