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Income Tax Appellate Tribunal, “ F” BENCH, MUMBAI
सुनवधई की तधयीख / Date of Hearing :2.11.2015 घोषणध की तधयीख /Date of Pronouncement:2.11.2015 आदेश / O R D E R
Per B R Baskaran, AM:
The appeal filed by the assessee is directed against the order dated 25.11.2013 passed by the ld. CIT(A)-23, Mumbai and it relates to the assessment year 2009-10.
The assessee is aggrieved by the decision of the ld.CIT(A) in confirming the penalty of Rs.55.30 lakhs levied by the AO u/s 271 (1)(c) of the Income Tax Act, 1961.
The ld. Counsel appearing for the assessee submitted that the impugned penalty was levied in respect of disallowance made under section 40(a)(ia) of the Act. The ld. Counsel submitted that the Tax Auditor had given details of disallowance which are required to be made under section 40(a)(ia) of the Act in the tax audit report and the copy of Tax Audit Report was also filed along with the return of income. However, since the Tax Audit Report was obtained on the last date for filing the return of income, the disallowance required to be under section 40(a)(ia) of the Act was , by inadvertence, omitted to be added to the total income. However, at the time of assessment proceedings, the assessee accepted the said disallowance when the same was pointed out by the AO. He submitted that the tax audit report contains all the details relating to the disallowance required to be made u/s 40(a)(ia) of the Act. Accordingly, the ld. AR submitted that the assessee did not conceal any particulars of income or furnished inaccurate particulars of income. He further submitted that the Hon’ble Supreme Court considered an identical issue in the case of Price Waterhouse Cooper (P) Ltd. V/s CIT reported in 348 ITR 306 (SC). In the case before Hon’ble Apex Court, the assessee there omitted to disallow “Provision of Gratuity” in the computation of income, though the said disallowance was duly reported by the Tax Auditor and the Tax audit report was filed along with return of income. The Hon’ble Apex Court held that the same cannot be considered to be a case of concealment of particulars of income or furnishing of inaccurate particulars of income and accordingly deleted the penalty levied in that case.
The ld. AR further submitted that the disallowance u/s 40(a)(ia) fof the Act is made for non-deduction of tax at source from any expenditure and hence it is only a technical disallowance and the said expenditure shall be allowed in the year in which the TDS was deducted and remitted. He submitted that, in the following cases, it has been held that the penalty u/s 271(1)(c) cannot be levied in respect of omission to make disallowance u/s 40(a)(ia) of the Act: a) Shri Dalchand H Gupta V/s ACIT -ITA No.2982/Mum/2013 b) Rush Builders and Developers V/s ACIT -ITA No.6684/Mum/2012 c) M/s New Horizon India Limited V/s DCIT -ITA No.865/Del/2010 d) DCIT V/s TATA Asset Management Ltd -ITA No.8437/Mum/2011 e) CIT V/s L G Chaudhary -215 Taxmann 95 (Guj)(HC) 5. The ld. DR, on the contrary, placed full reliance on the orders passed by the lower authorities.
Having heard the rival contentions, we are of the view that there is merit in the contentions made by the ld.AR. There is no dispute with regard to the fact that the details relating to disallowance required to be made u/s 40(a)(ia) of the Act have duly been furnished in the Tax Audit Report. We further notice that the tax auditor has furnished the tax audit report on 30-09-2009, i.e., on the last date for filing return of income for assessment year 2009-10. Hence, there is merit in the contentions of the assessee that the disallowance was omitted to be made, by inadvertence. It is also an undisputed fact that the assessee has agreed to the disallowance, when the same was pointed out by the AO. Hence, the facts available in the present case is identical to the one considered in the case of Price Water House Cooper (P) Ltd (supra) by Hon’ble Supreme Court, wherein, on identical facts, the Hon’ble Supreme Court held as under:- “The contents of the Tax audit report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the asessee
should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. In the instant case also, the Tax auditor has duly reported the disallowance that is required to be made u/s 40(a)(ia) of the Act and the Ld A.R, during the course of arguments, took us through the relevant report given by the Tax auditor. Hence, by following the decision rendered by Hon’ble Supreme Court in the above said case, the penalty levied 271(1)(c) of the Act and confirmed by Ld CIT(A) is liable to be set aside.
In other cases relied upon by the assessee, it has been held that failure on the part of the assessee to make disallowance u/s 40(a)(ia) of the Act will not give rise to concealment of particulars of income or furnishing of inaccurate particulars of income. Following observations made by the Mumbai Bench of the Tribunal in the case of Rushi Builders and Developers V/s ACIT in (AY-2007-08) dated 4.3.2015, are relevant in this regard:
“4. We have heard the rival contentions and have also gone through the records. In this case, the penalty has been levied for disallowance of expenditure u/s.40(a)(ia) of the Act. It is not a case of furnishing of inaccurate particulars of income or concealment of income. The failure to deduct the TDS on the part of the assessee has resulted in disallowance of expenditure. The assessee had not furnished any inaccurate particulars of income or expenditure. The assessee has already faced the consequences by way of disallowance of expenditure for non-deduction of TDS as per the provisions of section 194C of the Act. It is not the case of the Revenue that the assessee had not incurred the expenditure claimed or that the claim of expenditure was bogus or incorrect. The disallowance of expenditure was attracted due to non-deduction of TDS and it cannot be said to be a case of concealment of income or furnishing of inaccurate particulars of income. The levy of penalty u/s.271(1)(c) of the Act is not attracted in this case and the same is accordingly ordered to be deleted.” The ratio of the above said decision shall also apply to the facts of the present case.
In view of the aforesaid discussions, we are of the view that the ld. CIT(A) was not justified in confirming the penalty levied u/s 271(1)(c) of the Act by the AO. Accordingly, we set aside the order of ld. CIT(A) and direct the AO to delete the impugned penalty.