TaxTMI 
TaxTMI 
2022 (8) TMI 1585
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.... 115JB of the Act. The AO also initiated penalty proceeding under section 271(1)(c) of the Act for the addition of income/ disallowance of expense/ exemption/ deduction and TP adjustment with respect to which the particulars of income were concealed or inaccurate particular of income were furnished. 2.1 Thereafter, several of the additions made by the AO/TPO came to be confirmed by the learned CIT (A) in quantum proceedings. Accordingly, the AO levied the penalty under section 271(1)(c) of the Act on the additions confirmed by the learned CIT (A) which are detailed as under: S. No. Nature of addition Amount of quantum addition (in Rs. ) 1 TP upward adjustment on sale of drug Pantoprazole 3,825,237,167 2 Disallowances of reduction of partner remuneration received from book profit 401,276,441 3 TP upward adjustment on loan to AE 78,382,483 4 TP upward adjustment on investment in OFCD 210,842,301 5 TP upward adjustment on corporate guarantee 2,388,000 6 Disallowances of weighted deduction on Trademark and overseas product registration 10,658,244 7 Disallowances of weighted deduction on corporate a....
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....28/AHD/2017 read as under: "The Appellant raises the following grounds, which are mutually exclusive, independent of and without prejudice to one another: 1. On the facts and in the circumstances of the case, the order passed by the learned Commissioner of Income-tax (Appeals) [hereinafter referred to as 'the Ld. CIT(A)] is bad in law and void ab initio and consequently, needs to be quashed. 2. Re: Levy of Penalty u/s 271(l)(c) of Rs. 1.71.85.00.000/-: 2.1 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in upholding the validity of the penalty order passed by the Assessing Officer without appreciating that the Assessing Officer had failed to record proper satisfaction at the time of initiation of penalty and that even after insertion of section 271 (IB), recording of satisfaction is must for initiation of penalty. 2.2 Under the facts and in the circumstances of the case and in law, the Ld. CIT (A) has acted in a grossly erroneous manner by overlooking the infirmity in the penalty show cause notice which was issued in a stereotype manner and hence was bad in law in as much as it did not men....
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....bitrary basis of profit split. 2. The addition made by the AO/TPO and the learned CIT (A) was made on their whims & fancies without bringing on record "any reliable external market data which indicates how such contribution would be evaluated" as prescribed under Rule 10B(1)(d)(ii) of the Income-tax, Rules 1962 which was the fundamental prerequisite and hence penalty on such estimated additions needed to be dropped. 3.5 The learned CIT (A) erred in relying on the decision of the Hon'ble ITAT, Mumbai in the matter of Clestra Life Science (P) ltd v/s ITO (2016) 75 taxmann.com 112 which was distinguishable as facts of the case were different and not applicable to the present case of the Appellant. 4. Re: Levy of penalty for reduction of remuneration received from M/s Sun Pharmaceutical Industries ('SPI') while calculating book profits u/s 115JB of Rs. 40.12.76.441/-: On the facts and in the circumstances of the case and in law, the Ld. CIT (A) grossly erred in confirming the levy of penalty pertaining to reduction of remuneration received from SPI of Rs. 40,12,76,441/- while determining book profits u/s 115JB on the basis of the en....
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.... this regard during assessment proceedings as well as appellate proceedings". 4. "On the facts and in the circumstances of the case, the learned CIT (A) erred in the law and facts in deleting the penalty levied on account of disallowance of weighted deduction on Trade Mark Registration & Overseas Product Registration expenses u/35 (2AB). Order of Hon'ble ITAT, Ahmedabad in ITA. No. 3025 & 3069/Ahd/2010 dated 03.05.2016 in AY 2005-06, has not been decided on account of non-receipt of ITAT order till date. Further, the assessee company was fully aware of Law at the time of claiming excess deduction u/s. 35(2AB)". 5. "On the fads and in the circumstances of the case, the learned CIT (A) erred in the law and facts in deleting the penalty levied on account of disallowance of expenditure on corporate advertising u/s. 35(2AB) ignoring the fact that The expenditure incurred for Corporate advertisement like quarterly results etc. has not direct nexus with the activity of R & D and the assessee was fully aware of the Law at the time of claiming excess deduction u/s. 35(2AB). Mere disclosure in Tax audit Report could not contention of the assessee is not mala fide a....
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.... was a new asset purchased by assessee company and accordingly treated the same as capital expenditure". 11. "On the facts and in the circumstances of the case, the learned CIT (A) erred in the law and facts in deleting the penalty levied addition on account of disallowance of provision for Leave Encashment, ignoring the fact that it is obligatory on the part of the assessee to pay the leave encashment to its employees, the allowability of the expenditure would base on the actual payment and not on making provision. The provision of leave encashment is not an accrued/ascertained liability". 12. "On the facts and in the circumstances of the case, the learned CIT (A) erred in the law and facts in deleting the penalty levied addition on account of Disallowance u/s. 14A While assessing income under normal Income Tax ignoring the fact that the assessee company has earned huge non taxable income as share of profit from partnership firm and for earning such income huge expenses would have been incurred by the assessee company, which also held by the Ld.CIT (A) in quantum appeal". 13. The appellant crave leave to add to, amend or alter the above grounds as may be....
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....hich penalty levied by the AO Amount of quantum addition (in Rs. ) Paragraph No. of ITAT order Assessee 3 TP upward adjustment on sale of drug Pantoprazole 3,825,237,167/- 34 to 94 Department 1 TP upward adjustment on loan to AE 78,382,483/- 20 to 26 Department 2 TP upward adjustment on investment in OFCD 210,842,301/- 6 to 15 Department 4 Disallowances of weighted deduction on Trademark and overseas product registration 10,658,244/- 95 to 97 Department 5 Disallowances of weighted deduction on corporate advertisement 14,433/- 98 to 99 Department 6 Disallowances of weighted deduction on expenses not approved by DSIR 163,725,000/- 100 to 101 Department 7 Addition on account sale to sister concern 27,507,069/- 122 to 124 Department 8 Disallowances of selling and Distribution expenses 621,578,070/- 125 to 126 9. From the above, there remains no ambiguity that the additions on the basis of which the penalty was levied upon the assessee by the AO has ceased to exist. In other words, the quantum additions made by the AO and confirmed....
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....ount of penalty cannot be determined. Consequently, in the interest of justice and fair play, we are setting aside the issue of the penalty to the file of the respective authorities for fresh adjudication after considering the outcome of the quantum additions pending before them. Thus the ground of appeal of the Revenue bearing Nos. 3, 9, 11 and 12 are hereby allowed for statistical purposes. Now we proceed to adjudicate the remaining issue of the assessee's appeal in ITA No 928/Ahd/2017 11. The issue raised by the assessee in ground no. 1 and 2 of its appeal are general in nature and don't require any separate adjudication. Hence the same are dismissed as infructuous. 12. The issue raised by the assessee in ground no. 3 of its appeal has been dealt above in paragraph number 8 to 9 of this order and has been allowed in favour of assessee. 13. The issue raised by the assessee in ground no. 4 of its appeal is that the learned CIT (A) erred in confirming the penalty levied by the AO on account of addition of Rs. 40,12,76,441/- made in book profit u/s 115JB representing the remuneration received from the partnership firms. 14. The assessee in the year under con....
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....ed by the learned CIT(A). At the outset we note that the AO has levied the penalty under explanation 1 to section 271(1)(c) of the Act. As per explanation 1 to section 271(1)(c) of the Act, the addition or disallowance in computation of income by the AO deemed concealment of income subject to condition provided therein. Under the explanation 1 to section 271(1)(c) of the Act, there are 2 situations. In situation (A), if the assessee failed to offer an explanation or offers an explanation which is found to be false with respect to any fact material to the computation of income, then the amount added or disallowed shall be deemed as concealment of income. In situation (B), the assessee offers an explanation but fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides and that all the facts relating such explanation and material to the computation of income have been disclosed by him, then the amount added or disallowed to the total income of the assessee shall be deemed as concealment of income. 19.1 Coming to case on hand, there was no iota of evidence suggesting that the assessee failed to offer an explanation or explanation off....
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....Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961." 19.3 Thus following the above observation of Hon'ble Kolkata High Court, the ITAT in the own case of the assessee for the A.Y. 2011-12 has decided the issue with respect to the exclusion of remuneration received from the partnership firm while calculating the profit under the provisions of section 115JB of the Act in favour of the assessee. 19.4 Thus, in our considered view the provisions of explanation 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed. 20. In the result appeal of the assessee is allowed. Now we proceed to adjudicate the remaining issue of the Revenue's appeal in ITA No. 921/Ahd/2017 21. The issue raised by ....
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....not been doubted and merely because certain expenses have been considered as capital in nature, penalty u/s. 271(1)(c) cannot be imposed. This view gets support from the ratio laid down in the case of Reliance Petroproducts Pvt. Ltd. (supra). Hence the penalty imposed by the Assessing Officer on this account is directed to be deleted and appellant succeeds in respect of Ground No. 10." 27. Being aggrieved by the order of the learned CIT (A) the Revenue is in appeal of the assessee. 28. The learned DR before us contended that the assessee has furnished inaccurate particulars of income by treating the capital expenditure under the head repair and maintenance as revenue in nature. Thus the assessee to this extent has furnished the inaccurate particulars of income. 29. On the other hand, the learned AR before us submitted that the claim made by the assessee was genuine and no infirmity was pointed out therein by the AO. Simply, a claim of the assessee not admitted as revenue in nature cannot give the authority to hold that the assessee has furnished inaccurate particulars of income. Both the learned DR and the AR before us vehemently supported the order of the authorities....