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2018 (10) TMI 487 - AT - Income TaxPenalty u/s 271(1)(c) - furnishing inaccurate particulars of income as well as concealment of income - Provision for doubtful debts - Held that:- In the instant case, the assessee has claimed the deduction which is not eligible as per the provision of section 36(2) of the Act. Thus, we note that the Hon’ble Delhi High Court in the case of Zoom Communication Pvt. Ltd.[2010 (5) TMI 34 - DELHI HIGH COURT] after considering the judgment of Hon’ble Supreme Court in the case of Reliance Petroproduct Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] has decided the issue against the assessee. Penalty confirmed. Disallowance on Foreign Exchange Fluctuation Loss - Held that:- As the quantum addition has been set aside to the AO, we therefore are inclined to set aside the impugned issue of penalty to the file of AO for fresh adjudication in accordance with the provision of the law. Thus the ground of appeal is allowed for statistical purposes. Claim of deduction for the penalty expenses claimed in the income tax return - Held that:- It is fact on record that the penalties are not allowable for the deduction. But the assessee has claimed the deduction for the same despite the fact that these are not allowable for the deduction. Thus we confirm the penalty in view of the judgment of the Hon’ble Delhi High Court in the case of Zoom Communication Pvt. Ltd (Supra) on account of inaccurate particulars of income furnished in the income tax return. Accordingly we hold that the assessee is liable for penalty under Section 271(1)(c) of the Act. Deemed dividend under Section 2(22)(e) - Held that:- As relying on assessee's own case Both parties have given amounts to each other and these are adjustment entries. Considering the current account and number of transactions, and since the Hon’ble High Court has upheld the finding of the Tribunal in earlier years that these are not loans, which could be brought in the ambit of section 2(22)(e) of the Act for the purpose of treating it as deemed dividend. Thus once the quantum addition has been deleted then in our considered view the question of levying the penalty does not arise. Hence, the ground of appeal of the assessee is allowed. Deduction under Section 80(G) - Held that:- As decided in assessee's own case This expenditure was incurred by the assessee in order to perform its corporate social responsibility. Expenditure was given to Municipal Corporation, Surat and Ahmedabad and Surat Diamond Association. According to the assessee there were heavy rains and request came from Municipal Corporation. In order to fulfill the social responsibility, it has given the amounts. On due consideration of the facts, we are of the view that there cannot be any doubt about the genuineness of the payment. The payment was made to Municipal Corporation towards corporate social responsibility. This is an essential expenditure for keeping relationship smooth and the society at large. This expenditure deserves to be allowed to the assessee. No penalty Transfer pricing addition - Held that:- The assessee has fairly demonstrated that the rate charged by it was at a market rate and its transactions were at arm’s length. No adjustment can be made in the rate of interest charged by the assessee from its AE on providing loans in dollar denomination. We note that the quantum addition on interest of loan has been deleted by the Hon’ble ITAT in the own case of the assessee, the penalty under Section 271(1)(C) will not survive. Penalty imposed on account of the adjustment in respect insurance expenses - Held that:- The addition was confirmed on account of allocation of insurance expanses, which was incurred by the AE of the assessee. Thus, the amount of insurance expense claimed by the assessee represents the reimbursement of the expenses to its AE which were duly disclosed in the income tax return. Therefore, we hold that there was no concealment of income or furnishing inaccurate particulars of income. Prior period income - Held that:- As decided in assessee's own case once the assessee has been offering income of prior period as an entity, then its prior period expenditure cannot be disallowed simply by observing that it is not ascertainable whether this expenditure were incurred for earning a particular receipts offered under the head “prior period income”. According to the Tribunal, if an assessee is offering prior period income, then the expenditure which were incurred under different heads and crystalilised in this year ought to be set off against hat income. We hold that once the quantum addition has been deleted then the penalty under Section 271(1)(C) will not survive. Misc. Expenses return - sufficient details were not furnished - Held that:- Penalty on account of ad hoc disallowances cannot be made. Disallowances of depreciation - addition was made on account of rate applied by the assessee for charging the depreciation on the assets. The assessee has charged depreciation at the higher rate than the rate applied by the AO - Held that:- We note that the Hon’ble Courts in such kind of addition has deleted the penalty levied u/s 271(1)(c) of the Act. We find support and guidance from the judgment of Lala Harbhagwan Das & Memorial & Dr. Prem Hospital (P.) Ltd. Vs. CIT [2014 (1) TMI 1129 - ITAT DELHI] wherein held where higher depreciation was wrongly claimed under bona fide belief in respect of nature of equipment and its professional use, no penalty would be leviable. Disallowances u/s. 14A - Held that:- We note that the Hon’ble Supreme Court in the case of Reliance Petro Products Ltd..[2010 (3) TMI 80 - SUPREME COURT] has held that no penalty will be levied in case the addition is made on account of disallowance made u/s 14A of the Act. Disallowance u/s 40(a)(i) - Held that:- AO failed to bring any material on record to justify the administrative expenses required to be incurred for availing services of Dr.Henk. It is totally in the domain of the businessman and the AO cannot dictate terms how much salary and other expenses are necessary for availing the services. This disallowance made by the AO is not sustainable. The ld.CIT(A) ought to have not confirmed disallowance made by the AO. Since no disparity of the facts have been pointed out by the ld.DR on this issue, we following the order of the Tribunal cited supra for the assessment year 2006-07, delete the impugned additions and allow the grounds of appeals of the assessee. No penalty to survive. Disallowance u/s 10B - Held that:- As addition deleted in assessee's own case we hold that once the quantum addition has been deleted then the penalty under Section 271(1)(c) will not survive. - Revenue appeal dismissed.
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