TaxTMI 
TaxTMI 
2024 (3) TMI 303
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....order dated 20/5/2019 2) The learned CIT(A) erred in law and on facts in confirming penalty u/s 271(1)(c) in respect of other disallowances disregarding that it did not involve any concealment or furnishing of inaccurate particulars. 3) The learned CIT(A) erred in not dealing with the contention of the appellant challenging the validity of the penalty order in as much as the assessment as well as penalty order erroneously relied on both limbs of 271(1)(c), and therefore the AO failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted. Your appellant craves leave to add to alter or vary any of the Grounds of Appeal set out herein above." 3. The only grievance of the assessee is against the levy of penalty under section 271(1)(c) of the Act. 4. We have considered the submissions of both sides and perused the material available on record. The facts of the case are that the assessee is engaged in the business of manufacturing drugs and drugs intermediaries, etc. For the year under consideration, the assessee filed its return of income on 27/11/2006 dec....
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.... and perusing the material on record, we observe that the assessee has made payment of freight to M/s. Om Freight Forwarding Ltd. who is an agent of British Airways which is hired by the assessee to transport the cargo. We have examined the ledger accounts opened in the name of M/s. Om Freight Forwarding Ltd. in the books of the assessee as the invoice was received from the said party, however, the invoices backed by an airway's bill of British Airways, copies of which are placed on page No.58 & 59. We find merit in the contentions of the Ld. A.R. that this is just a payment to the non resident through agent M/s. Om Freight Forwarding Ltd. and therefore the same is not liable for TDS at source. The case of the assessee is squarely covered by the ratio laid down in the case of Tab Leather Works vs. ACIT - 23 taxmann.com 58 (Kol). The operative part of the decision is as under:- "5. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 6. It is an admitted position that so far as the airfreight is concerned, it is paid to the agents on the actual basis and that the bills and airf....
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....of payment has an element of "income" chargeable to tax in India. It is in this context that the Supreme Court stated, "If no such application is filed, income - tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such 'sum' to deduct tax thereon before making payment. He has to discharge the obligation to TDS". If one reads the observation of the Supreme Court, the words "such sum" clearly indicate that the observation refers to a case of composite payment where the payer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the above observations of this Court in Transmission Corpn. of A.P. Ltd.'s case (supra) which is put in italics has been completely, with respect, misunderstood by the Karnataka High Court to mean that it is not open for the payer to contend that if the amount paid by him to the non- resident is not at all "chargeable to tax in India", then no TAS is required to be deducted from such payment. This interpretation of the High Court completely loses sight of the plain words of section 195(1) which in clear terms lays down that tax at source....
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.... the coordinate bench in the quantum proceedings, we find no basis in sustaining the penalty in relation to the aforesaid disallowance. Accordingly, the same is directed to be deleted. (b) Penalty levied in relation to unexplained investment in capital work in progress (c) Penalty levied in relation to capital expenditure claimed as Revenue expenses 8. During the assessment proceedings, from the response to the notice under section 133(6) of the Act issued to M/s JAES Construction, through whom the assessee claims to have carried out work in progress at its Taloja factory site to the extent of Rs. 40,69,500/-, it was observed that the party has confirmed the total work to be completed to the extent of Rs. 45,40,490/-. Accordingly, the assessee was asked to show cause as to why the balance amount of Rs. 4,70,961/- be not considered as an unexplained investment. In the absence of any satisfactory response from the assessee, the AO vide order passed under section 143(3) of the Act treated the aforesaid amount of Rs. 4,70,961/- as unexplained investment under section 69 of the Act. 9. Further, during the assessment proceedings, it was observed that the assessee has claimed Rs. ....
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....e assessee was asked to furnish the complete details in respect of the foreign travel expenses debited during the year. From the perusal of details furnished by the assessee, it was observed that assessee's wife also accompanied the Managing Director of the assessee. Accordingly, the AO disallowed 50% of Rs. 2,63,692/-, i.e. Rs. 1,31,846/-, in respect of the expenditure pertaining to the Managing Director. Further, the AO disallowed the expenses of Rs. 26,208/- for the wife of the Managing Director and the expenditure of Rs. 79,233/- for which no bills/vouchers were produced. Accordingly, the AO made a total disallowance of Rs. 2,37,287/-. In further appeal, the learned CIT(A) dismissed the ground raised by the assessee on this issue. It is an admitted position that in the quantum appeal before the Tribunal, the assessee did not press its ground challenging the aforesaid addition. During the hearing, no material was brought on record to controvert the findings of the AO that the expenditure incurred on foreign tours of the family members is wholly and exclusively for the purpose of the business of the assessee. Accordingly, we find no infirmity in the findings of the learned CIT(A)....