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TMI Blog2017 (4) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer in respect of disallowance made u/s 40(a)(ia) of the Act. In this case, the assessee company has not deducted TDS at a time of credit to the Associate Business Associates (ABA) Pool account but has deducted TDS at a time of credit to the account of individual ABA. The Ld. CIT(A) noted that this practice of not deducting TDS at a time of credit in the ABA pool account but deducting it at a time of credit to the individual ABA account has been regularly followed by the assessee since A.Y. 2002- 03. It was therefore, noted that this is not the first year the appellant has followed such a practice. It is also noted that the appellant has deducted TDS on such payments made to ABA and has deposited the same in subsequent year. Thereafter the ld. CIT(A) taking into consideration the decision of Hon'ble Supreme Court in case of Reliance Petro Products Ltd. 322 ITR 580 deleted the penalty and his relevant findings are contained at para3.5 of this order which is as under:- "In this case as well, the assessee has made a claim of expenditure which has been disallowed u/s 40(a)(ia) due to failure on the part of the assessee to deduct TDS as per the provisions of Chapter XVII-B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be no requirement of TDS, in respect of such provision for expenses. 3.5 Thus, the view adopted by the assessee company of deducting tax at source at the time of actual payment to the individual ABA and not at the time of booking of expense and crediting the ABA Pool Account was one of the plausible views. 3.8 It is to be noted that complete details were disclosed by the assessee company in the return filed in a bona-fide manner, the fact of which is undisputed. The additions made by the ld. AO was solely on account of different views taken on the same set of facts and, therefore, they could, at the most, be termed as difference of opinion but nothing to do with the concealment of income and furnishing of inaccurate particulars of such income. 3.9 It is to be stated that mere addition in the assessment proceedings could not be the sole basis for levying penalty under section 271(1)(c) of the Act. Thus a bonafide view taken by the assessee company, even though rejected, would not make the assessee company liable for penalty under section 271(1)(c) of the Act. Hon'ble Supreme Court in the case of reliance petroproducts (P) Ltd. (supra) held that ".. we must hasten to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has concealed the income by furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the ld. AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind. 3.26 Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 ( Karnataka) after referring to the decision of Hon'ble supreme Court in the case of T. Ashok Pai (Supra) held as under:- ".. Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashokd Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High court in the case of Virgo Marketing reported in 171 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schools after certain deductions such as TDS, electricity charges, penalty etc. out of such amount received by the assessee company from the schools, 80% was passed on to the ABAs. Remaining 20% was retained by the assessee company as its profit. As per the agreement the liability to remit the amount to ABAs, for their share, arose only when the assessee company received the entire amount from the school with the help of respective ABAs. Till such time the amount, to be remitted to ABAs, remained outstanding in the books of the assessee company. Once the amount to be received from the school became due, income was recognized and the school was treated as a debtor. At the same time expenditure to the extent of 80% of such gross amount was recognized in the books and an ABA Pool Account was credited and not the individual account of each ABA. Thereafter, when the amount was received from any particular school, the amount due to respective ABA was taken out from ABA Pool Account and transferred to the individual account of such ABA. Assessee company did not deduct TDS on the amount of expenses booked through the ABA Pool Account as the exact amount to be paid to individual ABAs was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to such services became due to the assessee and the same was recognized as income and corresponding expenditure to the extent of 80% of such gross amount (due to the ABAs) was recognized in the books under the ABA Pool Account and not to the individual account of the respective ABAs. Therefore, on such credit to the ABA Pool Account, the assessee has not deducted any TDS. However later on when the payment was realized from the schools, the amount was credited to the individual ABA account, TDS was deducted and deposited with the Government. We found force in the above explanation that liability to pay under the contract is a relevant consideration for determining the liability towards the TDS and only when such event happens, the TDS has to be deducted. The entries/credit in the books of account have therefore to be read taking into consideration the contractual obligations under the contract and cannot be read devoid of the same. Its a different matter that such explanation has not been accepted by the AO and by the ld CIT(A) while confirming the disallowance in the quantum proceedings. However, the said explanation continue to hold the fort and support the case of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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