2018 (4) TMI 130 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowances/additions on incentive payments, unexplained cash credits/deposits u/s.68, loans and advances to M/s. Cox and Kings (India) Ltd., other persons and expenditure incurred by assessee s Director Shri Ashwin Patel - Held that - For disallowances/additions on incentive payments quantum disallowance had been made on ad hoc basis without any question of its genuineness per se. We conclude that accordingly that the same is not in the nature of furnishing of inaccurate particulars of income as the quantum disallowance hereinabove has arisen as the assessee could not prove its justification to have incurred the same in the relevant previous year as per its turnover and profit figure. We accordingly accept assessee s challenge to correctness of the impugned penalty qua this first issue. Section 68 addition - It emerges that the Assessing Officer s remand report submitted during the course of the quantum lower appellate proceedings on 10.05.2010 found aggregate sum of ₹ 12,21,251/- out of ₹ 12,61,251/- to be genuine. The assessee does not appear to have filed confirmation of Shri Narayanbhai Motibhai in this regard. We observe in these facts that the said failure in view of all mitigating facts particularly in view of the tax payer having proved almost all of the amounts in question cannot be taken as an instance of furnishing of inaccurate particulars of income. We accept assessee s challenge to the impugned penalty qua this second issue as well. Quantum addition in the nature of payments made to various parties Departmental Representative fails to dispute that the CIT(A) has not specifically rejected the above telling of the cash balance vis- -vis the sum in question. We therefore delete the impugned penalty pertaining to this third issue as well. Expenditure incurred by assessee s Director Shri Ashwin Patel - It emerges that the assessee has not filed any explanation much less a satisfactory one in quantum as well as in the instant penalty proceedings. We thus reject assessee s substantive ground relevant to the instant issue. The impugned penalty on this last issue is therefore affirmed. - Decided partly in favour of assessee.

Summary

Issues:
1. Penalty levied under section 271(1)(c) for inaccurate particulars of income.
2. Quantum disallowances/additions on incentive payments, unexplained cash credits/deposits, loans and advances, and expenditure incurred by the assessee's Director.

Analysis:
1. The appeal pertains to the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2002-03. The penalty was imposed by the Assessing Officer and affirmed by the CIT(A) for various disallowances and additions made during the assessment. The tribunal considered the quantum disallowances/additions on incentive payments, unexplained cash credits/deposits, loans and advances, and expenditure incurred by the assessee's Director. The tribunal noted that the penalty pertained to five specific items and analyzed each separately to determine if inaccurate particulars of income were furnished.

2. The first issue involved a disallowance of incentive payments. The tribunal referred to previous orders and found that the disallowance was made on an ad hoc basis without questioning its genuineness. It was concluded that the disallowance did not amount to furnishing inaccurate particulars of income as the justification for the expense was not proven by the assessee. Therefore, the penalty on this issue was deleted.

3. The second issue concerned a section 68 addition of a specific amount. The tribunal observed that the Assessing Officer's remand report found a significant portion of the amount to be genuine. Considering the mitigating circumstances and the assessee proving most of the amounts in question, the tribunal held that this did not constitute furnishing inaccurate particulars of income. Consequently, the penalty on this issue was also deleted.

4. The third issue involved a quantum addition related to payments made to various parties. The tribunal noted that the assessee provided an explanation in the lower appellate proceedings regarding the cash balance corresponding to the sum in question. As the explanation was not rejected by the CIT(A), the penalty pertaining to this issue was deleted.

5. The final issue concerned expenditure incurred by the assessee's Director. The tribunal found that no satisfactory explanation was provided by the assessee in both quantum and penalty proceedings. Consequently, the penalty on this issue was affirmed.

6. In conclusion, the tribunal partially allowed the assessee's appeal by deleting penalties on the first, second, and third issues while affirming the penalty on the fourth issue of expenditure incurred by the Director. The judgment was pronounced on March 28, 2018, by the tribunal.