TaxTMI 
TaxTMI 
2017 (1) TMI 1212
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.... under:- "GROUND NO. I: LEVY OF PENALTY U/S.271 (1) (c) - Rs. 17,12,092/- : 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of Joint Commissioner of Income Tax (0SD) - 8 (1) ("the AO") in levying penalty u/s. 271(l)(c) of the Act on the alleged ground that the Appellant has concealed / furnished inaccurate particulars of its income. 2. The CIT{A) failed to appreciate and ought to have held that: a) the Appellant had furnished full and correct particulars of income, in the return of income filed by it; b) the claims made by the Appellant is bonafide; c) mere disallowance of expenditures would not automatically lead to confirmation of penalty; d) when two views are possible or issue is debatable, the question of penalty would not arise; 3. The Appellant prays that the penalty levied u/s. 271(l)(c) in respect of the addition / disallowance should be deleted." 3. The brief facts of the case are that during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the A.O. observed that the assessee is engaged in the business of Asset Management and Portfolio Management and ad....
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....ory obligation on the assessee to pay these amounts to investors as the omission was committed by the transfer agent M/s Karvy Consultants Limited and not by the assessee and the AO observed that the assessee had tried to reduce its tax liability . Hence , the penalty of Rs. 17,12,092/- was levied on the assessee by the AO u/s 271(1)(c) of the Act , vide penalty orders dated 22nd March, 2012 passed by the AO u/s 271(1)(c) of the Act. 7. On first appeal filed by the assessee before learned CIT(A) against penalty orders dated 22-03-2012 passed by the AO u/s 271(1)(c) of the Act, the ld. CIT(A) confirmed/sustained the penalty levied by the AO of Rs. 17,12,092/- u/s 271(1)(c) of the Act vide his appellate orders dated 3rd June, 2013. 8. Aggrieved by the appellate orders dated 03-06-2013 passed by the ld. CIT(A) confirming/sustaining the penalty of Rs. 17,12,092/- levied by the AO u/s 271(1)(c) of the Act, the assessee filed second appeal before the tribunal. 9. The ld. Counsel for the assessee, at the very outset, submitted that the Mumbai tribunal vide its order dated 18th May, 2016 in ITA no. 2716/Mum/2011 in assessees' own case for assessment year 2007-08 in assessee's appe....
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....the difference largely remain unrealized and the matter was taken-up with SEBI and in consultation with SEBI it was decided that the deficit of Rs. 16.00 crores should be made over by Asset Management Company and replenished to the mutual funds. It is also a fact that out there are unknown credits lying in the bank account to the extent of Rs. 6.00 crores, which was adjusted and balance Rs. 10.00 crores were paid to mutual funds. As explained by the Ld. Counsel for the assessee before us now and he relied on Tribunal decision assessee's own case wherein, in assessment year 2002-03 the Tribunal taking note of the provisions of the Act and SEBI Regulations, contractual agreement between assessee and the prospects of mutual fund, held that the assessee was contractually and statutorily bound to make the payment so as to keep assessee's business interest and, therefore, held that making good of deficit of Rs. 16.00 crores, after adjusting credits of unknown bank balance of Rs. 6.00 crores, balance amount of Rs. 10.00 crores is allowable as deduction. We find that the assessee is carrying over the entire legacy pertain to earlier period, for which, it claimed amounting to Rs. 50.86 lacs....
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.... 15,98,083 Units erroneously not allotted to the investor in January, 2000 2 V. Meenakshi 13.07.2006 6,96,257 Non receipt of dividend warrant 3 V. Meenakshi 22.08.2006 6,54,959 Interest on delayed dividend payment 4 Nareshkumar Trehas 31.03.2007 8,83,000 Compensation to investor for redemption proceeds 5 Various Investors 12,54,135 Compensation expenses various investors less than Rs. 5 lakh 50,86,434 These compensation were paid as per acts' of omission by earlier consultant M/s. Karvy Consultants Limited appointed by the Mutual Fund. These payments are settlement of claims as per SEBI regulations. The AO in quantum assessment disallowed these payments made by the assessee to investors which was later confirmed by learned CIT(A), while the tribunal vide its order dated 18th May, 2016 in ITA No. 2716/Mum/2011 for assessment year 2007-08, allowed the appeal of the assessee and the quantum additions has been deleted by the tribunal. The tribunal in its order dated 18th May, 2016 observed as under:- "7. We have heard the rival contentions on this issue an....
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....s. As explained by the Ld. Counsel for the assessee before us now and he relied on Tribunal decision assessee's own case wherein, in assessment year 2002-03 the Tribunal taking note of the provisions of the Act and SEBI Regulations, contractual agreement between assessee and the prospects of mutual fund, held that the assessee was contractually and statutorily bound to make the payment so as to keep assessee's business interest and, therefore, held that making good of deficit of Rs. 16.00 crores, after adjusting credits of unknown bank balance of Rs. 6.00 crores, balance amount of Rs. 10.00 crores is allowable as deduction. We find that the assessee is carrying over the entire legacy pertain to earlier period, for which, it claimed amounting to Rs. 50.86 lacs in respect to above noted five persons. Now the question arises, whether the above payments qualify for allowance for the reason that these are commercial expediency, contractual obligations and statutory obligations. We are of the view that in the present case the unit holders, who made claim with the transfer agent, are entitled for return of their money invested in assessee's mutual fund. Even the SEBI Regulation states so ....