2014 (11) TMI 469 - AT - Income Tax

Imposition of penalty u/s 271(1)(c) Inaccurate particulars furnished or not - Held that - In the absence of any particular form of disclosure of the transaction, the disclosure in its books of account as done by the assessee was sufficient in law - in the absence of any provision of particular disclosure of the transaction, the disclosure in its books of account as done by the assessee was sufficient in law - There cannot be any charge of furnishing inaccurate particulars as well - the disallowance u/s 40A(2)(b) cannot be considered as concealment of income or furnishing of inaccurate particulars - the facts of the case does not warrant penalty u/s 271(1)(c) thus, the order of the CIT(A) is set aside Decided in favour of assessee. Additions made Hiring charges Sale of software Editing transfer charges - Held that - There was no material on the basis of which this addition was made - Merely on the ground of dual rates being charged by assessee for the same episode the addition was made - No discrepancy had been found in the disclosures made by the assessee - the penalty is not sustainable The AO had not pointed out any discrepancy in the disclosures made by assessee on this count in its books of account - The disallowance has been made primarily u/s 40A(2)(b) on account of reasonableness of expenses - The assessee s explanation has not been found to be false but only because of difference of opinion held by AO thus, the penalty levied on the disallowance is not sustainable Decided in favour of assessee. Payments made to artists Held that - Since TDS was made from the payments made to the artists and amount was duly deposited with the department, merely on the ground of non-receipt of any reply from the said artists, for which there could be several reasons, it cannot be inferred that assessee had advanced wrong claim - the onus lies on the assessee to substantiate its claim but for the purposes of levying penalty u/s 271(1)(c) of the I.T. Act, this is not sufficient - where the assessee s explanation is not malafide and he has not failed to disclose material in that regard, penalty cannot be levied - assessee had given details regarding various artists out of which only eight did not respond and the reason for the same was the time gap between the payment made to the artists and the enquiries initiated by AO - assessee s explanation cannot be branded as malafide. Excess food expenditure Held that - AO had not pointed out even a single voucher in his order which was not verifiable - by no stretch of reasoning can be held to be a wrong claim made by assessee - The nature of expenditure was such for which infallible evidence could not be expected - there was no basis for levying penalty - Decided in favour of assessee.

Issues Involved:
1. Penalty under Section 271(1)(c) for inaccurate particulars of income.
2. Disallowance of hire charges.
3. Disallowance related to the sale of serials.
4. Disallowance of payments made to artists.
5. Disallowance of food expenses.
6. Disallowance of editing transfer charges.

Detailed Analysis:

1. Penalty under Section 271(1)(c) for Inaccurate Particulars of Income:
The primary issue revolves around whether the assessee furnished inaccurate particulars of income, leading to the imposition of a penalty under Section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) levied a penalty of Rs. 15,98,073, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], on the grounds that the assessee claimed wrong expenses amounting to Rs. 43,48,497.

2. Disallowance of Hire Charges:
The AO disallowed 10% of the total hire charges amounting to Rs. 14,69,175, questioning the reasonableness of expenses paid to an associate concern. The Tribunal referenced the decision in the case of Jhavar Properties Pvt. Ltd., emphasizing that the disallowance was primarily under Section 40A(2)(b) and that the genuineness of the expenses was not disputed. Consequently, the penalty related to this addition was deleted.

3. Disallowance Related to the Sale of Serials:
The AO added Rs. 2,50,000 by adjusting the sale price of serial episodes sold to an associate concern, citing dual rates without any substantial evidence. The Tribunal found no material basis for this addition and noted that no discrepancies were found in the disclosures made by the assessee. Thus, the penalty for this addition was also deleted.

4. Disallowance of Payments Made to Artists:
The AO disallowed Rs. 18,46,338 due to non-verification of payments to certain artists who did not respond to notices under Section 133(6). The Tribunal noted that the payments were subject to TDS and that the non-response could be due to the time gap. The Tribunal held that the assessee's explanation was not malafide and deleted the penalty for this addition.

5. Disallowance of Food Expenses:
The AO disallowed 10% of the total food expenses, amounting to Rs. 1,46,610, due to lack of supporting vouchers. The Tribunal observed that the AO did not point out any specific unverifiable vouchers and concluded that the nature of the expenditure did not warrant infallible evidence. Therefore, the penalty for this addition was deleted.

6. Disallowance of Editing Transfer Charges:
The AO disallowed Rs. 6,36,374 by adjusting the average rate per episode for editing transfer charges paid to an associate concern. The Tribunal found that the disallowance was primarily under Section 40A(2)(b) and that the AO did not point out any discrepancies in the disclosures. The Tribunal referenced the decision in Jhavar Properties Pvt. Ltd. and deleted the penalty for this addition.

Conclusion:
The Tribunal allowed the appeal, deleting the penalty imposed under Section 271(1)(c) for all the disallowed expenses, as the disallowances were primarily based on the reasonableness of the expenses and not on the genuineness or accuracy of the particulars furnished by the assessee. The Tribunal emphasized that the assessee's explanations were not malafide and that the disclosures in the books of account were sufficient in law.

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