TaxTMI 
TaxTMI 
2018 (4) TMI 395
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....act that the assessee had wrongly claimed expenses/deductions in contravention of the provisions of the Income Tax Act 1961 in the return of income which tantamount to furnishing of inaccurate particulars of income. (2) The ld.CIT(A) has also not appreciated the fact that the AO has correctly levied penalty of Rs. 41,37,505/-on the total additions/disallowances of Rs. 4,42,73,956/-." 3. Following grounds have taken by the assessee: "1. The assessment order passed by learned assessing officer u/s.271(1)(c) of the Act and the confirmation of disallowance therein by the Hon'ble Commissioner of Income Tax(Appeals), is bad in law, illegal and deserves to be amended. 2. The Hon'ble Commissioner of Income Tax (Appeals) has erred in law and in facts and circumstances of the case in confirming the disallowance of prior period expenses of Rs. 10,83,885/- claimed in the Profit and Loss Account. The disallowance may be cancelled." 4. The relevant facts as culled out from the materials on record are as under:- In the case, return of income was filed on 30.10.2004 declaring total income at Rs. 3,08,96,022/-. The assessment u/s.143(3) of the I.T. Act was comple....
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....description of the issues where the proposed penalty is desired to be levied. However, we have to state that: The Assessment order u/s. 143(3) states that the penalty is desired to be initiated for the addition under TP-ie. Rs. 60 Lacs addition in respect of Kenya AE transactions, which disallowance is already been granted full relief by the Hon. CIT-A. Further, without prejudice, we have to submit as under: The CIT-A has granted reliefs in a quantum of the disallowances and accordingly there cannot be any penalty on these, and as regards the confirmed disallowance/partial disallowances also we wish to submit as under: A. CADILA HARMACEUTICALS LTD. AY 2005- Income tax Assessment order dtd. 31-12- Demand Nil Tax situation upon CIT-A's reliefs : Demand Nil Sr. No Amt disallowed Disallowance continued 1 TP addition in resp. of Kenya 60 Lacs Nil 2 U/sec. 43B 3 ESIC etc. 4 Prior period Exps. 6 Lacs 6Lacs 5. Fresh addition in TP for Nigeria....
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....xps and Clinical trials thus as regards the clinic trials - there is no relevance of "in-house" or "outside" - further please note that in claiming the deduction we have relied upon Auditor's certification of expenditure eligible - thus a claim which is based on Professional auditors' certification cannot invite penalty -even if the disallowances gets sustained. It is also to be noted that - even in respect of the above points - though not accepted, but assuming without accepting it is considered that some of the aspects attract penalty - there will be no tax effect of the same, because the MAT tax of the assessee will be yet over and above such added normal situation. Moreover - for these nominal confirmed additions, there is no penalty initiated at the time of original disallowance." 5. The issue wise discussion as under: 5.1 Disallowance of deduction u/s 80HHC In its ROI the assessee claimed deduction u/s.80HHC of the I.T. Act of Rs. 18,85,093/-. Vide this office show-cause dated 13/12/06 the assessee was asked to justify its claim of deduction u/s. 80HHC in view of amended provisions of Sec 80HHC. The assessee was also asked to furnish revised wor....
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....al income of your assessee company." The submission of the assessee was carefully perused. It was mentioned that DSIR was the apex body in the country which looks after Scientific and Industrial Research. It was having a team of expert scientist who personally visit the facilities of industrial houses carrying out Scientific research like our assessee does and based on there inquiries and verification they determine and approve the eligible expenditure incurred by the assessee in this regards. There was no force in the argument of the assessee that the assessment of DSIR was arbitrary and without any base. In view of above facts, deduction for Scientific Expenditure u/s.35(2)(AB) was restricted to the extent of that approved by DSIR and surplus of Rs. 3,56,000/- (@ 150% it comes to 5,34,000/- was disallowed and added back to the income of the assessee. 5.3 Arms Length Price of International Transaction : In the year under consideration assessee entered into international transaction with its "associated enterprises" by way of purchase/sale of various commodities exceeding Rs. 5 crores. Accordingly, the assessee's case was referred to the Transfer Pricing Officer, Mu....
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....ssessee for the year under consideration. The addition was confirmed by CIT(A). 5.4 Disallowance of Rs. 10,83.885/- on account of prior period expenses: From 3CD report field along with the ROI it is seen that the assessee has debited number of prior period expenses in its P&L Account for the year under consideration. The details of such expenses are as under: Sr. No. Particulars Amount 1 Advertisement Expenses 2,29,700 2 Processing Fees 7,00,000 3 Samples 23,500 4 Membership & Subscription 90 5 Maintenance Expenses 49,755 6 Finished Goods purchased 5,147 7 Traveling Fares 3,275 8 Other Research Expenses 67,418 9 Miscellaneous Expenses 5,000 TOTAL 10,83,885 Vide this office show-cause dated 13/12/06 the assessee was required to justify with all the supporting evidences that how these expenses are admissible as revenue expenses during the year under consideration. The assessee was also required show-cause why as per the Mercantile system of accountancy followed by it, the same should not be disallowed. In reply the assessee submitted that its claim was j....
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.... 94.59 3. Unsecured Loans 14.29 4. Long Term Loans 191.93 Sub Total (B) 300.81 B over A 111.50 As you may kindly observe, the long term funds are much more than the fixed assets of the co. by Rs. 111.50 Crores as of 31st March 2004. It therefore follows from the above that this excess funds have been utilized towards current assets such as stocks, debtors etc. As you may kindly appreciate, money is a fungible asset and therefore loses its character once it is deposited into the Bank Account. The source of the funds is not relevant thereafter. We would like to further mention that the net current assets of Rs. 127.09 Crores have been funded partially by the Working Capital Loans from the Bankers and balance by the term loans as explained above. The term loans (in foreign currency) which have been used for the funding of current assets, when swapped or repaid resulted into the foreign exchange loss. In view of the above, the foreign exchange loss has been incurred on account of the revenue transactions only and is therefore fully deductible." The submission of the assessee were carefully perus....
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....urate particulars of income, which works out to Rs. 41,37,505/-, against the maximum penalty of Rs. 1,24,12,515 /- on the assessee. 7. Ld. AO was not convinced with the plea taken by the Assessee and hence levied the penalty of Rs. 41,37,505/-. 8. Against the said penalty assessee preferred appeal before the ld. CIT(A) who partly allowed the appeal. 9. We have gone through the relevant record and impugned order. In quantum proceedings, assessee went in appeal before the ITAT in ITA No.1117/Ahd/2012, in which co-ordinate bench gave relief to the assessee with following observation: "7. We have heard rival submissions. Both the lower authorities are fair enough in not disputing assessee's basic plea that it had received the impugned bills only in the relevant previous year. The assessee's case therefore is that all the said expenses have crystallized in the impugned assessment year. The Assessing Officer holds that there is no such evidence of crystallization of the expenses in question. We observe in these peculiar facts that the assessee could not have paid or claimed the impugned bills without receiving the same from its payees. Non receipt of the corresp....