TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1585
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....nalty 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 advertisement 14,433 8 Disallowances of weighted deduction on expenses not approved by DSIR ....
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....ioner 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 mention the specific ground for levy of penalty i.e concealment or furnishing inaccurate particulars of income. 2.3 The Ld. CIT (A) grossly erred in not appreciating that the grounds were legal and debatable issues and that the Appellant had furnished complete disclosure in the retur....
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....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 enhancement carried out under normal provisions in the order passed by the incumbent without appreciating that the relevant order could not be the basis for justification of penalty initiated by the Assessing Officer. The CIT (A) could not have upheld the penalty on any basis other than the basis on which the penalty has been initiated by the Assessi....
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....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 and the issue is debatable". 6. "On the facts and in the circumstances of the case, learned CIT (A) erred in law and facts in deleting the penalty levied on account of Disallowance of R&D expenses not approved by DSIR in Form 3CL ignoring the fact that the assessee company was fully aware of the Law at the time of claiming deduction u/s. 35(2AB) and also aware about issuance of Form no 3CL by th....
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.... 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 deemed necessary. Relief claimed in appeal It is prayed that the order of CIT(Appeals) be set aside and that of the Assessing officer be restored." 6. The learned AR before us submitted that several of the quantum additions in respect of which the penalties were levied have been deleted by the ITAT vide order dated 16-06-2017 in ITA Nos. 3297 & 3420/AHD/2014 vide order dated 16-06-2017. Therefore, once the quantum additions came t....
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..../- 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 by the learned CIT (A) were deleted by the ITAT with respect to the items as detailed above. Thus, the question of concealment of income or furnishing inaccurate particular of income does not arise and therefore the penalty cannot be sustained. Under the provisions of section 271(1)(c) of the Act, the amount of penalty has been specified which shall not be less than hundred percent of the amount of tax sought to be evaded subject to the maximum limit of 300% of such amount. Under explanation 4 to section 271(1)(c) of the Act, the manner for quantifying the amount ....
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....on. 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 consideration has shown remuneration received from the partnership firms amounting to Rs. 40,12,76,441/- but the assessee claimed the same as not chargeable to tax in its hands under normal computation of income on the reasoning that the remuneration received from the partnership firm has not been claimed as deduction in the hands of the partnership firm. 14.1 The assessee on the same reasoning has also reduced the amount of remuneration from the book profit while working out the MAT liability under the provisions of section 115JB of the Act. However, the AO found that the assessee is not eligible for such deduction while calculating t....
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....me. 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 offered by the assessee was false. Thus, the first situation under explanation 1 to section 271(1)(c) does not survive. It is also an undisputed fact that the assessee offered an explanation and submitted that the amount of remuneration received was based on percentage of profit earned by the firm, hence same is appropriation of profit and equivalent to share of profit from firm. Thus, treating the same as exempted income under section 10 of the Act it reduced the remuneration receipt from book profit under the provision of subsection 2 of section 115JB of the Act. We note that there was no finding of the authorities below qua the fact that the assessee f....
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....n 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 the Revenue in ground Nos. 1, 2, and 4 to 8 of its appeal has been dealt above vide paragraph number 8 to 9 of this order where we have decided the issue against the Revenue. Hence grounds of the Revenue's appeal are hereby dismissed. 22. The issue raised by the Revenue in ground Nos. 3, 9, 11, and 12 of its appeal have been dealt above vide paragraph number 10 to 10.1 of this order where we have decided the issue in favour of the Revenue for statistical purposes. Hence, the grounds of appeal of Revenue's appeal are allowed for statistical purposes. 23. The issue raised by the Revenue in ground no. 10 of its appeal is that the learned CIT (A) erred in delet....
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.... 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 below to the extent favourable to them. 30. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have been elaborated in the previous paragraph. Therefore, for the sake of brevity, we are not inclined to repeat the same. 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 additions or disallowances in computation income by the AO are 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 ....