TaxTMI 
TaxTMI 
2018 (2) TMI 1141
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....tax (Appeals) ("herein after referred to as "CIT(A)") erred in relying on section 292B of the Act for confirming the order passed by the AO when the provision of section 292B are not applicable on the facts of the present case. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) ("herein after referred to as "CIT(A)") erred in confirming the levy of penalty of Rs. 7,36,12,079/- under section 271(1)(c) of the Act. 4. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the provisions of Explanation 5A to section 271 is applicable. 5. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the levy of penalty under section 271(1)(c) of the Act, when there is no difference between the returned income and the assessed income. 6. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the levy of penalty under section 271(1)(c) of the Act, when there was no "tax sought to be evaded" by the Appellant as no additional tax was payable as per the assessment order passed under section 153A of the Act. The CIT(A) ....
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....ct, whereas the 'Book Profit' as per Sec. 115JB of the Act remained at the same figure of Rs. 79,84,14,271/-. So far as the present controversy is concerned, it is notable that income under the normal provisions was enhanced by a sum of Rs. 22,68,82,660/- representing additional income u/s 132(4) of the Act offered under four heads relating to business income and non-set-off of unabsorbed business loss/depreciation. However, the final tax liability remained the same at Rs. 15,97,44,731/- (as originally determined as per MAT u/s 115JB), since the tax payable as per the normal provisions was calculated after allowing the MAT credit. The assessment u/s 153A r.w.s. 143(3) r.w.s. 144C(4)(a) of the Act was completed on 30.03.2015 at a figure of Rs. 67,47,10,320/- under the normal provisions of the Act; however, the accompanying Income Tax Computation Form (ITNS), a copy of which was filed in the course of hearing, determines the tax chargeable at Rs. 15,97,44,731/-. 5. In the above background, the Assessing Officer passed an order u/s 271(1)(c) of the Act holding the assessee guilty of furnishing inaccurate particulars and committing a default within the meaning of Explanation 5A to Sec....
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....inath Holdings Pvt. Ltd., ITA No. 2555/Mum/2012 dated 28.04.2017; ii) Satra Properties (India) Ltd., ITA Nos. 4199 & 4733/Mum/2014 dated 31.03.2017; iii) Siddhi Home Makers, ITA No. 4168/Mum/2013 dated 28.04.2017; iv) PCIT vs. Smt. Baisetty Revathi, I.T.T.A No. 684 of 2016 dated 13.07.2017 (Andhra Pradesh High Court); v) CIT vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Karnataka); and, vi) CIT vs. Samson Perinchery, 392 ITR 4 (Bom) 8. On this aspect, the ld. CIT-DR vehemently pointed out that a perusal of the penalty order clearly establishes that the penalty has been imposed for furnishing of inaccurate particulars of income in the background of the default falling in the scope of Explanation 5A to Sec. 271(1)(c) of the Act, and that the Assessing Officer had duly applied his mind. It is, therefore, canvassed that it is not a case of non-application of mind by the Assessing Officer. The attention of the Bench was also drawn to discussion by the CIT(A) in para 7.2.1 of his order wherein it has been noted that in the assessment order itself the Assessing Officer had issued directions to issue notice u/s 274 r.w.s. 271(1)(c) of the Act for furnishing of inac....
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.... noted by the Mumbai Bench of the Tribunal in the case of Meherjee Cassinath Holdings Private Limited, ITA No. 2555/Mum/2012 dated 28.04.2017 wherein one of us (AM) is a Member constituting the Bench. The said distinction is quite well understood and, in that context, reference can also be gainfully made to the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff, 161 Taxman 218 (SC) and T. Ashok Pai, 292 ITR 11 (SC). Based on the fact that the two expressions have different connotations, the Tribunal in its decision dated 28.04.2017 (supra) deduced that it is imperative for the assessee to be made aware as to which of the two limbs is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act so that the assessee can defend accordingly. 10. At this stage, we may refer to the following discussion by the Hon'ble Andhra Pradesh High Court in the case of Smt. Baisetty Revathi (supra) :- "On principle, when penalty proceedings are sought to be initiated by the revenue under Section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefor has to be spelt out in clear terms. Otherwise, an assessee would not h....
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....ey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT *2000+ 2 SCC 718+" 9. Factually speaking, the aforesaid plea....
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.... find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :- "12. A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. U....
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....le Supreme Court observed that the Assessing Officer was not required to record his satisfaction in a particular manner while imposing the penalty. Ostensibly, and as noted by the Hon'ble Andhra Pradesh High Court, the judgment of the Hon'ble Supreme Court in the case of MAK Data P. Ltd. (supra) does not militate against the reasoning adopted by the Tribunal in the case of Meherjee Cassinath Holdings Private Limited (supra). 12. In the background of the above legal position, we may now proceed to examine the factual matrix in the present case. For that matter, we start with the assessment order passed u/s 144C(4)(a) r.w.s. 143(3) r.w.s. 153A of the Act dated 30.03.2015 wherein five additions have been made on account of (i) inadmissible payments to Doctors under the head 'sale promotion' - Rs. 7,08,11,326/-; (ii) personal expenses debited in the account books accrued - Rs. 37,40,000/-; (iii) excess claim u/s 35(2)(AB) for Research & Development - Rs. 9,15,58,910/-; (iv) unexplained/bogus purchases on revenue account - Rs. 5,84,24,786/-; and, (v) unexplained/bogus purchases on capital account - Rs. 23,47,637/-, all totalling to Rs. 22,68,82,660/-. The relevant discussion at....
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....ance of notice and upheld the decision of the Tribunal of treating the imposition of penalty as invalid in such a situation. In our considered opinion, the factual matrix in the present case is directly governed by the ratio of the judgment of Hon'ble Andhra Pradesh High Court in the case of Smt. Baisetty Revathi (supra) and assessee deserves to succeed on this aspect itself. 13. Insofar as the stand of the CIT(A) that a mistake in the notice issued would not invalidate the notice is concerned, the same does not merit acceptance in view of the decision of the Hon'ble Andhra Pradesh High Court in the case of Smt. Baisetty Revathi (supra) and other pronouncements referred earlier. On this aspect, we may also refer to the decision of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery, ITA Nos. 1154 of 2014, 953 of 2014, 1097 of 2014 & 1226 of 2014 dated 05.01.2017 wherein the factum of initiation of proceedings on one limb and imposition of penalty on the other limb has not been found to be legally tenable. Therefore, in view of the parity of reasoning flowing from the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (su....
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....es. The fifth and the last addition is with regard to reversal of depreciation of Rs. 23,47,637/- on cost of capital assets which were purchased from parties who were listed as hawala parties on the website of VAT Department of Maharashtra. On all these additions, the penalty has been levied by the Assessing Officer. 15. Insofar as the disallowance relating to payments to Doctors is concerned, the learned representative for the assessee pointed out that though the same was offered for taxation in the statement made u/s 132(4) of the Act, but it is not an expenditure which is summarily disallowable. Explaining the nature of expense, it has been asserted that assessee being a pharmaceutical manufacturing and marketing company, it has to promote its business by approaching and explaining the Doctors about its products, who in turn prescribe the same to the patients. It has been explained that the entire expenditure incurred by a pharmaceutical concern on Doctors is a marketing and sales promotion exercise which is necessarily required for the purpose of business of a pharmaceutical concern and thus, the entire expenditure can be construed to be incurred wholly and exclusively for the....
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....incurred. It has been pointed out that though assessee has an arguable case in view of the judgment of the Hon'ble Bombay High Court in the case of Sakal Papers (P.) Ltd. vs. CIT, 114 ITR 256 (Bom.), but it decided to withdraw the claim for deduction in the statement recorded u/s 132(4) of the Act and included the same in the return of income filed in pursuance of notice u/s 153A(1) of the Act. 17. Similarly, with regard to the disallowance out of purchases, the learned representative pointed out that the said income was offered in the statement u/s 132(4) of the Act merely in the face of search party having explained that the Department was disallowing purchases made from parties whose names appear on the website of the sales tax department as being hawala dealers. The learned representative pointed out that the said addition to the returned income even under normal circumstances does not invite penalty u/s 271(1)(c) of the Act, and for that matter, referred to the decision of the Tribunal in the case of Chempure vs. ITO, [2010] 40 SOT 164 (Mumbai) dated 07.05.2010, which has been rendered under similar circumstances. 18. With regard to the denial of deduction u/s 35(2AB) of....
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....ation 5A to Sec. 271(1)(c) of the Act, assessee is deemed to have furnished inaccurate particulars of such income. In this context, we have perused Explanation 5A, which has been inserted by the Finance (No. 2) Act, 2009 with retrospective effect from 01.06.2007. Insofar as it is relevant for the present purposes, the Explanation prescribes that if in the course of a search initiated u/s 132 on or before 01.06.2007, an assessee is found to be the owner of any income based on any entry in any books of account for any previous year ending before the date of search and where the return of income for such year has been furnished before the said date, but no such income has been declared therein, then, notwithstanding that such income is declared by him in the return furnished after the date of search, for the purposes of clause (c) of sub-section (1) of Sec. 271, such assessee shall be deemed to have concealed the particulars of such income or furnished inaccurate particulars of such income. On the said basis, it has been canvassed that the income on account of the aforesaid additions totalling to Rs. 22,68,82,660/-, which has been offered in the statement u/s 132(4) of the Act at the ....
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....tently wrong claim. Similarly, with regard to disallowance of fees paid to educational institution, the appellant had a good arguable case on merit in view of the judgment of the Hon'ble Bombay High Court in the case of Sakal Papers (P.) Ltd. (supra) and herein also, we appreciate that the assessee could not be said to have made a totally wrong claim. Thirdly, even with regard to the treatment of some of the purchases as unexplained, the same has been offered for taxation by the assessee based on a contemplated stand of the assessing authority that such purchases are from parties listed as hawala dealers by the VAT authorities, same is liable to be disallowed. While it may be a good ground to disallow the said expenditure, but dehors any specific inquiries, it could not be said that the case of the assessee was found to have been clinchingly false. The learned representative had relied on the decision of the Mumbai Bench of the Tribunal in the case of Chempure (supra) wherein under identical situation, levy of penalty u/s 271(1)(c) of the Act has been deleted. Be that as it may, such like cases, the quantum proceedings have regularly come up before the Tribunal, which are gener....