9911796707
TMI Blog2019 (10) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... of twin charges for which penalty is initiated. Though in assessment order penalty has been initiated by assessing officer for furnishing inaccurate particulars of income but in accompanying notice along with assessment order learned assessing officer has not cancelled 1 of twin charges for making charge very specific and clear to assessee. Levy of the penalty on the basis of not striking of any of the twin charges in the notice issued u/s 274 of the income tax act in earlier years cancelling the penalty levied - Decided in favour of assessee - ITA No. 3528/Del/2016, ITA No. 3529/Del/2016, ITA No. 3530/Del/2016 - - - Dated:- 30-9-2019 - Amit Shukla Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Ms Ananya Kapoor, advocate For the Revenue : Shri NK Bansal Senior Departmental Representative ORDER PER PRASHANT MAHARISHI, A. M. 1. These are three appeals filed by Yum! Restaurant ( India) Private Limited [ Appellant] against order of The Commissioner Of Income Tax (Appeals) 9, New Delhi [ CIT (A)] dated 23/3/2016 for Assessment Year 2001 02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent of INR 125,000 per month for 2 months and INR 246,000 per month for subsequent 10 months totaling INR 2 710000/ . The learned assessing officer disallowed above sum. On appeal before CIT appeal he allowed a payment of INR 20,000 per month as reasonable rent and balance expenditure of lease rent was held to be excessive and disallowed u/s 40 A (2) (b) of act. The coordinate bench, on appeal, upheld decision of learned CIT A. 5. The facts for assessment year 2005 06 are also similar as far as issue of disallowance of rent is concerned. 6. Therefore, for all these 3 years penalty was initiated by learned assessing officer and levied by LD AO, which was upheld, by learned CIT Appeal and thus assessee has preferred appeal before us. 7. Before commencement of hearing assessee has raised an additional ground in all 3 appeals challenging that notice issued under section 271 (1) (c ) read with section 274 of The Act , order passed under that section are illegal, bad in law and without jurisdiction. It is further agitated that notice has been issued without any specific charge, hence said notice and order passed u/s 271 (1) (c) of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). He further submitted that penalty proceedings were properly initiated and proper so cause notice was issued to assessee. He submitted that penalty proceedings were initiated for furnishing inaccurate particulars of income and such proposition of learned assessing officer is clearly mentioned in last paragraph of assessment order, which was sent along with penalty notice. He further submitted that penalty proceedings could be initiated only while completing assessment meaning thereby passing of assessment order. So if it is mentioned in assessment order as to under which clause penalty is being initiated, intention of AO becomes clear and there is no infirmity in penalty notice. He further submitted that learned assessing officer has clearly mentioned in appellant in order that penalty is being imposes assessee has furnished inaccurate particulars of income. She submitted that there was no infirmity in penalty notice or proceedings. He further stated that decision of coordinate bench in case of assessee is not applicable since it is not on record that facts are identical. With respect to issue of correct, Olympic applicable he submitted that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted basis, no penalty is leviable. She heavily relied on decision of CIT vs Metal products of India (Punjab and Haryana High Court) 150 ITR 714 and CIT vs white line chemicals (Gujarat High Court) 360 ITR 385. Therefore, she stated that as coordinate bench itself has given part relief to assessee on this issue penalty is not leviable. She further stated that for assessment year 2004 05 and 2005 06 disallowance has been made by invoking provisions of section 40A (2) of act. She stated that it is a well-settled principle that disallowance under that section can only be made on account of excess quantum of expenditure made on estimate which does not warrant levy of penalty for concealment of income or furnishing of inaccurate particulars of income. She further relied upon decisions of coordinate bench in 124 TTJ 858, ITA number 499/IND/2009 and ITA number 312/Mum/2010. 12. On merits of issues, she stated that there is no tax evasion in previously mentioned transaction and levy of penalty in instant case is unwarranted. She submitted that accommodation was provided in accordance with employment contract between app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... She further stated that as held by honourable Gujarat High Court in 253 ITR 749 there could not be any personal expenditure in hands of company. She therefore stated that on these issues penalty could not be levied. 14. On issue of additional ground, she submitted that notices of penalty u/s 274 read with section 271 of income tax act has been placed on record in appeal set as well as photocopies are given. For which assessment year 2001 02, notice was issued on 29/12/2006 wherein none of twin charges has been cancelled by assessee officer. She further referred to notice for assessment year 2004 05 wherein notice dated 27/12/2006 and for AY 2005-06 dated 24/12/2008 none of twin charges are cancelled/ struck off. She submitted that in such circumstances penalty u/s 271 (1) cannot be levied. She relied upon decision of honourable Supreme Court in CIT vs SSA Emerald Meadows in 73 taxmann.com 248 to support her contention. She also relied on series of decision of coordinate benches where above decision has been followed. She also referred to latest decision of honourable Delhi High Court in case of Sahara financial ITA No 475/2019 dated 2/8/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Mezbaan hoteliers private limited paid interest free security deposit of only INR 50,000/- to Ms Surendra judge. The AO also noted that Mezbaan Hoteliers Pvt ltd is a sister concern of the assessee because of directors of that company are related to the directors of the appellant closely. He held that owner of property is Mrs. Surendra judge who is related to Mr. and Mrs. Sandeep Kohli, Mrs. Shah A Naaz is wife of Sandeep Kohli who is along with father of Mr. Sandeep Kohli is director of Mezban hoteliers private limited. Mr. Sandeep Kohli is managing director of assessee for whose residence impugned property was rented. Therefore, learned assessing officer questioned about transaction and made disallowance of INR 1,500,000 as rent paid to Mezbann hotelier s private limited and made an addition of interest at rate of 6% on INR 5,000,000 given as interest free deposit to that company. Thus, total addition of INR 2,100,000 was made by AO on this transaction. While making disallowance learned assessing officer stated that assessee has filed inaccurate particulars of income and tried to reduce tax liability and therefore provisions of section 271 (1) (C) of act are attracted and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate bench. On this disallowance penalty is levied by learned assessing officer as per order dated 24/3/2014. Before AO assessee submitted that though disallowances confirmed partly by ITAT, genuineness of transaction has not been doubted and disallowance has been made only on account of excessive nature of payment to a related party. Therefore transactions were genuine and not sham as pointed out in assessment order. The learned assessing officer rejected contention of assessee and stated that assessee has failed to observe relevant finding of ITAT, which questions basic logic of paying excessive amount of INR 1,260,000 to a related party. He held that finding of coordinate bench is no less than declaring excess amount as sham transaction. He submitted that penalty has already been upheld by CIT A for assessment year 2002 03, 2003 04 and 2006 07 on identical issue. The assessee challenged it before CIT A, who confirmed penalty as per his order for assessment year 2002 03, 2003 04 and 2006 07. On merits of this addition, it is apparent that assessee has furnished inaccurate particulars of its income by claiming the deduction of the rental expenditure, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished inaccurate particulars of its income and failed to substantiate its explanation. 18. However on the other to additions with respect to the expenditure held to be not for the purposes of the business under section 37 of the act, we do not find it proper to uphold the penalty u/s 271 (1) of the act. 19. In view of the above facts, on the merits of the case, subject to our decision on the additional ground raised by the assessee, the orders of the lower authorities levying the penalty with respect to the axis rental deduction claimed by the assessee disallowed by the lower authorities deserves to be confirmed. 20. On the issue of admission of additional ground of appeal in all these three appeals, order of CIT Appeal was challenged before coordinate bench who passed an order in ITA number 894/895/896 Del 2013 wherein admitting additional ground of assessee with respect to not specifying any of twin charges in notice, penalties were cancelled. Identical additional ground has been raised by assessee for these years. Therefore according to judicial precedent available before us in assessee s own case as well as it is merely a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, honourable Karnataka High Court has held that matter is covered by judgments of division bench of that court. The above decision of Karnataka High Court was challenged by revenue before honourable Supreme Court by filing a special leave petition which was dismissed in 73 taxman.com 248 (2016) (SC). Further honourable Delhi High Court also in ITA 475/2019 in PR. COMMISSIONER OF INCOME TAX, versus M/S SAHARA INDIA LIFE INSURANCE COMPANY, LTD in para number 21 has held as under:- 21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. 2016) 73 Taxman.com 241 (Kar) , the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
