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TMI Blog2020 (8) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO are not in accordance with the law and, therefore, has to be quashed. We accordingly quash the penalty proceedings and direct the AO to cancel the penalty. Since the assessee succeeds on this legal ground, the grounds challenging the penalty on merit are not being adjudicated. Medical expenses on director disallowed - AO noted that the assessee should have entered the perquisite in the hands of Shri Raman Kumra, the non-executive director which was not done in the instant case - HELD THAT:- CIT(A), in the instant case, has passed an ex parte order due to nonappearance of the assessee. A perusal of the paper book page 50 shows that the assessee has filed an adjournment application before the CIT(A) on 24th August, 2016 seeking adjournment of the case to 2nd September, 2016. However, the same was rejected by the CIT(A) and he passed the order on 26th August, 2016. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT(A) with a direction to grant one more opportunity to the assessee to substantiate its case and decide the issue as per fact and law. - ITA Nos. 5058 & 5059/Del/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 r.w. section 274 does not specify the limb under which the penalty was levied, the entire penalty proceeding stands vitiated. He submitted that the above decisions were challenged by the Revenue before the Hon ble Supreme Court and the SLPs filed by the Revenue have been dismissed. Referring to the decision of the Hon ble Delhi High Court in the case of Pr. CIT vs Sahara India Life Insurance Company vide ITA 475/2019, order dated 02.08.2019 and various other decisions of the coordinate benches of the Tribunal, he submitted that in these decisions also the penalty proceedings were quashed where the inappropriate words in the notice were not struck off as the AO has miserably failed to specify in the notice issued u/s 274 r.w. section 271(1)(c) as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of income. He submitted that in the instant case not only the notice issued to the assessee u/s 274 r.w. section 271(1)(c) is defective, but, the AO has not even made himself satisfied at the time of making the disallowance/addition in the assessment order if the assessee has furnished inaccurate particulars of income or has conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of property. He submitted that in the instant case, the assessee has sold office flat at 206, SF Saran Chamber-II, Five Park Road, Lucknow for ₹ 6,00,000/- to Mr. Pradeep Kumra and shown the taxable long term capital gain of ₹ 87,620/- after indexation while filling the return on 30.09.2008. He submitted that during the search conducted on Mr. Pradeep Kumra on 14.02.2008 it was found that the buyer, Mr. Pradeep Kumra, has actually purchased the office flat from assessee for ₹ 6,00,000/-, but the stamp duty was paid on ₹ 19,23,400/-, and on this ground the case of the assessee was reopened and in the order passed u/s 143(3)/147, an addition of ₹ 13,23,400/- was added being the difference between the stamp duty value and the actual sales consideration received. He submitted that valuation by Stamp Valuation Authority is not a conclusive evidence of actual fair market value of the property. The A.O. has not brought any evidence on record by which it can be established that assessee has received more than the amount shown to have been received as per the sale deed. 9. Referring to the decision of the Hon ble Kolkata High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied by the AO and upheld by the CIT(A) under the facts and circumstances of the case is justified:- i) CIT vs. Zoom Communications Pvt. Ltd., 327 ITR 51 (Del); ii) Gouli Mahadevappa vs. CIT, 356 ITR 90 (Kar); iii) Balarampur Chini Mills Ltd., 376 ITR 1 (Cal); iv) Jawahar Lal Jain (HUF), 370 ITR 712 (P H) 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, made addition of ₹ 13,23,400/- u/s 50C on account of difference between the stamp duty value and actual sales consideration received by the assessee on the sale of the property. A perusal of the notice issued u/s 274 r.w. section 271(1)(c), copy of which is placed at page 78 of the paper book, shows that the inappropriate words in the said notice has not been struck off and the said notice does not specify the limb under which the penalty was levied. We find, the Hon ble Karnataka High Court in the case CIT v. Manjunatha Cotton And Ginning Factory (supra) has observed as under:- 9. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the option and discretion of the ITO whether or not take action, it cannot be described as a direction. Similar ratio is laid down in the case of M/s Vardhman Polytex Ltd. v. ACIT ITA No.626/Chd/2016 dated 31.05.2017 14. In the present case since the notice does not specify for what offence proceedings were initiated, the decision of the Hon'ble Apex Court, as pointed out above, will squarely apply to the facts of the case, following which we hold that there is no scope for levy of penalty under section 271(1)(c) of the Act on the assessee. Considering the above, we have no hesitation in cancelling the penalty. 12. We find, the above decision of the Hon ble Karnataka High Court was challenged by the Revenue and the Hon ble Supreme Court has dismissed the SLP. Similar view has been taken in various other decisions relied on by the ld. Counsel placed in the paper book. Since the inappropriate words in the notice has not been struck off, therefore, following the decision of the Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) and SSA's Emerald Meadows (supra), where the SLP filed by the Revenue has been dismissed, we ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropped from to ₹ 5.76 crores to ₹ 2.46 crores i.e. 57% Decline in sales in F.Y. 2013-14 as compared to F.Y. 2011-12 and that is reason why the company intend to save his life by giving best medical treatment which has also resulted in drop in revenue as well as drop in payment of income tax to the department. The expenses incurred by the assessee company are of business expenditure and should be allowed under section 37 of the income tax act, 1961 after keeping in view the fact stated above. 14. The assessee enclosed the duplicate final bill of Late Mr. Raman Kumra obtained from Sir Ganga Ram City Hospital. Relying on the decision of the Cuttack Bench of the Tribunal in the case DCIT vs. Paradeep Oxygen Pvt. Ltd., 71 TTJ 662, where it has been held that reimbursement of medical expenses to the Managing Director can be said to be wholly and exclusively for the purpose of business, he submitted that the medical expenses is an allowable claim u/s 37(1) of the IT Act. 15. However, the AO was not satisfied with the arguments advanced by the assessee. According to the AO, the assessee should have entered the perquisite in the hands of Late Shri Raman Kumra, non-execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he medical expenses of the director can be said to be wholly and exclusively incurred for the purpose of business and are allowable as business expenditure on account of the following:- i) The income of the assessee has fallen due to the death of Shri Raman Kumra, since the sales have drastically fallen which is clearly evident from the Profit Loss Account, copy of which is placed at page 9 of the paper book. He submitted that the copy of the Board Resolution passed by the Director, copies of the bank statements and the ledger of medical expenses along with provisional medical bill were all filed before the AO which has been verified by the CIT(A). Relying on various decisions, he submitted that the medical expenditure of the director can be said to be wholly and exclusively for the purpose of business. He further submitted that it is not a case where the AO has pointed out any particular instance that the expenses have not been incurred. So far as the order of the CIT(A) doubting the commercial expediency of the payment is concerned, he submitted that the Hon ble Supreme Court in the case of Shahzada Nand and Sons vs. CIT, 108 ITR 358 has observed that commercial expediency d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee that incurring of such expenses has not been doubted by the AO and the assessee is maintaining proper books of account which are duly audited. Further, the assessee has filed the copy of Board Resolution, bank statement and bills of Sir Gangaram Hospitel relating to the treatment of the non-executive director Late Shri Raman Kumra, who was looking after the sales of the company. It is also his submission that he was the key person for enhancement of sales of the assessee company and, after his death, the sales has drastically fallen down and, therefore, his life was very important to the assessee company for which the assessee company has incurred the medical expenses. We find, the ld.CIT(A), in the instant case, has passed an ex parte order due to nonappearance of the assessee. A perusal of the paper book page 50 shows that the assessee has filed an adjournment application before the CIT(A) on 24th August, 2016 seeking adjournment of the case to 2nd September, 2016. However, the same was rejected by the CIT(A) and he passed the order on 26th August, 2016. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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