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2016 (8) TMI 1493 - ITAT MUMBAIDisallowance genuine business expenditure in the form of director’s salary - allowability of salary paid to the Director - HELD THAT:- Since we have already concluded that the expenditure incurred by way of salary payments is allowable expenditure u/s 37(1) of the Act, we do not find any necessity to adjudicate the said additional Ground. Conclude by holding that the material and evidence on record clearly suggests that services were rendered by Shri Faraz G. Joshi as Director of the assessee-company and that the salary paid to him cannot be disallowed. Therefore, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition. Thus, the assessee succeeds on this aspect. Assessment u/s 153A - HELD THAT:- A perusal of the assessment order as well as the order of CIT(A) reveals that the pleas of assessee have not been appreciated in its proper perspective. Notably, CIT(A) in para 4.3 of his order has reproduced the submission of the assessee which was to the effect that such action of Assessing Officer was untenable in the impugned proceedings carried out u/s 143(3) r.w.s. 153A of the Act. The assessee has supported the said plea on the strength of an order passed by the Commissioner u/s 263 of the Act, which was required to be given effect to by the Assessing Officer by amending the original assessment framed u/s 143(3) of the Act. We find that the aforesaid plea of assessee has been completely disregarded and action of the Assessing Officer has been upheld. After considering the factual matrix brought out by the assessee, we find that the impugned action of Assessing Officer is unsustainable in the eyes of law and is hereby set-aside. Thus, assessee succeeds in this Ground. Mis-declaration of PFAD as Acid Oil which has resulted in inflation of purchases - HELD THAT:- The relevant discussion in the order of Assessing Officer as well as the CIT(A) clearly shows that the only basis for the impugned addition is the findings of DRI. There is no independent finding of the Assessing Officer on the basis of any material to say that assessee has inflated its purchases by declaring the import of PFAD as that of Acid Oil. In fact, the order of CESTAT dated 4.12.2014 (supra), whose copy has been placed on record, upholds the contention of assessee that it has imported Acid Oil and not PFAD. Quite clearly, since the basis on which the addition made by the Assessing Officer itself does not remain, the addition is directed to be deleted. Therefore, on this aspect also assessee succeeds. Levy of penalty u/s 271(1)(c) - HELD THAT:- Levy of penalty is unjustified. It would also not be out of place to mention here that once on the same issue the Assessing Officer did not initiate penalty at the time of making the disallowance in the course of original assessment proceedings u/s 143(3) of the Act, then without there being any material found in the course of search, repetition of the same disallowance in the proceedings u/s 143(3) r.w.s. 153A of the Act would not justify levy of penalty u/s 271(1)(c) - Thus, on this aspect also we find no reason to uphold the penalty levied u/s 271(1)(c) - we set-aside the order of CIT(A) and direct the AO to delete the penalty imposed u/s 271(1)(c) of the Act. Accordingly, appeal of the assessee is allowed.
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