2014 (1) TMI 547 - AT - Income Tax

Non-allowance of reduction in respect of income - Held that - The income has been reduced due to double billing n the months of January-2001, February- 2001 and March-2001 on account of defect in the new billing software - The same was not substantiated by any documentary evidence by showing comparative rates - The assessee vide letter dated 3.7.2004 filed before CIT(A) had given comparative statement of billing done in the month of December 2000, February 2001, March 2001 and April 2001 to demonstrate that billing in the months of January 2001 to March 2001 for similar advertisements had been made at double rate - These details which had been filed first time before the CIT(A) have not been examined - The issue has been restored for fresh examination. Payments to Midday Outdoor - Held that - The assessee had taken certain out door contracts for which it had no infrastructure of its own and had utilized the facilities of MOL for which the cost incurred by MOL had been reimbursed by the assessee - There were discrepancies in the findings of CIT(A) in different years regarding this issue - AO himself has allowed 50% of expenses which means he has admitted the use of assets but has given no basis for disallowance of 50% - The issue requires fresh examination at the level of AO. Professional charges and travel expenditure Held that - These expenses had been included by the assessee in the share issue expenses - Later on the assessee claimed these expenses as revenue expenditure incurred for the purpose of business - It is clear that share issue expenses had not been claimed as revenue expenditure in the PL Account - There is no double claim of deduction - CIT(A) has also given a finding that there was no evidence that these expenses were incurred wholly and exclusively for the purpose of business - This aspect has not been examined by the AO - The issue has been restored for fresh examination. Notional Advertisement Credits Held that - The assessee in connection with IPO had published advertisements in its own newspapers in respect of which the expenditure incurred had been claimed as revenue expenditure - CIT(A) has confirmed the addition on the ground that the auditors had also not made any qualification regarding the notional entry - There is no finding given either by AO or CIT(A) that the assessee had received any income - The assessee had published the advertisement for its own business, therefore, the assessee could not earn income from itself - No income could be assessed on account of notional entry Decided in favour of assessee.

Summary

Issues:
- Justification of cancellation of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2001-02.

Analysis:
1. The Revenue challenged the impugned order dated 15th February 2007, passed by the Commissioner (Appeals)-V, Mumbai, regarding the cancellation of a penalty of Rs. 24,12,560 under section 271(1)(c) of the Income Tax Act, 1961.

2. The Tribunal observed that most issues related to the penalty had been set aside or deleted by the Assessing Officer or the Tribunal in the quantum proceedings.

3. The penalty was mainly on account of disallowances such as non-allowance of reduction claimed in income, disallowance of payments to a company, disallowance of professional charges, and notional advertisement credits.

4. The Tribunal found that certain issues were set aside to the file of the Assessing Officer while some were deleted by the Tribunal itself.

5. Regarding the reduction claimed in income due to double billing, the Tribunal set aside the issue to the Assessing Officer for further examination, emphasizing the need to review documentary evidence provided by the assessee.

6. The penalty on this issue was set aside, allowing the Assessing Officer to initiate penalty proceedings afresh if necessary.

7. The Tribunal also set aside the issue of disallowance of payments to a company for asset utilization, citing discrepancies in findings and the need for a fresh examination by the Assessing Officer.

8. Similarly, the issue of disallowance of professional charges and travel expenses was sent back to the Assessing Officer for reconsideration due to lack of evidence regarding business purpose.

9. The Tribunal deleted the addition related to notional advertisement credits as no actual income was received, leading to the cancellation of the penalty on this issue.

10. Consequently, the Tribunal partly allowed the Revenue's appeal for statistical purposes, deleting the penalty in various instances where issues were set aside or deleted.