DCIT- CIRCLE- 1, THANE V. DARSHAN ENTERPRISES , THANE

MA 471/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5002 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-10-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 09-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH D. CHOUGHULE
• Keywords: Revenue expenditure; Set aside
• Section: 271(1)(c); 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI AMARJIT SINGH, AM MA. No. 471/Mum/2023 (Arising out of ITA. No.463/Mum/2019 (निर्धारण वर्ा / Assessment Year: 2010-11) DCIT, Circle-1, Thane Room No.22, B- Wing 6 th Floor, Ashar IT Park, Wagle Industrial Estate, Thane (W)- 400604. बिधम/ Vs. M/s. Darshan Enterprises 2 nd Floor, Rosa Vista, Ghodbunder Road, Opp Suraj Water Park, Thane (West)-400615. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AADFD8612N (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 27/10/2023 घोषणा की तारीख /Date of Pronouncement: 29/11/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an MA preferred by the revenue against the order of this Tribunal dated 13.01.2023 in ITA. No.463/Mum/2019 for AY 2010-11 wherein according to the revenue, the Tribunal has not adjudicated ground no. 5 of the department’s appeal which reads as under: - “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied on the addition of Rs.5,00,000/- and Rs.6,000/- made on account of business promotions expenses and donations respectively, which are confirmed also, without appreciating the assessee had failed to establish the genuineness of these expenses by submitting documentary evidence in support thereof and thus rendering itself for penalty.” 2. From a perusal of the impugned order of the Tribunal dated 13.01.2023 in ITA. No.463/Mum/2019, we note that it was a penalty Assessee by: Ms. Shivani Shah Revenue by: Shri Prakash D. Choughule (Sr. AR) MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 2 appeal preferred by revenue against the order of the Ld. CIT(A) dated 05.11.2018 for AY. 2010-11 wherein the Tribunal while adjudicating the grounds of appeal had adjudicated ground no. 1 to 4 of revenue appeal and did not adjudicate ground no. 5 (supra), therefore, the same need to be adjudicated, since there was omission on our part in not adjudicating the same. Therefore, we are inclined to proceed to adjudicate ground no. 5 (supra) as under. 3. The relevant facts as noted by AO while imposing penalty on the quantum addition of Rs. 5 Lakhs reads as under: - “9. In the course of assessment proceedings, the AO disallowed the expenses paid to Oxygen Events of Rs.5,00,000/- on account of business promotion since the assessee failed to prove that the expenses were incurred exclusively for the purpose of its business activities. Even during the penalty proceedings, no such details could be furnished by the assessee. Therefore, the expenses of Rs.5,00,000/- is treated as revenue expenditure. The assessee has filed inaccurate particulars of income which was established by the AO in the assessment order and was the only reason why penal proceedings were initiated u/s 271(1)(c). Had the case not been selected for scrutiny, the income to this extent would have gone unnoticed. Thus, the assessee has filed inaccurate particulars of its income.” 4. Aggrieved by the aforesaid action of the AO dated 30.09.2013, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same, even after taking note that in the quantum appeal, he has confirmed the addition vide order dated 05.11.2018. The Ld CIT(A) noted that the assessee had spent the amount of Rs.5 MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 3 Lakhs for business promotion and merely because assessee did not file the name and address of the persons would not make the assessee liable for penal action. And therefore, he deleted the penalty in respect of quantum addition of Rs.5 Lakhs. Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is before us. 5. We have heard both the parties and perused the records. We note that the AO while framing the assessment order dated 28.03.2013 has noted that assessee had claimed expenses to the tune of Rs.5,61,323/- under the head “Business Promotion”. And therefore, he called for details of the expenses for the purpose of verification of the expenses. Pursuant to the same, assessee filed details of expenses and AO noted that the assessee had incurred expenses of Rs.5 Lakh (i.e, payment made of Rs.5 Lakhs to M/s. Oxygen Events claimed as expense) on account of function conducted by it for brokers/clients at Golden Valley Resort, Thane on 07.02.2010; and contented that the ibid expense was incurred to organize the aforesaid function with a view to promote the business of the assessee firm; and claimed it as revenue expenditure. The AO asked the assessee to furnish the list of the persons who attended the function with names & addresses of all such persons, for verification (as to whether it has been incurred by assessee exclusively for the purpose of its business activities or otherwise). According to AO, the assessee failed to furnish such details. And therefore, he was of the opinion that Rs.5 Lakhs claimed to have been paid to the M/s. Oxygen Events cannot considered as revenue expenditure and therefore disallowed Rs. 5 Lakhs by passing the assessment order dated 28.03.2013, wherein AO initiated penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 4 “the Act”) on account of “concealing the particulars of income and furnishing inaccurate particulars of such income”. And thereafter, the AO had levied impugned penalty by order dated 30.09.2013 and levied penalty by taking note that the assessee had claimed as “business promotion expenses” of Rs.5 Lakhs to M/s. Oxygen Events but could not prove that the expenses were incurred exclusively for the purpose of business activity; and since assessee failed to produce details of the expenses, it was disallowed and which led to the same (Rs.5 Lakhs) be added back to the total income of the assessee. And further noted that even during the penalty proceedings, assessee could not furnish any details of the expenses. Therefore, he was of the opinion that the assessee had filed “inaccurate particulars of income” and levied penalty on it. On appeal, the Ld. CIT(A) had deleted the addition by taking note that though he had confirmed the quantum addition of Rs.5 Lakhs, but penalty need not be levied merely because the assessee failed to furnish the names & address of the persons who attended the function, and according to him, non filing of such details, cannot be reason for levying penalty against the assessee and deleted the penalty. 6. We note from the discussion (supra) that assessee claimed expenditure of Rs 5 Lakhs paid to to M/s. Oxygen Events for organizing an event on 07.02.2010 for brokers/customers meet at Golden Valley Resort, Thane; the AO disallowed the expense of Rs.5 Lakhs citing non-verification on account of assessee’s failure to furnish the list of the invitees along with their address. And the Ld. CIT(A) also confirmed the action. Thereafter, the AO levied penalty for the fault of “furnishing inaccurate particulars of its income” and MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 5 again alleged the omission on the part of assessee in non-filing details of the persons who attended the function. In this regard, assessee pleaded for non imposition of penalty, on the ground that the expense/payment of Rs.5 Lakhs to M/s. Oxygen Events [for organizing an event for brokers/customers meet on 07.02.2010 at Golden Valley Resort, Thane], has not been found to be incorrect. And the event was organized for promoting the business interest of assessee. And merely because assessee could not give the details of the names & address of its clients/brokers, levy of penalty is not warranted. And the Ld. CIT(A) deleted the penalty. According to him, merely because the assessee failed to give the names & address of the persons who attended the event organized by the assessee on 07.02.2010 at Golden Valley Resort, Thane, when the payment is undisputed, cannot be the ground to levy penalty. In the facts and circumstances discussed, the impugned action of Ld CIT(A) cannot be faulted. Moreover, we are unable to uphold the action of the AO to have levied penalty for “furnishing inaccurate particulars of income” because AO has not been able to show that in the facts of the case, the assessee had filed “inaccurate particulars of income”. It is matter of fact that assessee had made payment of Rs.5 Lakhs to M/s Oxygen Event and has given the details of the event organized by them. Merely because the list of invitees & their address could not be furnished cannot ground to allege that assessee has furnished “inaccurate particulars of income”. For that, we rely on the decision of the Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) wherein the Hon’ble Supreme Court has observed (relevant portion only) as under: - MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 6 “However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :— "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 7 item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. 11. In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu[2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed: "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 8 dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. 12. The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the revenue has no merits and is dismissed.” 7. In the light of the aforesaid decision of the Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra), we concur that the action of the Ld. CIT(A) to delete the penalty and dismiss this ground of appeal of revenue. 8. Coming to the penalty levied on account of addition made of Rs.6,000/-, we note that the AO had made addition since the assessee failed to support the expenditure/donation with evidence, so he added Rs.6,000/- which action of AO was not contested by assessee before the Ld. CIT(A). Therefore, the AO levied penalty for the quantum addition made of Rs.6,000/- which action of AO was assailed before Ld. CIT(A) who deleted the same for considering the smallness of the amount. Now the revenue is before us. 9. In this regard, we note that assessee claimed expenditure/donation of Rs.6000/- and AO disallowed the same for failure to produce evidence during assessment proceedings. The assessee did not contest the action of AO disallowing Rs.6000/- before the First Appellate Authority. Thereafter, the AO levied penalty for the MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 9 disallowance of Rs.6,000/-. And the Ld. CIT(A) has deleted the penalty for the smallness of the amount. The AO has levied the penalty for “furnishing of inaccurate particulars of its income”. The AO has stated that the assessee had filed inaccurate particulars of income, but AO failed to show what was the inaccurate particulars of income. It is true that assessee made a claim of expense of Rs.6000/- which according to assessee, it incurred for giving donation and AO disallowed such expense, since assessee failed to prove the expenses. However, the action of AO to have levied penalty on the fault of “furnishing of inaccurate particulars” cannot be countenanced, since AO have not shown what was the inaccurate particulars of income assessee has shown in its return. Therefore, the penalty has been rightly deleted by Ld. CIT(A), so the action of the Ld. CIT(A) is upheld. In the result both grounds of Revenue are dismissed. 10. In the result, Miscellaneous application filed by the revenue is disposed off as aforesatated. Order pronounced in the open court on this 29/11/2023. Sd/- Sd/- (AMARJIT SINGH) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुुंबई Mumbai; दिनाुंक Dated: 29/11/2023. Vijay Pal Singh, (Sr. PS) MA. No. 471/Mum/2023 A.Y. 2010-11 M/s. Darshan Enterprises 10 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुुंबई / ITAT, Mumbai 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.