TMI Blog2014 (11) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty is not sustainable – The AO had not pointed out any discrepancy in the disclosures made by assessee on this count in its books of account - The disallowance has been made primarily u/s 40A(2)(b) on account of reasonableness of expenses - The assessee’s explanation has not been found to be false but only because of difference of opinion held by AO – thus, the penalty levied on the disallowance is not sustainable – Decided in favour of assessee. Payments made to artists – Held that:- Since TDS was made from the payments made to the artists and amount was duly deposited with the department, merely on the ground of non-receipt of any reply from the said artists, for which there could be several reasons, it cannot be inferred that assessee had advanced wrong claim - the onus lies on the assessee to substantiate its claim but for the purposes of levying penalty u/s 271(1)(c) of the I.T. Act, this is not sufficient - where the assessee’s explanation is not malafide and he has not failed to disclose material in that regard, penalty cannot be levied - assessee had given details regarding various artists out of which only eight did not respond and the reason for the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts in regard to various expenses claimed by assessee held that assessee had claimed excess expenditure to the tune of ₹ 43,48,497/- and, therefore, levied a penalty of ₹ 15,98,073/- being 100% of tax sought to be evaded. 4. Ld. CIT(A) dismissed the assessee s appeal, inter-alia, observing that assessee had claimed wrong expenses and had, therefore, furnished inaccurate particulars of income. Ld. CIT(A) relied on various decisions for holding that penalty can be imposed u/s 271(1)(c) even when disallowances are made on estimate basis. He also referred to the decision of ITAT Ahmedabad Bench in the case of Patel Chemical Works vs. ITO, wherein it has been held that penalty is leviable where payments made to sister concerns are not genuine. 4.1 Being aggrieved with the order of ld. CIT(A) the assessee is in appeal before us and has taken following grounds of appeal: 1. The ld. CIT(A) has erred in upholding penalty of ₹ 15,98,078/- imposed under section 271(1)(c). 5. Ld. Counsel for the assessee submitted that no appeal was filed by assessee against the CIT(A) s order dismissing the assessee s appeal in quantum proceedings. Ld. Counsel submitted that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) in the case of Arecha Kamal Ahe, A Marathi Serial the assessee had shown received ₹ 76,40,000/- for 131 episodes. It was noticed by the AO that the assessee had sold the 6 episodes of this serial at ₹ 65,000/- per episode and ₹ 58,000/- per episode for 125 episodes. When confronted the assessee had given no justification for dual rates applied for sale of software and that to the associate concern of the assessee company, M/s Advance Entertainment Ltd. where the shareholders were of associates company. With reference to above observations ld. DR submitted that onus was not on AO but of assessee to substantiate the genuineness of dual rates. Ld. DR, therefore, submitted that penalty has rightly been sustained by ld. CIT(A). 7. We have considered the rival submissions and have perused the record of the case. 7.1 The penalty has been levied apropos five additions noted earlier. The penalty has been levied by AO on the ground that assesee had furnished inaccurate particulars of income to the extent of ₹ 43,48,497/-. Ld. CIT(A) has held that assessee had claimed wrong expenses and, therefore, furnished inaccurate particulars of income. Therefore, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment u/s 40A(2)(b) of the I.T. Act. Ld. CIT(A) had confirmed the disallowance. In the backdrop of these facts, penalty proceedings u/s 271(1)(c) were initiated. On the ground that explanation of the assessee was not bonafide. Tribunal held that in the absence of any particular form of disclosure of the transaction in question, the disclosure of the same in its books of account as done by the assessee was sufficient in law. It was held as under: We therefore hold that in the absence of any provision of particular disclosure of the transaction in question, the disclosure of the same in its books of account as done by the assessee was sufficient in law. There cannot be any charge of furnishing inaccurate particulars as well. This is because, the assessee had furnished all the details and the details admittedly were correct. By applying deeming provisions of law the disallowance has been made by the Assessing Officer. But for these deeming provisions the AO could not have made any disallowance, as admittedly the genuineness as well as the incurring of the expenditure, have not been doubted or disputed by the Assessing Officer .. In the present case the disallowance u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee had sold six episodes of the serial at ₹ 65,000/- per episode and ₹ 58,000/- per episode for 125 episodes. This sale was made to the associate concern of the assessee company, M/s Advance Entertainment Ltd. In the backdrop of these facts, the AO considered the sale of 125 episodes @ 60,000/- per episode instead of ₹ 58,000/- per episode declared by assessee. Admittedly, there was no material on the basis of which this addition was made. Merely on the ground of dual rates being charged by assessee for the same episode the addition was made. No discrepancy had been found in the disclosures made by the assessee. Therefore, the penalty is not sustainable. Further in our opinion, this issue is also fully covered by the decision of Tribunal in the case of Jhawar Properties Pvt. Ltd. In view of the discussion, we delete the penalty apropos this addition. 8.4 The third addition was of ₹ 18,46,338/- in regard to payments made to artists. The AO had issued notices u/s 133(6) to various artists who had no PAN Number. He has pointed out that only two replies were received but in case of eight persons, as detailed hereunder, no replies were received: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee s explanation is not malafide and he has not failed to disclose material in that regard, penalty cannot be levied. Here is a case where assessee had given details regarding various artists out of which only eight did not respond and the reason for the same was the time gap between the payment made to the artists and the enquiries initiated by AO. Moreover, the artists were engaged for short periods. In our opinion the assessee s explanation cannot be branded as malafide. We, therefore, do not find any justification in sustaining the penalty apropos this addition. 8.5 The next disallowance is on account of excess food expenditure of ₹ 1,46,610/-. In this regard the facts are assessee had debited an amount of ₹ 14,66,120/-in the profit and loss account as food expenses. The AO observed in assessment proceedings that a perusal of the details of expenses revealed that these expenses were not fully supported by the supporting vouchers. He, therefore, made a disallowance of ₹ 1,46,610/- being 10% of the total food expenses. 8.5.1 Admittedly, AO had not pointed out even a single voucher in his order which was not verifiable. This by no stretch of reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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