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TMI Blog2017 (1) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... stained and hence is hereby ordered to be deleted. - Decided in favour of assessee - I .T.A. No.5456/Mum/2013 - - - Dated:- 23-1-2017 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Manthan Shah For The Revenue : Shri Suman Kumar,DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 5456/Mum/2013, is directed against the appellate order dated 3rd June, 2013 passed by learned Commissioner of Income Tax (Appeals)- 16, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, the appellate proceedings before the learned CIT(A) arising from the penalty order dated 22nd March, 2012 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 271(1)(c) of the Income-tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- GROUND NO. I: LEVY OF PENALTY U/S.271 (1) (c) - ₹ 17,12,092/- : 1. On the facts and in the circumstances of the case and in law, the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not allowed by the AO in the assessment proceedings vide assessment order dated 30th December, 2009 passed by the AO u/s 143(3) of the Act on the grounds that it was not the liability of the assessee . The AO also initiated penalty proceedings against the assessee. 4. On first appeal filed by the assessee with the learned CIT(A) against the assessment order dated 30th December, 2009 passed by the AO u/s 143(3) of the Act , the ld. CIT(A) confirmed the disallowance made by the A.O. in quantum assessment by sustaining/confirming the assessment orders of the AO and dismissing the appeal of the assessee. 5. The A.O. initiated penalty proceedings u/s 271(1)(c) of the Act on the grounds of assessee concealing income by furnishing inaccurate particulars of income . 6. During the penalty proceedings u/s 271(1)(c) of the Act, the assessee submitted that as per SEBI regulation, the assessee is not only responsible for acts of commission and omission by its employees but also of person whose services has been obtained/produced by AMC. The assessee submitted that these payments were made to compensate the investors . It was observed by the AO that the above payments were not related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the beneficial owners and for the same charging asset management fee from the various schemes as per SEBI regulations. We also find that in this process the assessee company has settled claim towards compensation to various investors on account of business expediency and as per regulations of SEBI amounting to ₹ 50,86,431/-. The complete details are given in the assessment order. The assessee has claimed these expenses as deduction, which was incurred, in the course of business on account of business expediency. As claimed by the assessee, we are of the opinion that in such nature of business, the assessee has to incur such expenses to safeguard its business interest against complaint made by investors on SEBI, which may lead to violation of SEBI regulations and also it is duty bound to make the loss good of the investors. We also find from the facts of the case that the assessee and Trustees of the mutual fund entered into an investment management agreement, which was guiding factor for rights and obligation of Asset Management Company. We also find that the assessee has raised this issue and filed reconciliation during the assessment year 2002-03, wherein the reconciliatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer cannot ignore the same. We are of the view that even this comes within the ambit of commercial expediency for the reason that this is indirectly for facilitation of carrying on of the business of the assessee. In view of this reasoning, we allow the claim of the assessee and the orders of the lower authorities on this issue are reversed. This issue of assessee s appeal is allowed. Thus, the ld. Counsel submitted that since the quantum additions made by the A.O. and confirmed by learned CIT(A), have been deleted by the Tribunal vide its order dated 18th May, 2016 in ITA No. 2716/Mum/2011 for the assessment year 2007-08, the penalty levied u/s 271(1)(c) of the Act by the AO and as confirmed by learned CIT(A), cannot be sustained and has to be deleted. 10. The ld. D.R., on the other hand, relied on the order of the ld. CIT(A). However, the ld. D.R. fairly conceded that in view of the aforesaid order of the Tribunal dated 18th May, 2016 (supra) in assessee s own case, the penalty levied by the AO u/s 271(1)(c) of the Act and as sustained by learned CIT(A), cannot be now sustained/confirmed . 11. We have considered the rival contentions and also perused the material avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind from the facts of the case that that the assessee does necessary activity for the beneficial owners and for the same charging asset management fee from the various schemes as per SEBI regulations. We also find that in this process the assessee company has settled claim towards compensation to various investors on account of business expediency and as per regulations of SEBI amounting to ₹ 50,86,431/-. The complete details are given in the assessment order. The assessee has claimed these expenses as deduction, which was incurred, in the course of business on account of business expediency. As claimed by the assessee, we are of the opinion that in such nature of business, the assessee has to incur such expenses to safeguard its business interest against complaint made by investors on SEBI, which may lead to violation of SEBI regulations and also it is duty bound to make the loss good of the investors. We also find from the facts of the case that the assessee and Trustees of the mutual fund entered into an investment management agreement, which was guiding factor for rights and obligation of Asset Management Company. We also find that the assessee has raised this issue and f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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