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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 ..... able as 'NIL' but applies only to a loss return and also that para (c) of Explanat ion 4 of Sect ion 271(1) (c) is not workable in the appel lant 's case and therefore the machinery provisions of calculating the penalty fail and hence 'NIL' penalty should have been calculated by the I.T.O. Without prejudice to Ground No.1 2. On the facts and in the ci rcumstances of the case, the Learned C. I .T. (Appeals) was not justi fied in upholding the levy of penalty under Section 271(1) (c) on an addition of Rs. 596085/ - made by the ITO in his assessment order U/s.143(3) which at best was an addition of a 26AS difference, but termed as "excess realization on account of exchange" by the ITO and also without considering the remarks of the Learned C.I.T. (Appeals) in quantum appeal in its proper perspective and also not appreciating the explanations given and evidences adduced on the fact that the appel lant had not real ized any monies in i ts books in excess of what was stated in the agreement and that each of the foreign exchange realizations were fully substantiated by the F.I.R.Cs ' issued by the bankers and that there was no concealment of income and that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited (upto 20.06.2022) for a consideration of USD 4,75,000. Accordingly, the assessee had accounted for an amount of Rs. 1,92,01,434/- as sale consideration in his 'books of accounts' for the year ended 31.03.2007. As the amount was not received by the assessee till the end of the aforesaid preceding year i.e F.Y 2006-07, therefore, the said amount was reflected under the head 'Sundry debtors' in his 'balance sheet' for the year ended 31.03.2007. As per the details furnished by the assessee in the course of the assessment proceedings, it was observed by the A.O, that the aforesaid amount was received by the assessee in the month of May, 2007. In the course of the assessment proceedings, the assessee had filed with the A.O a letter alongwith a TDS certificate and "Form No. 26AS" (in the name of the assessee) as was gathered from the NSDL Portal. As per the "Form No. 26AS" filed by the assessee, M/s UTV Motion Pictures Mauritius Ltd. had deducted TDS amounting to Rs. 11,22,519/- on the payment made to the assessee, and had deposited the said amount in the Govt. Account on 03.05.20007. It was observed by the A.O, that as per the "Form No. 26AS" the amount shown to have been credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 1,97,97,519/-, while for he had accounted for an amount of Rs. 1,92,01,434/- in A.Y. 2007-08, therefore, he ought to have considered the differential amount of Rs. 5,96,085/- as his income for A.Y. 2008-09 on account of excess realization due to exchange rate difference. As such, the A.O considered the amount of Rs. 5,96,085/- as the income of the assessee for the year under consideration. Also, "business promotion expenses" of Rs. 1,94,731/- which were claimed by the assessee were disallowed by the A.O and added to his total income. Further, taking cognizance of the fact that the assessee had failed to account for a sum of Rs. 2,455/- that was received by him as interest under Sec.244A on the Income Tax Refund for A.Y 2006-07, the A.O added the same to his returned income. 4. Aggrieved, the assessee inter alia assailed the aforesaid additions/disallowances before the CIT(A). As regards the addition made by the A.O on account of the impugned excess realization on account of exchange rate difference of Rs. 5,96,085/-, it was averred by the assessee in the course of the quantum appellate proceedings, that as it had not realized any exchange rate difference of Rs. 5,96,085 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. Also, penalty that was imposed by the A.O as regards the remaining two other additions/disallowances viz. (i) disallowance of "business promotion expenses" : Rs. 1,94,731/-; and (ii) addition of interest received of the Income tax refund: Rs. 2,455/-, the same were also sustained by the CIT(A). 7. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee at the very outset of the hearing of the appeal took us through the facts of the case. It was submitted by the ld. A.R, that the lower authorities were in error in imposing/sustaining penalty under Sec. 271(1)(c) in respect of the impugned additions made by the A.O viz.(i) addition of the impugned foreign exchange difference : Rs. 5,96,085/-; (ii) disallowance of "business promotion expenses": Rs. 1,94,731/-; and (iii) addition of interest of Income tax refund: Rs. 2,455/-. Adverting, to the additions made by the A.O in respect of the impugned excess realization of foreign exchange difference of Rs. 5,96,085/-, it was submitted by the ld. A.R, that as the same pertained to the sale of IPR of its film "Yu Hota T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the same was shown as 'Sundry debtor' in his 'balance sheet' for A.Y. 2007-08. Subsequently, the aforesaid amount was received by the assessee in the month of May, 2007. As per the "Form No. 26AS" filed by the assessee in the course of the assessment proceedings, it was observed by the A.O that M/s UTV Motion Pictures Mauritius Ltd. had credited to the assesses account an amount of Rs. 1,97,97,519/-, on which they have deposited TDS amounting to Rs. 11,22,519/-.Observing, that the assessee had accounted for only an amount of Rs. 1,92,01,434/- as sale consideration in the immediately preceding year i.e A.Y. 2007-08, the A.O called upon the assessee to put forth an explanation as regards the deficit amount of Rs. 5,96,085/- [Rs. 1,97,97,519/- (-) Rs. 1,92,01,434/-]. As observed by us hereinabove, the assessee had submitted before the A.O, that the aforesaid difference of Rs. 5,96,085/- was due to the variance in the "foreign exchange conversion rate" that was applied by UTV Motion Pictures Private Limited, for the limited purpose of computing the amount of its TDS liability. However, not finding favour with the aforesaid claim of the assessee, the A.O had added the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a conversion rate of Rs. 42.5133):Rs. 10,62,834/-; and (ii) USD 4,50,000 paid on 07.05.2007 (at a conversion rate of Rs. 40.308/-): Rs,1,81,38,600/-, M/s UTV Motion Pictures Mauritius Pvt. Ltd. had after applying the prevailing exchange rate of Rs. 41.67899 worked out the rupee equivalent of USD 475,000 at Rs. 1,97,97,519/- [USD415,000*41.67=Rs. 1,97,97,519/-], and had deducted TDS of Rs. 11,22,519/- on the said amount. Aforesaid amount of TDS of Rs. 11,22,519/- was thereafter deposited on 05.01.2008 by M/s UTV Motion Pictures Mauritius Pvt. Ltd. in the Government account, and a TDS certificate in "Form No. 16A", dated 26.06.2008 was issued to the assessee. It has been the claim of the assessee before the lower authorities, that he had not realised the "exchange rate difference" of Rs. 5,96,085/-. Accordingly, it has been the claim of the assessee that the A.O had merely picked up the amount of Rs. 1,97,97,519/- from the TDS certificate of M/s UTV Motion Pictures Mauritius Ltd. and taxed the difference i.e Rs. 5,96,085/- in his hands, overlooking the fact that no such exchange rate difference was ever realised by him. Be that as it may, we are of the considered view that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, which had not been dislodged or disproved by the revenue till date, therefore, he could not have justifiably been saddled with levy of penalty under Sec.271(1)(c) in respect of the said amount. Accordingly, not finding favour with the view taken by the lower authorities, we set aside the penalty imposed by the A.O under Sec. 271(1)(c) on the impugned "excess realisation of foreign exchange" of Rs. 5,96,085/-, which thereafter had been sustained by the CIT(A). 11. We shall now advert to the levy of penalty under Sec. 271(1)(c) on the disallowance of 'business promotion expenses' of Rs. 1,94,731/- by the A.O. As observed by us hereinabove, the A.O had disallowed 100% of the "business promotion expenses" claimed by the assessee, which thereafter had been sustained by the CIT(A). As is discernible from the orders of the lower authorities, the 'business and promotion expenses' of Rs. 1,94,731/- comprises of two parts viz. (i) the expenses incurred by the assessee through credit card payments in Turkey: Rs. 89,964/-; and (ii) the expenses incurred by the assessee towards hotel bills in Turkey (through credit cards): Rs. 1,04,767/-. It has been the claim of the assessee that the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, would thus not justify subjecting the same to imposition of penalty under Sec.271(1)(c). Accordingly, not finding favour with the view taken by the lower authorities, we vacate the penalty imposed by the A.O under Sec.271(1)(c) in respect of the disallowance of the 'business promotion expenses' aggregating of Rs. 1,94,731/-. 12. We shall now advert to the levy of penalty by the A.O under Sec. 271(1)(c) on the addition of interest on Income tax refund of Rs. 2,455/- pertaining to A.Y 2006-07, which was received by the assessee during the year under consideration. As can be gathered from the orders of the lower authorities, the assessee had credited a sum of Rs. 1,08,910/- in his 'Capital account' on account of Income tax refund received (including interest component) for A.Y.2006- 07. As the assessee had failed to offer the interest portion of the aforesaid Income Tax refund amounting to Rs. 2,455/- as his income in his return of income, therefore, the A.O had added the same to his returned income. Subsequently, the A.O had subjected the assessee to penalty under Sec. 271(1)(c) in respect of the aforesaid addition of interest on Income Tax Refund. 13. We have given a thoughtful ..... X X X X Extracts X X X X X X X X Extracts X X X X
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