POPCORN ENTERTAINMENT P.LTD,MUMBAI vs. ACIT 11(1), MUMBAI
In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the assessee failed to provide any evidence to substantiate the claim that the expenditure belonged to the director. The expenditure was incurred through the company's vouchers and not reflected in its books, indicating concealment.
What were the facts?
During a survey, unexplained expenditure of Rs. 36,35,791 was found not reflected in the assessee's books. The assessee claimed it belonged to a director, but provided no evidence. A penalty was imposed under Section 271(1)(c).
What were the issues?
Whether penalty under Section 271(1)(c) is leviable for unexplained expenditure not reflected in books, and for cash expenditure violating Section 40A(3), when the assessee fails to provide substantiating evidence.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
आदेश / O R D E R
Per Joginder Singh (Judicial Member)
The assessee is aggrieved by the impugned order dated 27th May 2013 of the ld. first appellate authority confirming the penalty of Rs.14,49,333, imposed u/s 271(1)(c) of the Income Tax Act, 1961 (herein after “the Act”) without appreciating the fact that the amount of Rs.36,35,791, added to the income of the assessee as unexplained expenditure was in fact the expenditure incurred by one of the directors of the assessee firm, Dr. Prakash Khubchandani, in his personal business and further confirming the penalty on the addition of Rs.6,29,974, being the disallowance for cash expenditure u/s 40A(3) of the Act.
During the hearing of this appeal, the ld. Counsel for the assessee, Shri Subhash Shetty, advanced his arguments which are identical to the ground raised. The ld. Counsel contended that the vouchers found during the survey in fact belong to the director of the assessee firm and not to the assessee. Therefore, it was contended that the addition was wrongly made and so is the penalty. On the other hand, the ld., D.R., Shri Arvind Kumar, defended the imposition as well as sustenance of penalty by contending the vouchers found during survey in fact belongs to the assessee and no evidence at any stage was produced by the assessee evidencing that the documents belongs to the assessee firm. It was also contended that quantum has been accepted by the assessee and no appeal has been filed before this Tribunal against the quantum addition. This factual matrix of not filing the appeal was accepted by the ld. Counsel.
2.1 We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee company is in the business of entertainment, declared loss of Rs.19,26,988, in its return filed on 23rd November 2006. A survey action u/s 133A was carried out on 23rd November 2006. Certain documents were impounded wherein it was found that an amount of Rs.35,35,791, was not reflected in the books of account of the assessee. It was claimed by the assessee that these expenses were booked in the accounts of Mr. Prakash Khubchandani. However, neither any documentary evidence was furnished by the assessee nor any confirmation from Mr. Prakash Khubchandani was filed. These documents were found from the office premises of the assessee company. Such expenditure was treated as unexplained expenditure for which penalty was imposed u/s 271(1)(c). The A.O. asked the assessee to furnish the confirmation from the director but that was not done by the assessee. The ld. A.O. was of the view that had there been no survey by the Department, the income would have escaped assessment, therefore, the addition was made against which no appeal was filed by the assessee before this Tribunal meaning thereby the addition was accepted to be correct which was sustained by the ld. Commissioner of Income Tax (Appeals). We note that right from the assessment stage till this Tribunal, no evidence has been furnished by the assessee evidencing that the vouchers belongs to the director of the assessee firm or these documents pertains to the personal business of the director. Undisputedly, the expenditure was not reflected by the assessee in the return of income and the assessee company has not substantiated the genuineness of such expenditure. The expenditure of Rs.36,35,791, was incurred through the vouchers of the assessee company. Likewise, the disallowance of expenditure u/s 40A(3) of the Act amounting to Rs.6,29,974, being 20% of the total cash expenditure of Rs.31,49,868, was also confirmed which was in violation of the provisions of the Act. We note that the assessee deliberately did not show the unexplained expenditure, incurred out of books of account in its books of account and, therefore, there is a deliberate attempt on the part of the assessee firstly, to incur such expenses without routing the same in its books and secondly did not disclose the source of the expenses. Had there been no survey, such expenses would have remained out of taxation, therefore, Explanation-1 to section 271(1)(c) is clearly attracted. This factual matrix of incurring expenditure was discovered only during the course of survey proceedings, consequently, the explanation of the assessee is not justified and more so the assessee right from the assessment stage has not brought on record any evidence substantiating that such expenses were routed through the books or belongs to the director of the assessee firm. It is also noteworthy that knowing fully well that the addition was rightly made / sustained no appeal was filed by the assessee before this Tribunal against the quantum addition. The assessee has deliberately concealed its income and did not furnish any explanation to substantiate the genuineness of the expenditure. More so, the assessee furnished inaccurate particulars of its income, therefore, the penalty was rightly imposed, therefore, we find no infirmity in the conclusion drawn by the ld.CIT(A).
Finally, the appeal of the assessee is dismissed. This Order was pronounced in the open court on 20/11/2015.
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