2018 (1) TMI 1240 - AT - Income Tax

Penalty u/s 271(1)(c) - Claim of the assessee as to making salary to its family members and management of the society was also disallowed and depreciation claimed by the assessee having been paid to M/s. Dev Packaging has also been disallowed - Held that - As in assessee s own case 2018 (1) TMI 18 - ITAT DELHI for AY 2010-11 passed in the quantum proceedings from which penalty proceedings have been emanated vide which issue as to addition of ₹ 7,82,465/- on account of honorarium and addition of surplus of ₹ 2,04,757/- have been set aside to the file of AO to decide afresh after providing an opportunity of being heard. However, the coordinate Bench of the Tribunal in the aforesaid order (supra) deleted the addition of ₹ 4,54,300/- on account of salary paid u/s 13(3); addition of ₹ 1,64,715/- on account of depreciation and ₹ 51,000/- on account of interest on loan and advances. Penalty levied by the AO and affirmed by the ld. CIT (A) is not sustainable, hence penalty levied by the AO and affirmed by the CIT (A) is ordered to be deleted and AO to pass afresh order consequent upon the decision on the issues which have been set aside to him for deciding afresh. Consequently, the appeal stands allowed.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Commissioner of Income-tax (Appeals) for the assessment year 2010-11.
2. Disallowance of various expenses by the Assessing Officer (AO) and subsequent penalty imposition.
3. Appeal seeking to set aside the impugned order dated 27.11.2015 passed by the Commissioner of Income-tax (Appeals), Ghaziabad.

Issue 1: Confirmation of Penalty under Section 271(1)(c)
The Appellant, a society running a school, challenged the penalty imposed under section 271(1)(c) by the Commissioner of Income-tax (Appeals) for the assessment year 2010-11. The grounds for appeal included contentions that the Assessing Officer's order was against taxation principles, based on wrong interpretation, and lacked relevant evidence. The penalty was confirmed based on assumptions and surmises, despite full disclosure in audited financial statements. The additions made by the AO and upheld by the CIT-(A) were contested by providing evidence and explanations, particularly regarding honorarium and salary payments under section 13(3). The Appellant argued that no excess payments were made, and all payments were justified based on services rendered.

Issue 2: Disallowance of Various Expenses and Subsequent Penalty Imposition
The AO disallowed several expenses, including honorarium, salary payments to family members, depreciation, and interest on loans and advances. The AO considered these claims as deliberate concealment of income and imposed a penalty. The CIT (A) partially allowed the appeal, affirming the penalty on specific additions totaling &8377;16,57,237. However, the Tribunal, in a previous order, set aside certain additions for fresh consideration by the AO. The Tribunal subsequently deleted the disallowed amounts for salary paid under section 13(3), depreciation, and interest on loans and advances. Consequently, the penalty levied by the AO and affirmed by the CIT (A) was deemed unsustainable and ordered to be deleted.

Issue 3: Appeal Against the Impugned Order
The Appellant sought to set aside the order passed by the Commissioner of Income-tax (Appeals) for the assessment year 2010-11. The Tribunal, after considering the arguments and previous decisions, ruled in favor of the Appellant. The Tribunal found that the penalty imposed by the AO and upheld by the CIT (A) was not sustainable due to the deletion of certain disallowed expenses. The Tribunal directed the AO to pass a fresh order on the issues remanded for reconsideration. Consequently, the appeal was allowed, and the penalty was ordered to be deleted.

This detailed analysis covers the confirmation of the penalty, the disallowance of expenses, and the subsequent appeal process, providing a comprehensive overview of the legal judgment delivered by the Tribunal.