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TMI Blog2019 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... de the penalty imposed by the A.O in respect of the addition of the Income Tax refund. On the basis of our aforesaid observations, we vacate the penalty imposed by the A.O u/s 271(1)(c), which thereafter had been sustained by the CIT(A). - Decided in favour of assessee. - ITA No.4303/Mum/2018 - - - Dated:- 27-11-2019 - Shri Pramod Kumar, Vice President And Shri Ravish Sood, Judicial Member For the Appellant : Shri Din esh Acharya, A.R For the Respondent : Shri V. Vinod Kumar, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-4, Mumbai, dated 17.04.2018, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income Tax Act, 1961 (for short Act ), dated 20.03.2014 for A.Y. 2008-09. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. On the facts and in the circumstances of the case, the Learned CIT (Appeals) in his appel late order fai led to consider Ground No. 4 of the Grounds of Appeal before him by which the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the Leaned C.I.T. (Appeals) was not just i f ied in upholding the levy of penal ty under Sect ion 271(1) (c) in respect of interest received of ₹ 2455/- on income tax refund which through oversight could not be considered as income by the appellant since it was credited to personal savings account of the appel lant and being a small amount wi th details not available. The appellant prays that the ground may please be allowed by cancelling the levy of penalty arising out of addition of ₹ 2455. 5. The appellant craves leave to add to, to alter or to amend the above grounds of appeal. 2. Briefly stated, the assessee who is engaged in the business of film production, was however during the year under consideration only in receipt of income only from the professional services which were provided by him to M/s Popcorn Motion Pictures Pvt. Ltd. Return of income for A.Y 2008-09 was e-filed by the assessee on 16.09.2008, declaring his income at Rs.nil. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. In the course of the assessment proceedings, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate at the time of filing of the e-TDS return in the year 2009, as a result whereof the amount in Form No. 26AS was reflected at ₹ 1,97,97,519/-. Accordingly, it was submitted by the assessee, that the difference of ₹ 5,96,085/- [₹ 1,97,97,519/- (-) ₹ 1,92,01,434/-] was on account of difference in the rate of conversion of foreign exchange that was applied by M/s UTV Motion Pictures Mauritius Ltd. on the sale consideration of USD 4,75,000 for the limited purpose of quantifying its TDS liability. However, the A.O declined to accept the aforesaid explanation of the assessee. It was observed by the A.O, that a perusal of the TDS certificate filed by the assessee revealed that his account was credited as on 03.05.2007 with an amount of ₹ 1,97,97,510/-. Further, it was noticed by the A.O, that the aforesaid TDS certificate was stated to have been issued on 26.06.2008 and the date of deposit of tax was shown as 05.01.2008. On the contrary, It was observed by the A.O that as per Form No. 26AS filed by the assessee the date of deposit of TDS was stated as 20.02.2009. In the backdrop of the aforesaid facts, the A.O was of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid additions/disallowances partly allowed the appeal of the assessee. 5. After receiving the order of the CIT(A), the A.O called upon the assessee to explain as to why penalty may not be imposed on him as regards the aforesaid additions/disallowance as were upheld by the CIT(A). As regards the explanation of the assessee that no penalty under Sec. 271(1)(c) was called for in his hands as regards the amount of Rs,5,96,085/- that was assessed as his income on account of excess realization on account of exchange rate difference, which thereafter had been confirmed by the CIT(A), the same did not find favour with the A.O. Accordingly, the A.O imposed penalty under Sec. 271(1)(c) on the aforesaid addition of ₹ 5,96,085/-. Also, the A.O not being persuaded to subscribe to the claim of the assessee that no penalty under Sec. 271(1)(c) was called for in respect of the remaining two additions/disallowances viz. (i). disallowance of business promotion expenses : ₹ 1.94,731/-; and (ii). addition of interest on Income Tax refund : ₹ 2,455/-, thus subjected the same to penalty under Sec. 271(1)(c). 6. Aggrieved, the assessee assail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shooting was to be done in India. It was submitted by the ld. A.R, that as the A.O while framing the assessment had merely inferred that the personal element involved in incurring of the aforesaid expenses could not be ruled out, therefore, it was in the backdrop of such presumptions that he had disallowed the aforesaid expenses. It was the claim of the ld. A.R, that no penalty under Sec. 271(1)(c) was liable to be imposed in respect of the aforesaid disallowance of expenses claimed by the assessee. As regards the addition of ₹ 2,455/- made by the A.O in respect of interest on refund received by the assessee, it was submitted by the ld. A.R, that as the assessee had inadvertently omitted to account for the aforesaid interest income, therefore, no penalty under Sec.271(1)(c) merely for the said reason could have been validly imposed. 8. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. 9. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. As is discernible from the orders of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee. Further, the A.O had imposed penalty under Sec. 271(1)(c) in respect of the aforesaid disallowance of business promotion expenses . Also, the A.O had made an addition of the interest on Income Tax refund of ₹ 2,455/- for A.Y 2006-07, that was received by the assessee during the year under consideration but was not accounted for by him in his total income for the year under consideration. Also, the A.O had imposed penalty under Sec. 271(1)(c) on the aforesaid addition of interest on Income Tax Refund of ₹ 2,455/-. 10. We have deliberated at length on the aforesaid issues as regards which the assessee had been saddled with penalty under Sec. 271(1)(c) of the Act, which thereafter had been confirmed by the CIT(A). We shall first advert to the addition on account of alleged excess realisation of foreign exchange difference of ₹ 5,96,085/-, which had been subjected to levy of penalty under Sec.271(1)(c).On the basis of the facts discernible from the records, we find, that it has been the claim of the assessee that as per agreement dated. 15.03.2007, he had only received USD 4,75,000 [i.e ₹ 1,92,01,434/-] viz. (i) USD 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Accordingly, it has not been proved by the revenue that the aforesaid amount of ₹ 5,96,085/- was received by the assessee. As a matter of fact, we find that the claim of the assessee that he had not realised the exchange rate difference of ₹ 5,96,085/- had not been dislodged by the lower authorities. On a perusal of the records, we find that as per F.I.R.C issued by the asseses s bank, it can safely be gathered that M/s UTV Motion Pictures Mauritius Ltd. while making the payments aggregating to ₹ 1,92,01,434/- to the assessee on 04.04.2007 and 07.05.2007 had not deducted any tax at source. Realising, the failure on its part in not deducting tax at source, M/s UTV Motion Pictures Mauritius Ltd. had thereafter by applying the prevailing exchange rate of ₹ 41.678 on USD 475,000, had as on 03.05.2007 deducted TDS of ₹ 11,22,519/- on the Indian rupee equivalent amount of ₹ 1,97,97,519/- [USD 475,000*41.678 USD]. Accordingly, TDS certificate in Form No.16A was thereafter issued to the assessee on 26.08.2008. Although, the impugned exchange rate difference of ₹ 5,96,085/- supplementing the actual sale cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any production activity of his own, and was in fact fully engaged in providing professional services to M/s Popcorn Motion Pictures Pvt. Ltd. for their film Mission Istanbul , therefore, his aforesaid claim of expenses did not merit acceptance. In fact, the A.O was of the view that personal element involved in incurring of the aforesaid expenses could not be completely ruled out. Apart therefrom, the A.O had observed that the assessee could not justify his aforesaid claim of expenditure on the basis of any supporting evidence. In the backdrop of the aforesaid facts, we find that the disallowance of the assesse s claim of business promotion expenses is backed by a presumption that the same were in the nature of personal expenses. In our considered view, though the failure on the part of an assessee to substantiate the veracity of its claim of expense would justify an addition in his hands, however, merely on the said standalone basis he cannot be subjected to penalty under Sec.271(1)(c) of the Act. As a matter of fact, we find that the aforesaid claim of expenses had been disallowed by the A.O, for the reason, that the same had remained unproved by the assessee. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration. As observed by us hereinabove, the assessee had credited his Capital account for the year under consideration by the amount of the Income Tax Refund (including interest) of ₹ 1,08,910/-. In our considered view, a mere bonafide omission on the part of the assessee to account for the interest portion of the refund (which though had duly been reflected in his Capital account ), would though have justified an addition to the said extent, however, a levy of penalty under Sec. 271(1)(c) merely for the said bonafide mistake would be totally unjustified. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC). We thus set aside the penalty imposed by the A.O in respect of the addition of the Income Tax refund of ₹ 2,455/-. 14. On the basis of our aforesaid observations, we vacate the penalty aggregating to ₹ 2,44,811/- imposed by the A.O under Sec.271(1)(c), which thereafter had been sustained by the CIT(A). 15. Resultantly, the appeal filed by the assessee is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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