TaxTMI 
TaxTMI 
2019 (10) TMI 291
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.... dated 20/01/2016 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act) ITA No.2872/Mum/2016 This appeal in ITA Nos.2872/Mum/2016 for A.Y.2010-11 arises out of the of the order by the ld. Commissioner of Income Tax (Appeals)-9, Mumbai in appeal Nos.CIT(A)-9/Cir.4/155/2013-14, dated 28/01/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2013 by the ld. The Asst. Commissioner of Income Tax - 4(3), Mumbai (hereinafter referred to as ld. AO). ITA No.2873/Mum/2016 This appeal in ITA Nos.2873/Mum/2016 for A.Y.2011-12 arises out of the of the order by the ld. Commissioner of Income Tax (Appeals)-9, Mumbai in appeal Nos.CIT(A)-9/Cir.4/424/2013-14, dated 28/01/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2013 by the ld. The Asst. Commissioner of Income Tax - 4(3), Mumbai (hereinafter referred to as ld. AO). As the issues involved are identical in all these appeals, they are taken up together a....
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....resses of 34 such persons. Notices u/s 133(6) of the Act were issued asking them to confirm whether they had received any brokerage from the assessee. Most of these notices were either received back unserved or the persons receiving it did not reply to the ld AO. The ld AO observed that one entity i.e The Merchant Navy Officers Welfare Fund had denied receiving any brokerage. The ld AO observed that the assessee had submitted the photocopies of latest confirmations of following persons:- a) R.V.R.Services - Rs. 6,08,891/- b) Ellora Consultant Pvt Ltd - Rs. 52,833/- c) Hiralal Pipalia - Rs. 63,928/- d) Ajay Agarwal - Rs. 53,400/- e) Arun Bhuta - Rs. 1,11,500/- f) Mid-East Portfolio Management Services - Rs. 95,000/- 2.3. In response to notices u/s 133(6) of the Act, two persons namely M.B.Vasundhara Devi and Premier Spinning and Weaving Mills Pvt Ltd had confirmed receiving brokerage of Rs. 96,714/- and Rs. 1,04,000/- respectively from the assessee. Accordingly the ld AO granted deduction towards payment of brokerage in the sum of Rs. 11,86,266/- and disallowed the remaining amount of Rs. 51,67,026/- for want of evidences in the second round....
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....essee is in appeal before us. 2.5. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the assessee had raised an additional ground of appeal before us challenging the validity of levy of penalty u/s 271(1)(c ) of the Act on the ground that the ld AO had not mentioned the specific charge of offence in the penalty notice by striking off the irrelevant portion . We find that this ground deserves to be admitted as it goes to the root of the matter and does not involve verification of any fresh facts as the penalty show cause notices issued by the ld AO both at the time of original assessment proceedings (for quantum) and second round of quantum assessment proceedings are very much on record. We would like to address this preliminary issue first. We have gone through the penalty notice u/s 274 read with section 271(1)(c ) of the Act issued by the ld AO on 28.3.2001 ( i.e first quantum assessment proceedings) and also on 23.12.2010 ( i.e second quantum assessment proceedings) which are enclosed in pages 83 to 87 of the paper book filed before us. From the perusal of the said notices, we find that the ld AO had not struck off ....
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.... is mandatory on the part of the Assessing Officer to specifically state the particular charge on which penalty is proposed to be levied and non-striking off of the irrelevant limb will go to the root of Jurisdiction of the Assessing Officer to pass penalty order. In the case of Manjunath Cotton & Ginning Factory (supra) and M/s SSA's Emerald Meadows, ITA No. 38 of 2015 dated 23.11.2015 , it has been held that no penalty can be imposed where one of the two limbs i.e 'concealment of income' and 'furnishing of inaccurate particulars of income' on which penalty was proposed to be imposed is not mentioned. In the case of M/s SSA's Emerald Meadows (supra), SLP filed in Hon'ble Supreme Court by the Department has also been dismissed. In the case of Shri Samson Perinchery (supra), Hon'ble Bombay High Court has held that penalty to be imposed on the ground / limb on which penalty has been initiated. Thus, in view of the ratio laid down by various courts and judicial forums, we are of the view that penalty order is bad in law. Accordingly, we direct the Assessing Officer to delete the penalty. 2.5.2. Further the Hon'ble Telangana & Andhra Pradesh High Court in PCIT vs Smt Baisetty Revath....
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.... carried on by the assessee on the BSE and NSE was transferred to Joint Venture Companies along with trading rights. 4.2. The assessee owned three properties and had tenancy rights with respect to one of the properties, which were not transferred to the Joint Venture Company. All the properties were given on rent from 1.4.1999. The rent from the properties was disclosed by the assessee under the head 'Income from Business or Profession'. During the year under consideration, the assessee earned rental income, capital gains and income from other sources. The assessee had incurred various expenses like salaries, insurance premium, property taxes etc. 4.3. The ld AO taxed the rental income under the head 'Income from House Property' and also disallowed all expenses except audit fees. Penalty proceedings u/s 271(1)( c) of the Act were initiated for both the limbs i.e concealment of income and furnishing of inaccurate particulars of income by the ld AO. In the notice issued u/s 274 read with section 271(1)(c ) of the Act, the ld AO did not strike off the irrelevant portion specifying the charge of offence by the assessee. 4.3.1. The ld AO had considered the assessee as the....
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....ddress this preliminary issue first. We have gone through the penalty notice u/s 274 read with section 271(1)(c ) of the Act issued by the ld AO on 28.2.2005 ( ie. first round of proceedings) and another notice u/s 274 read with section 271(1)(c) of the Act was issued by the ld AO on 23.1.2014 and 3.3.2014 (i.e in the second quantum assessment proceedings) which are enclosed in pages 67 to 69 of the paper book filed before us. From the perusal of the said notices, we find that the ld AO had not struck off the irrelevant portion by clearly specifying the charge of offence committed by the assessee i.e whether the assessee had concealed its income or had furnished inaccurate particulars of income. We find that the ld AO in the quantum assessment order had stated that the penalty is initiated for both concealment of income and furnishing of inaccurate particulars of income. But in the show cause notice for penalty, the same is not mentioned by including the word 'and' at the relevant place. But ultimately we find that the penalty has been levied only for furnishing inaccurate particulars of income as is evident from the reading of the penalty order u/s 271(1)(c ) of the Act dated 2....
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....xed assets in its books. However, the ld AO did not accept the alternate claim of the assessee for granting depreciation and finance charges on leased assets. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us. 6.2. We have heard the rival submissions. The primary facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The ld AR stated that similar disallowance made by the ld AO in Asst Year 2008-09 was deleted by the ld CITA , against which no appeal was preferred by the revenue before this tribunal and that the issue had already become final. The ld AR also stated that no disallowance of lease rentals was made by the ld AO in Asst Year 2009-10 in the case of the assessee itself. We find that the issue in dispute is fully settled in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd reported in 350 TIR 527 (SC) wherein it was held that depreciation on leased assets is allowable in the hands of the lessor who is the owner. Though this decision has been rendered on the allowability of depreciation on leased assets from the angle of the less....
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....puted the disallowance under third limb thereon towards administrative expenses in the sum of Rs. 7,15,49,747/-. We find that the ld AO while computing this disallowance had considered all the investments of the assessee instead of considering only those investments which had yielded exempt income. 7.1.1. We find that the issue in dispute is decided in favour of the assessee in the case of JM Financial Consultants P Ltd (now known as JM Financial Institutional Securities P Ltd) vs DCIT in iTA No. 1863/Mum/2013 for Asst Year 2009-10 dated 7.10.2015 wherein it was held that the ld AO had not rejected the computation made by the assessee and hence the ld AO could not invoke the computation mechanism provided in Rule 8D(2) of the Rules mechanically. It was also held that the ld AO had not recorded any satisfaction in terms of Section 14A(2) of the Act read with Rule 8D(1) of the Rules by examining the accounts of the assessee and correctness of the claim of the assessee. We find that this decision of the tribunal was upheld by the Hon'ble Jurisdictional High Court in Income Tax Appeal No. 1482 of 2016 dated 29.1.2019 wherein the question raised by the revenue before the Hon'ble High....
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....ised for Asst Year 2010-11 and hence the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 10. The Ground Nos. D and E and additional grounds A, B and C raised by the assessee are with regard to disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules. This issue is also similar to that raised for Asst Year 2010-11 and hence the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures. 11. The Ground No. F raised by the assessee is with regard to disallowance of advertisement expenses in the sum of Rs. 84,00,000/-. 11.1. The brief facts of this issue are that the ld AO on perusal of the profit and loss account of the assessee observed that the assessee had debited an amount of Rs. 2,05,99,612/- towards advertisement expenses, for which the details were called for in the course of assessment proceedings. The details were submitted by the assessee vide submission dated 20.11.2013. From the said details, the ld AO observed that the assessee had debited Rs. 84,00,000/- under the head 'Living Media India Ltd - Advertisement in Business Today' . The ....
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....fession": (a) The expenditure should not be of the nature described u/s.s.30 to 36. (b) It should not be in the nature of capital expenditure. (c) It should not be the personal expenditure of the assessee. (d) It should have been incurred in the previous year. (e) It should be in respect of the business carried on by the assessee. (f) ft should have been expended wholly and exclusively for the purposes of the business. (g) It should not have been incurred for any purpose which is an offence or is prohibited by any law. The Company submits that the expenditure incurred during the relevant previous year satisfies all the conditions mentioned herein above. In this regard, your goodself would appreciate the above contention. Thus, it should be allowed u/s.37(l) of the Act. 6) We further wishes to state that said expenses does not result in acquiring a capital asset, the above expenditure is allowable as revenue expenditure. In this regard, we rely on the decision of the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT (1980) 124 ITR I wherein the Hon'ble Supreme Court held that if a....
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....ge consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstance of a given case. But even if this were applied in the present case, it does not yield a conclusion in favour of the revenue. Here, by purchase of loom hours no new asset has been created. There is no addition to or expansion of the profit-marking apparatus of the assessee. The income-earning machine remains what it was prior to the purchase of loom hours. The assessee is merely enabled to operate the profit making structure for a longer number of hours. And this advantage is clearly not of an enduring nature. It is limited in its duration to six months and, moreover, the additional working hours per week transferred to the assessee have to be u....
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....dvertisement expenses - Rs. 84,00,000/- 36) During the year under consideration, the appellant had incurred advertisement expenses of Rs. 84,00,000/-. The said expenses were incurred for creating and releasing artworks for various signages, etc., intelligence series campaign with Business India and Business Today magazines, concept note and designing internet newsletters, designing Diwali and new year e- greeting cards, HR and other internal event communications mailers, various product leaflets and other marketing collaterals like bulleting, etc., branding for conferences and events, designing screen savers/desktop wallpapers, etc. and designing brouchers. 37) During the course of assessment proceedings, the AO had asked the appellant to clarify as to why the advertisement expenses should not be treated as capital in nature. The appellant had filed a letter giving a detailed explanation as to why the advertisement expenses should not be considered to be capital in nature. 38) The AO has disallowed the expenses on the alleged ground that the expenses do not have any direct nexus and hence cannot be considered as business expenses and the expenses would ha....
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....total of Rs. 27,60,00,000/- as Group Support Fees which also includes reimbursement of advertisement expenses. If we consider the expense and the income, there is a surplus. Accordingly, as no expenditure has been incurred or debited to the profit and loss account, the question of any disallowance on account of advertisement f expenses does not arise. 43) The appellant therefore prays that the disallowance of advertisement expenses of Rs. 84,00,000/-as made by the AO may be deleted. 44) Without prejudice, if your honour is not inclined to delete the disallowance, the appellant prays that the income of the appellant may also be reduced by the like amount as the advertisement expenses are on account of the group, which has been also recovered from the group companies. Accordingly, the group support fees may be reduced by Rs. 84,00,000/- and there would be no net impact on the profit and loss account. 45) In view of the above, if your honour is not inclined to reduce the disallowance of advertisement expenses, the AO may be directed to disallow only the net advertisement expenses." 11.5. The ld CITA however upheld the action of the ld AO by observing as u....