EMAK GLASS FIBRE & ACCESSORIES PVT.LTD.,TIRUVALLUR V. ITO, CORPORATE WARD-1(1), CHENNAI

ITA 3290/CHNY/2024

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The case involves M/s. Emak Glass Fibre & Accessories Pvt. Ltd., which appealed against the penalty imposed by the Assessing Officer (AO) for the Assessment Year 2015-16. The penalty was based on two main issues: (i) a disallowance under section 40(a)(ia) for non-deduction of TDS amounting to Rs.10,89,292, and (ii) a disallowance of expenditure amounting to Rs.3,30,250. The Tribunal had previously deleted the TDS disallowance and partially allowed the expenditure disallowance, which led to the current appeal against the penalties imposed. The Tribunal found the penalties to be unwarranted, citing the principle that if the foundation (quantum assessment) is removed, the superstructure (penalty) falls.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312628 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Other Referred Cases: CIT v. P. Rojes [2013] 356 ITR 703 (Madras HC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: N. ARJUN RAJ
• Keywords: TDS

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.3290/Chny/2024 िनधा\u000eरणवष\u000e/Assessment Year: 2015-16 M/s.Emak Glass Fibre & Accessories Pvt. Ltd., SP-95, 12th Street, 11th Lane, Ambattur Indl. Estate S.O. Tiruvallur-600 058. v. The ITO Corporate Ward-2(1), Chennai. [PAN: AAACE 6493 N] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.N. Arjun Raj, Advocate (Virtual) \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms.Gouthami Manivasagam, JCIT सुनवाईक\u001aतारीख/Date of Hearing : 13.03.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 29.04.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 27.08.2024 for the Assessment Year (hereinafter referred to as \"AY”) 2015-16 confirming the ITA No.3290/Chny/2024 (AY 2015-16) M/s.Emak Glass Fibre & Accessories Pvt. Ltd. :: 2 :: penalty levied by the AO u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as \"the Act”). 2. The Ld. Counsel for the assessee submitted that there is a delay of ‘53’ days in filing of this appeal, because, assessee was prevented by reasons beyond his control and prayed for condonation of delay. Having gone through the contents of the application for condonation of delay, we find that there is excusable reason for the delay; and hence, we condone the delay of ‘53’ days and proceed to adjudicate the appeal on merits. 3. At the outset, the Ld.AR of the assessee submitted that the AO had levied penalty on two issues i.e. (i) disallowance made u/s.40(a)(ia) of the Act for non-deduction of TDS amount of Rs.10,89,292/- & (ii) disallowance of expenditure of Rs.3,30,250/-. According to the Ld.AR, the quantum assessment was challenged by the assessee before this Tribunal [in ITA No.52/Chny/2021 for AY 2014-15] wherein the Tribunal passed an order dated 22.09.2022 deleting the disallowance of Rs.10,89,292/- u/s.40(a)(ia) of the Act; and restricted disallowance of expenditure to the extent of 20% of it i.e. Rs.66,000/- out of addition of Rs.3,30,250/-. According to Ld AR, despite knowing about the decision of the Tribunal in the quantum assessment, the Ld.CIT(A) dismissed the appeal of the assessee against levy of penalty by passing a non-reasoned order. Be ITA No.3290/Chny/2024 (AY 2015-16) M/s.Emak Glass Fibre & Accessories Pvt. Ltd. :: 3 :: that as it may, we find that the AO levied the penalty on two issues i.e. (i) disallowance made u/s.40(a)(ia) of the Act for non-deduction of TDS amounting to Rs.10,89,292/- & (ii) disallowance of expenditure of Rs.3,30,250/- and note that this Tribunal has deleted the disallowance of Rs.10,89,292/- made u/s.40(a)(ia) of the Act, therefore, the penalty levied in respect of this issue needs to be deleted on the principle given in legal maxim “sublato Fundmento Credit opus” meaning in case a foundation is removed, the super-structure falls. Coming to other disallowance of expenditure, which Tribunal is noted to have partly allowed the appeal of assessee by restricting the same to only Rs.66,000/- i.e., estimated disallowance of 20% of Rs.3,30,250/-. Thus, only Rs.66,000/- has been confirmed by the Tribunal, while deciding the quantum appeal. In the light of discussion, it is noted that only the estimated disallowance of expenditure has been confirmed by this Tribunal while deciding the quantum appeal. Bearing in mind the fact that the related quantum addition was purely on estimated basis with inherent subjectivity involved, we are of the view that the penalty is not warranted u/s.271(1)(c) of the Act and also rely on the decision of the Hon’ble Madras High Court in the case of CIT v. P. Rojes reported in [2013] 356 ITR 703 (Madras HC) wherein the Hon’ble High Court observed that since the levy of penalty is based on the estimation of income, there can’t be any imposition of penalty based on the estimation of income. Therefore, ITA No.3290/Chny/2024 (AY 2015-16) M/s.Emak Glass Fibre & Accessories Pvt. Ltd. :: 4 :: the penalty levied by the AO vide order dated 16.03.2022 to the tune of Rs.4,38,637/- is directed to be deleted. 4. In the result, appeal filed by the assessee is allowed. Order pronounced on the 29th day of April, 2025, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद /ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 29th April, 2025. TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0018/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF "