TaxTMI 
TaxTMI 
2016 (10) TMI 536
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....i. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in deleting the above said penalty ignoring the fact that the quantum addition on disallowance u/s 40(a)(ia) of the Act was confirmed by the first appellate authority and the assessee did not contest on the issue of LTCG. iii. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal. 2. The facts in brief of the case are that in the case of the assessee the assessment under section 143(3) of the Income Tax Act, 1961 (in short "the Act") was passed on 18/09/2009 assessing the total income at Rs. 3,83,03,325/- as against the returned income of Rs. 3,55,15,180/-. The assessing officer also initiated penalty proceedings under section 271(1)(c) of the Act .The additions/disallowances made by the Assessing Officer was confirmed by the learned Commissioner of Income Tax (Appeals) vide his order dated 26/07/2010. The Assessing Officer issued a show cause for levy of penalty on the additions disallowances confirmed by the learned Commissioner of Income Tax (Appeals). The submission made by the assessee that the assessee w....
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....wise realizable from the recipient of the income." 2.3 Before the learned Commissioner of Income-tax (Appeals), the assessee filed the submission, which are reproduced by the learned Commissioner of Income-tax (Appeals) as under: "The AR of the appellant submitted as under: "Submission:- A.Penalty in respect of disallowance u/s 40(a)(i) of Rs. 8,88,053/- (Rs.4,43,363 + Rs. 4,44,690) 1. The assessee made payment of Rs. 4,43,363/- to M/s. Coperion Werner & Pfleiderer in respect of process training conducted by it at the assessee's premises between 07.08.2006 to 11.08.2006. From this non-resident, assessee has purchased plant and machinery from time to time. The machines purchased by the assessee were not working at the optimum level and therefore on complaint by the assessee, the supplier of machine sent its engineer to provide the process training. The assessee has not deducted tax on this payment as according to it, it is a payment of business profit under Article 7 of DTAA with Germany and since the nonresident has no PE in India, no income has accrued or arisen in India. The AO observed that the payment made by the assessee to the nonresident is in respect of fee....
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....on that assessee has failed to demonstrate the applicability of Article 7/14 of DTAA with Germany. Hence, on such interpretational difference and particularly when the disallowance is made u/s 40(a)(1), penalty u/s 271(l)(c) is not leviable as per the various case laws referred below:- Tanushree Basu Vs. ACIT (2013) 36 CCH 089 (Mum.)(Trib.) It was a fact that assessee had claimed expenses & same were disallowed by the AO while completing the assessment u/s 143(3) of the Act on the ground that assessee failed to deduct TDS. It was observed that the genuineness of the claim of the assessee had not been disputed by the department Therefore, it could not be said that assessee had claimed expenses which were false or not genuine. Assessee had furnished all the relevant facts concerning the claim made by it in the return filed. It was held that the AO had levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s 40(a)(ia) of the Act as assessee failed to deduct TDS thereon. In the case of CIT vs. Reliance Petro products P. Ltd., 322 ITR 158(SC) it was held that a mere making of the claim which was not sustainable in the law, by itself will not ....
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.....O. In fact it is on the basis of the details filed by the appellant that the A.O. worked out the disallowable amounts both u/s 40(a)(ia) and 14A of the Act. The expenses claimed by the appellant were genuine expenses incurred for business purposes and there are no contrary observations by the Assessing Officer. The disallowance made by the A.O. u/s 40(a)(ia) of the Act was on account of legal provision and u/s 14A of the Act by attributing expenses to the tax free income claimed by the appellant." ". ..... The A.O. has in the last page of his order u/s 271(l)(c) levied the penalty on the assessee on the ground that "assessee has willfully furnished inaccurate particulars of income." The Ld. Commissioner of Income Tax (Appeals) held that the assessee has furnished all the required details and that hence no penalty can be levied on technical/legal disallowances u/s 14A or u/s 40(a)(ia). We on the facts of this case agree with these findings of the Ld. Commissioner of Income Tax (Appeals). We find no infirmity in the conclusions drawn by the Ld. CIT(A) on this issue. In the result this ground of Revenue is dismissed." 4. The only reason given by the AO for levy of penalty is th....
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....fore no TDS was required to be made. 5.13. The AO stated that TDS was required to be deducted and made a disallowance u/s 40(a)(i). The addition made by the AO u/s 40(a)(i) was confirmed by the Ld. CIT(A) and the Hon'ble ITAT. The Hon'ble ITAT stated that Article 7 will not be applicable. 5.14. The appellant had further made a payment of Rs. 4,44,690/- to Dr. U. K. Thele. This was for scientific services. The AO however held that the payment was for technical services and subject to TDS and therefore disallowed the amount u/s 40(a)(i). The Ld. CIT(A) and Hon'ble ITAT up held the addition. The Hon'ble ITAT observed that the payment to Dr. U. Thele was for rendering technical services not falling under Article 14 of the DTAA. 5.15. I shall now discuss whether penalty will be imposable on these amounts. All the particulars had been furnished by the appellant. All facts relating to the computation of his total income had been disclosed by him. The explanation give by the appellant appears to be bonafide. 5.16. As per the views of the AO, the Ld. CIT(A) and the Hon'ble ITAT the appellant was in default for not deducting TDS. However, there is no concealme....
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....used material on record. From the submission of the assessee before the lower authorities, we find that the assessee has filed all the particulars in respect of the expenses incurred, which has been held to be disallowable under section 40(a)(i) of the Act. The explanation furnished by the assessee in support of its claim of non-deduction of tax at source, though, has not been found correct, however, same was not malafide. According to the assessee, the payment of Rs. 4,43,363/- paid to an entity M/s. Coperion Werner & Pfleiderer was covered under Article-7 of the DTAA with Germany whereas the Tribunal has held that the Article-7 was not applicable in the case of the assessee. Similarly, in respect of payment of Rs. 4,44,690/- to Dr. UK Thiele, the assessee claimed that the payment was towards independent scientific activity which fall under Article 14 of DTAA with Germany, whereas the Tribunal held that the assessee failed to demonstrate that the services rendered by Dr UK Thiele are independent scientific services. The Assessing Officer has nowhere stated that the assessee has furnished false and fabricated bills or claimed expenditure which was not related to the business of the....
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....ied in levying the penalty. 4. This being a correct approach adopted by both the authorities concurrently, this tax appeal poses no question of law and the same requires no interference and is consequently to be dismissed. " 13. Therefore, respectfully following the judgment of Hon'ble Jurisdictional High Court, we hereby direct the Assessing Officer to delete the penalty on this amount. Thus, this ground is allowed and the appeal of the assessee for AY 2006-07 is allowed." 2.8 Thus respectfully following the above decision no penalty is leviable in the case for disallowances towards non-deduction of tax at source. 3. Third disallowance of Rs. 26,138/- under section 40(a)(i) has already been deleted by the Tribunal and, therefore, no penalty was leviable corresponding to the disallowance of Rs. 26,138/-. In view of above discussion, we find that order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference is required on our part and accordingly we uphold the same. The grounds of the Revenue on the issue are dismissed. 4. The second issue contested before us is in respect of penalty levied under section 271(1)(c) of....