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TMI Blog2016 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ils supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. - Decided in favour of assessee - I.T.A. No.7698/Mum/2012 - - - Dated:- 16-2-2016 - SHRI SAKTIJIT DEY, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri Pradeep N. Kapasi For The Respondent : Shri J.Saravanan ORDER PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 17/10/2012 of Commissioner of Income Tax (Appeals)-34, Mumbai (Hereinafter called as the CIT(A) ) for assessment year 2005-06 .The assessee has raised following ground of appeal: Grounds of Appeal against order u/s.250 passed by CIT(A) in an appeal against of order u/s 271(1)(c) passed by AO Ground No.01 Penalty u/s271(1)(c) in Respect of Disallowances of certain expenses. a. The learned CIT(A) erred in law and on facts; i. In confirming the action of the Ld. AO and levying the penalty u/s 271(1)(c) of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,00,000/- in respect of partners remuneration, whereas the ground in respect of foreign expenses of ₹ 2,59,550/- was not pressed before the Tribunal and the issue of disallowance of membership expenses of ₹ 32,460/- was not raised before the Tribunal. The ld. AO issued notices u/s. 274 r.w.s.271(1)(c) dated 27.11.2007 was served upon the assessee and also issued show cause notice dated 29.03.2010 . The assessee filed its reply to its show cause notice vide letter dated 25.3.2010 by submitting that the remuneration payable to the partners was apportionment of business income of the firm and there would be no change in the total income of the firm and its partners taken together and consequently there is no loss to the revenue, full details of remuneration were filed before the AO. The assessee also submitted that it had neither filed inaccurate particulars nor concealed particulars of income and all the supporting evidences/documents were filed in respect of partners remuneration, foreign tour expenses and club membership and subscription fee and mere fact that certain expenses claimed by the assessee were disallowed which did not mean that the assessee s guilty of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1.35 crores. We note that this calculation is not correct. On the contrary, the eligible proportionate remuneration for 285 days (that is from 20.6.2004 to 31.03.2005) will work out to ₹ 1.19 crores. We, therefore, hold that the excess claim of ₹ 16 lakhs (1.35 crores claimed by the assessee minus ₹ 1.19 crores) cannot be allowed as deduction at the threshold. In view of our discussion supra that the partnership deed was executed on 20.6.2004, the remuneration to the working partners for the period prior to that cannot be allowed as deduction. We, therefore, restrict the disallowance to ₹ 16 lakhs (for the period 1.4.2004 to 19.6.2004) and allow the relief of ₹ 1.19 crores. This ground is partly allowed. 1.7 The Hon'ble ITAT had given a factual finding that the appellant is entitled to claim the remuneration only for 285 days during the assessment year i.e., subsequent to the supplementary deed of partnership dated 20/06/2006. For the period 1/04/2004 to 19/06/2004, the appellant cannot claim the payment of remuneration which is anterior to the date of supplementary deed of partnership. It is within the knowledge of the appellant tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of partners remuneration was paid for 365 days including the claim for the period commencing from 1.04.2004 to 19.06.2004. In fact the said claim was never made but as matter of fact the claim was made for 285 days commencing from the period 20.06.2004 to 31.03.2005 and disallowance of ₹ 16,00,000/- was sustained by ITAT out of total ₹ 1,35,00,000/- claimed. Ld. AR further submitted that the tribunal even held that claim for 285 days was not properly calculated and it was never held by the Tribunal that the claim was made of 365 days. As such the counsel submitted that no claim was made for 80 days and hence the penalty levied was not sustainable under law as all the material facts were duly disclosed and this was a bonafide claim made and was the first year of the claim which was based upon the expert opinion of the professionals and disallowance of bonafide and of genuine claim was not liable for penalty as has been held in (i) Reliance Petroproducts (P.) Ltd. 322 ITR 158 (SC) (ii) Larsen Toubro 366 ITR 502 (Bom.). The Counsel also referred to Circular No.739 dated 23.03.1996 which provides that liberal approach in interpretation of section 40(b). The Counsel fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the orders of the authorities below by submitting that the expenses were incurred by the assessee with a view to evade tax and thus, the AO had rightly imposed the penalty u/s 271(1)(c) which were rightly upheld by the CIT(A). 5. We have heard the rival submissions and perused the material on record. We find from the order of the authorities below and other records available before us that the assessee had charged the sum of ₹ 1,35,00,000/- by way of partners remuneration which was duly evidenced by the deed of partnership and which was ultimately sustained to the extent of ₹ 16,00,000/- by the Tribunal by holding that the claim of partners remuneration was incorrectly calculated in respect of 285 days whereas the AO and the CIT(A) had observed that the assessee had claim remuneration for 365 days. In respect of foreign tour expenses claim of the assesee was reduced from ₹ 4,24,000/- to ₹ 1,64,451/- and thus sustained ₹ 2,59,550/- and the other items of disallowance was membership and subscription which was claim at ₹ 51,635/- and allowed by the AO at ₹ 19,175/- and thus, the addition to the extent of ₹ 34,450/-. We also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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