9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (7) TMI 899 - AT - Income TaxLevy of penalty u/s 271(1)(c) - Disallowance u/s 40A(3) and Disallowance of loading and unloading expenses - HELD THAT - Mere disallowance of expenses u/s 40A(3) in the present case would not invite the levy of penalty for concealing or furnishing of inaccurate particulars of income. As undisputed fact that all particulars relating to payments made in violation of the provisions of Section 40A(3) were disclosed by the assessee in its Tax Audit Report filed in terms of section 44AB of the Act, along with the return of income. No discrepancy has been pointed out by the Revenue in the contention of the assessee that he harboured a bona fide belief that these payments having been made in compelling business circumstances, they fell in the exceptions to the provisions of Section 40A(3) as brought out in Rule 6DD of the Income-tax Rules, 1962. It is not the case of the Revenue that the explanation furnished by the assessee for bonafidely believing that these payments were excluded from the purview of Section 40A(3) of the Act were found to be false. There was no concealment of the particulars of income relating to payments made in violation of Section 40A(3) by the assessee. We completely agree with the ld. Counsel for the assessee that it is simply a case of levying penalty on disallowance of claim of assessee, when the assessee admittedly had disclosed all particulars relating to the issue of payments made in violation of section 40A(3) of the Act and had also bonafidely believed the same as not covered under the said section. The assessee we hold ,cannot be charged with having concealed or furnished inaccurate particulars of income so as to impose penalty u/s 271(1)(c) of the Act. As decided in PRICE WATERHOUSE COOPERS (P.) LTD. 2012 (9) TMI 775 - SUPREME COURT where the assessee was noted to have disclosed all particulars of expense and the assesses explanation for not suo moto disallowing the same as being done by mistake, was found bonafide by the court, penalty levied u/s 271(1)(c) of the Act was deleted by the Apex court. Disallowing loading and unloading expenses was a mere ad-hoc disallowance. The disallowance was not based on any finding of fact that the assessee had claimed bogus expenses of loading and unloading. It was made merely because the claims were not fully verifiable and therefore it was considered fit to disallow 15% of the expenses incurred by the assessee on lump-sum basis . Also while holding that the expenses not verifiable, the ITAT in its order had gone on to note that these expenses of loading and unloading were made to small workers in cash on self-made vouchers, and because of the nature of these expenses, it was difficult to check and verify them. It is evident that again it is not a case of finding the assessee to have claimed bogus expenses. It is merely because of the nature of the expenses having been incurred in relation to small workers on self-made cash vouchers that it was found that they were not completely verifiable. There is no doubt that such disallowances do not tantamount to the assessee having concealed or furnished any inaccurate particulars of income. They are mere ad-hoc disallowances, which, Courts have repeatedly held, do not attract any levy of penalty. Assessee appeal allowed.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income-tax Act, 1961. 2. Disallowance of loading and unloading expenses. 3. Levy of penalty under Section 271(1)(c) for concealment/furnishing of inaccurate particulars of income. Issue-wise Detailed Analysis: 1. Disallowance under Section 40A(3): The penalty was levied on the assessee for making cash payments in excess of Rs. 20,000, violating Section 40A(3). The Assessing Officer (AO) observed that the assessee, engaged in the transportation business, made substantial cash payments to truck drivers, which were considered as rent. The AO disallowed these payments, leading to a penalty for concealment of income. The CIT(A) confirmed the disallowance to Rs. 65,20,741, excluding payments made on holidays and for road expenses. The ITAT upheld this decision. 2. Disallowance of Loading and Unloading Expenses: The AO disallowed Rs. 12,12,400 claimed for loading and unloading expenses, citing non-verifiability. The CIT(A) reduced this disallowance to Rs. 1,81,860, considering the volume of freight receipts. The ITAT upheld this reduced disallowance. The AO viewed this as an attempt to inflate expenses, leading to a penalty for concealment of income. 3. Levy of Penalty under Section 271(1)(c): The AO imposed a penalty of Rs. 22,78,213, which is 100% of the tax sought to be evaded. The CIT(A) upheld this penalty, stating that the assessee had concealed income. The assessee argued that all payments were disclosed in the Tax Audit Report and were made due to business expediency, covered under exceptions in Rule 6DD. The assessee also contended that the disallowance of loading and unloading expenses was based on an estimation and not on actual concealment. Judgment Analysis: Disallowance under Section 40A(3): The Tribunal agreed with the assessee that the mere disallowance of expenses under Section 40A(3) does not warrant a penalty for concealing or furnishing inaccurate particulars of income. It was noted that all particulars were disclosed in the Tax Audit Report, and the assessee had a bona fide belief that these payments, made under business exigencies, fell under exceptions in Rule 6DD. The Tribunal referenced the Supreme Court's decision in Price Waterhouse Coopers Pvt. Ltd. vs. CIT, which held that if an assessee discloses all particulars and has a bona fide belief, penalty under Section 271(1)(c) is not warranted. Disallowance of Loading and Unloading Expenses: The Tribunal found that the disallowance was an ad-hoc estimation due to non-verifiability, not based on any finding of bogus claims. The expenses were paid to small workers in cash, making verification difficult. The Tribunal held that such ad-hoc disallowances do not constitute concealment or furnishing of inaccurate particulars of income and do not attract penalty. This view was supported by multiple judicial precedents cited by the assessee. Conclusion: The Tribunal directed the deletion of the penalty of Rs. 22,78,213, holding that the levy of penalty on both disallowances was not sustainable. The appeal filed by the assessee was allowed. Order Pronouncement: The order was pronounced in the open Court on 15/07/2024 at Ahmedabad.
|
