9911796707
TMI Blog2018 (4) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... nd disallowance were made. In our considered opinion, respectfully following the above said judgment penalty cannot be levied in such cases. Therefore, penalty is directed to be deleted. X X X X Extracts X X X X X X X X Extracts X X X X ..... AL INCOME 4,42,73,956 It is seen that the disallowance made u/s.35(2AB) was not contested by the assessee in appeal; therefore the same has attained finality. 4.3 In view of the confirmation of disallowance by the Ld. CIT(A), penalty notice u/s.271(1)(c) was issued on 12/02/2013. In response, the assessee submitted its submission dated 18/02/2013 as under: "We refer to the subject and at the outset we have to state that the subject proceedings are time barred and we have to state that the period of six months have expired form the end of the Financial year in with the Hon. CIT-A has decided the 1st appeal in the subject assessment, accordingly there is no scope of continuing the subject proceedings against us and we request you to kindly drop the proceedings against us under intimation to us. However, without prejudice, we also submit here below the following also, for your kind perusal and consideration: In your intimation just received, there is no description of the issues where the proposed penalty is desired to be levied. However, we have to state that: The Assessment order u/s. 143(3) states that the penalty is desired to be initiated for the addition under TP- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this - hence no scope of penalty at all. (D) Disallowance of weighted claim based on DSIR's remark on Outside Clinical Trials u/s. 35(2AB)- ₹ 3,41,0000/- This is a case of denial of incentive provision, based on Dept.'s / AO's interpretation of provisions which is different from the claim made based on Audit reports and provisions of the section 35(2AB), being an incentive provision a fair eligibility of the proper deduction is very much expected. We also invite to the amendment of FA 04 whereby there is due clarification re. clinical trials - that the section allows deduction of " in-house r&d exps and Clinical trials thus as regards the clinic trials - there is no relevance of "in-house" or "outside" - further please note that in claiming the deduction we have relied upon Auditor's certification of expenditure eligible - thus a claim which is based on Professional auditors' certification cannot invite penalty -even if the disallowances gets sustained. It is also to be noted that - even in respect of the above points - though not accepted, but assuming without accepting it is considered that some of the aspects attract penalty - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Auditors pursuant to the provisions of the Income Tax Act, 1961. However, for t6he reasons known to them Department of Scientific and Industrial Research (DSIR) allowed and approved the sum of ₹ 10,38,08,966/-, resulting into non approval of ₹ 3,56,000/-. As you may kindly observe from the certificate issued by DSIR and enclosed with our submission Dt. 8th Sept. 2006, not only no reasons have been stated therein for non approval but the details thereof have not been clarified. The assessee company submits that the said disallowance is not only arbitrary but also illegal and should not be taken note of by computing total income of your assessee company." The submission of the assessee was carefully perused. It was mentioned that DSIR was the apex body in the country which looks after Scientific and Industrial Research. It was having a team of expert scientist who personally visit the facilities of industrial houses carrying out Scientific research like our assessee does and based on there inquiries and verification they determine and approve the eligible expenditure incurred by the assessee in this regards. There was no force in the argument of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the arguments raised by the assessee. The TPO passed very reasoned order and has adopted very scientific and logical method for arriving at Arms Length Price. Assessee was not at all justified in arguing that the TPO has adopted ad- hoc matter. Moreover, it can be seen that the assessee has not come out with any specific reasons and examples on basis of which it can be said that the method adopted by the TPO is not correct. Mere alleging that the method adopted by the TPO was wrong did not carry any weight. In view of above facts upward adjustment of ₹ 38,14,100/- as determined by the TPO is hereby made and the same is added in the income of the assessee for the year under consideration. The addition was confirmed by CIT(A). 5.4 Disallowance of ₹ 10,83.885/- on account of prior period expenses: From 3CD report field along with the ROI it is seen that the assessee has debited number of prior period expenses in its P&L Account for the year under consideration. The details of such expenses are as under: Sr. No. Particulars Amount 1 Advertisement Expenses 2,29,700 2 Processing Fees 7,00,000 3 Samples 23,500 4 Membership & Subscription 90 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per various judgments the loss in question requires to be capitalize. Assessee was required to show-cause why the loss in question should not be disallowed as revenue expenditure and should not be disallowed. In its reply the assessee has submitted that: "With respect to the above point and in continuation of our earlier submissions, we beg to submit further as under: We would like to give herein below an extract of the balance sheet as of 31/03/2004 Sr. No Descriptions 31.03.04 1. Net Fixed Assets 189.31 Sub total (A) 189.31 2. Net Worth 94.59 3. Unsecured Loans 14.29 4. Long Term Loans 191.93 Sub Total (B) 300.81 B over A 111.50 As you may kindly observe, the long term funds are much more than the fixed assets of the co. by ₹ 111.50 Crores as of 31st March 2004. It therefore follows from the above that this excess funds have been utilized towards current assets such as stocks, debtors etc. As you may kindly appreciate, money is a fungible asset and therefore loses its character once it is deposited into the Bank Account. The source of the funds is not relevant thereafter. We would like to further mention that the net current a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction as claimed by it and accordingly deduction of ₹ 3,50,000/- u/s. 80G of the I.T. Act was disallowed and added back to the income of the assessee for the year under consideration. Ld. CIT(A) also confirmed the disallowance. 6. In view of the above discussion, Ld. AO was satisfied that the assessee has furnished inaccurate particulars of its income and is liable for penalty u/s.271(1)(c) of the I.T. Act. I, therefore, levy a minimum penalty @ 100% of the amount of tax sought to be evaded on account of filing of inaccurate particulars of income, which works out to ₹ 41,37,505/-, against the maximum penalty of ₹ 1,24,12,515 /- on the assessee. 7. Ld. AO was not convinced with the plea taken by the Assessee and hence levied the penalty of ₹ 41,37,505/-. 8. Against the said penalty assessee preferred appeal before the ld. CIT(A) who partly allowed the appeal. 9. We have gone through the relevant record and impugned order. In quantum proceedings, assessee went in appeal before the ITAT in ITA No.1117/Ahd/2012, in which co-ordinate bench gave relief to the assessee with following observation: "7. We have heard rival submissions. Both the lower authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
