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2015 (3) TMI 532 - AT - Income TaxPenalty u/s.271(1)(c) - disallowance u/s 80-I for grant of claim on account of reallocation of administrative expense - Held that - The difference in the claim of deduction u/s 80-IA is mainly on the basis of allocation of administrative expenses, which has been allocated in the ratio of turnover. The assessee s case had been that it has adopted the basis of allocation based on the precedent of Tribunal order for assessment year 1983-84, which has been accepted by the department in subsequent assessment years. In this year, the basis of allocation of expenses has been changed. Under these facts it cannot lead to any inference that the assessee has furnished any inaccurate particulars, which warrants levying of penalty u/s. 271(1)(c) because change in the basis of allocation of expenses is matter of opinion. Thus, the penalty levied on this score is deleted. - Decided in favour of assessee. Disallowance u/s 40A(3) - Held that - disallowance u/s 40A(3) was made on the ground that the assessee has failed to establish any extra ordinary situation or difficulty of the payee under Rule 6DD. Whereas, the assessee s case has been that, the payments were made to the Government authorities and advance to the employees, genuineness of which have not been doubted. The disallowances have been made mainly on technical ground. In our opinion, such a disallowance does not warrant levy of penalty, because there is no furnishing of inaccurate particulars or concealment of income, because, it is not an absolute law that any payment made in cash excess of ₹ 10,000 is to be disallowed. Commercial expediency, business consideration and other factors are also required to be seen. Hence, we delete the penalty, which has been confirmed on such a disallowance.- Decided in favour of assessee. Disallowance on account of replacement of plant and machinery being held as capital expenditure - Held that - It is an admitted fact that the assessee has debited certain the expenditure, which were incurred towards car, minibus, electronic typewriter etc., which are capital in nature. If such an expenditure has been claimed in the profit and loss account as revenue expenditure, then definitely it amounts to furnishing of inaccurate particulars of income. Thus, penalty confirmed by the CIT(A) on the expenditure of ₹ 9,23,000 is upheld, because admittedly there are capital expenditure. - Decided against assessee. Disallowance u/s 43B - Held that - If the assessee has claimed the deduction u/s 43B on the basis of actual payment, then it should be held that the assessee s claim for deduction for the impugned assessment year is not bonafide or the assessee cannot be held liable for furnishing of inaccurate particulars. So far as the proof of evidence of payment is concerned, it is seen that there is a huge lag of time, because the assessment proceedings for giving effect of CIT(A) s order had started after a lapse of period of more than 14 years from the passing of the original assessment order. On the present facts the assessee s bonafide is liable to be accepted for the reason that the accounting period for the assessment years 1988-89 and 1989-90 had overlapped and assessment year 1989-90 being the transition period (because the accounting period in most of the cases was for more than 12 months), such claim for deduction cannot be adversely viewed, whether it should be treated as allowable in the assessment year 1988-89 or in the A.Y. 1989-90. The ambiguity with regard to the year of allowability of expenses for such a transition period should not be adversely viewed for the purpose of levy of penalty and more over all the particulars of payment and claim has been reported in the Audit report filed along with the return of income. Thus, under the peculiar facts and circumstances of the case, we are unable to confirm the penalty on the ground that the assessee had furnished any inaccurate particulars of income. Accordingly, penalty u/s 271(1)(c) on such a disallowance is deleted. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of claim under Section 80-I on account of reallocation of administrative expenses. 2. Disallowance under Section 40A(3) for cash payments exceeding Rs. 10,000. 3. Disallowance of expenditure on repairs and replacement of plant and machinery as capital expenditure. 4. Disallowance under Section 43B for statutory liabilities. Detailed Analysis: 1. Disallowance under Section 80-I: The assessee claimed a deduction under Section 80-I amounting to Rs. 3,73,40,000 for two new industrial units. The Assessing Officer (AO) reduced this claim to Rs. 2,01,02,365 by reallocating administrative expenses based on turnover, which was partially upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], resulting in a revised claim of Rs. 3,29,75,770. The penalty was levied on the difference of Rs. 43,64,230. The assessee argued that the allocation method was consistent with past assessments and based on a Tribunal order from 1983-84. The Tribunal found no concealment or inaccurate particulars, stating the change in allocation basis was a matter of opinion, and deleted the penalty. 2. Disallowance under Section 40A(3): The AO disallowed cash payments exceeding Rs. 10,000, totaling Rs. 5,24,079, which were made to government authorities and employees. The CIT(A) granted partial relief but upheld the disallowance of Rs. 5,24,079. The assessee contended that similar payments had been allowed in previous years and were genuine. The Tribunal noted that the disallowance was technical, with no inaccurate particulars or concealment, and deleted the penalty. 3. Repairs and Replacement of Plant and Machinery: The AO disallowed Rs. 50,93,829, later reduced to Rs. 9,23,000 after CIT(A) verification, for expenses on cars, minibuses, and electronic typewriters, treating them as capital expenditure. The assessee claimed a bona fide mistake in debiting these expenses as revenue expenditure. The Tribunal upheld the penalty, agreeing that claiming capital expenditures as revenue amounted to furnishing inaccurate particulars. 4. Statutory Liability under Section 43B: The AO disallowed Rs. 48,29,984 under Section 43B, later reduced to Rs. 33,69,014 by CIT(A), with directions to verify Rs. 14,60,970. The assessee could not provide evidence for the latter due to time lapse. The Tribunal accepted the assessee's bona fide claim, noting the overlapping accounting periods for assessment years 1988-89 and 1989-90, and the details were reported in the audit report. The Tribunal found no grounds for penalty due to the ambiguity in the transition period and deleted the penalty. Conclusion: The Tribunal allowed the appeal partly, deleting penalties related to Sections 80-I, 40A(3), and 43B, while upholding the penalty for the disallowance of capital expenditure under repairs and replacement of plant and machinery. The decision was pronounced on March 4, 2015.
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