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M/s. Shabro International Versus DCIT 23 (3) , Pratyakshkar Bhawan, Mumbai

2016 (4) TMI 116 - ITAT MUMBAI

Penalty u/s 271(1)(C) - disallowance of expenses - Held that:- After hearing counsels from both the sides and considering the nature of expenses disallowed by the AO which substantially allowed in the quantum appeal by the Tribunal. We are of the view that these were bonafide claim of the assessee and were incurred or provided by considering the same to be admissible under the law. The salary of the partners was provided under the expert views however wrongly calculated whereas the amount incurr .....

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SUPREME COURT) the Hon’ble Supreme Court has held, where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. - Decided in favour of assessee - I.T.A. No.7698/Mum/2012 - Dated:- 16-2-2016 - SHRI SA .....

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ed by AO Ground No.01 Penalty u/s271(1)(c) in Respect of Disallowances of certain expenses. a. The learned CIT(A) erred in law and on facts; i. In confirming the action of the Ld. AO and levying the penalty u/s 271(1)(c) of ₹ 6,92,330/-. ii. In levying the penalty without appreciating the fact that that all the facts in respect of the claim were disclosed in the return of Income. iii. In levying the penalty without identifying the offence for which the penalty u/s u/s 271(1)(c) was levied. .....

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eration disallowed in the hands of the appellant firm was offered for taxation in the hands of partner while filing the return of income of respective partners. viii. In ignoring the fact that the payment of remuneration for the full year was authorized by the deed of the partnership. ix. In levying the penalty without appreciating the fact that the claim of the appellant for foreign tour expenses and membership and subscription expenses were genuine business expenditures. b) Your appellant pray .....

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assessee was selected under scrutiny and the AO while framing the assessment u/s 143(3) made additions in respect of remuneration to partners at ₹ 1,35,00,000/- , foreign tour expenses of ₹ 2,59,550/- and Club membership and subscription of ₹ 32,460/- vide order dated 27.11.2007 u/s 143(3) at ₹ 3,85,61,999/-. The matter was taken before the CIT(A) who also confirmed the additions as made by the AO however in the appeal before the Tribunal, the assessee was allowed relief .....

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filed its reply to its show cause notice vide letter dated 25.3.2010 by submitting that the remuneration payable to the partners was apportionment of business income of the firm and there would be no change in the total income of the firm and its partners taken together and consequently there is no loss to the revenue, full details of remuneration were filed before the AO. The assessee also submitted that it had neither filed inaccurate particulars nor concealed particulars of income and all the .....

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assessee s case and consequently liable for penalty of ₹ 6,92,330/- being 100% tax sought to be evaded vide order dated 29.03.2010. The ld. CIT(A) dismissed the appeal of the assessee by confirming the penalty of ₹ 6,92,330/- by holding as under:- 1.6 I have carefully considered the submissions of the appellant. The contention that appellant firm had fully and truly disclosed all the facts relating to payment of remuneration of ₹ 1.35 crores cannot be accepted in view of the cl .....

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zed by, and is in accordance with the terms of the partnership deed and relates to any period falling after the date of such partnership deed shall not be deducted insofar as the amount of such payment of all the partners during the previous year exceeds the aggregate amount computed as per sub-clauses (1) and (2). From here it clearly transpires that the deductible part of remuneration to the partners should relate to any period falling after the date of such partnership deed subject to the ful .....

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amp; (2) of Section 40(b)(v) comes to ₹ 1.52 crores whereas the assessee had claimed remuneration for the proportionate part after 20.6.2004 t031.3.2005 at ₹ 1.35 crores. We note that this calculation is not correct. On the contrary, the eligible proportionate remuneration for 285 days (that is from 20.6.2004 to 31.03.2005) will work out to ₹ 1.19 crores. We, therefore, hold that the excess claim of ₹ 16 lakhs (1.35 crores claimed by the assessee minus ₹ 1.19 crores .....

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led to claim the remuneration only for 285 days during the assessment year i.e., subsequent to the supplementary deed of partnership dated 20/06/2006. For the period 1/04/2004 to 19/06/2004, the appellant cannot claim the payment of remuneration which is anterior to the date of supplementary deed of partnership. It is within the knowledge of the appellant that the supplementary partnership deed was executed by all' the partners only on 20/06/2004 before which there is no specific mention as .....

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)(v) and the Circular NO.739 dated 25/03/1996, the Hon'ble ITAT had sustained the disallowance to the extent of ₹ 16,00,000/-. Knowing fully well that the partnership deed has no provision for claim of remuneration for the period 1/04/2004 to 19/06/2004, but still consciously the claim of remuneration payment was made by the appellant in the Return of Income. Hence, this is a clear case of not only concealment of income but also furnishing of inaccurate particulars of income. Hence, th .....

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holly and exclusively for the purpose of business, it has to be construed that the appellant had filed inaccurate particulars as well as concealed the income. As far as the membership and subscription are concerned, the CIT(A) had confirmed the addition made by the Assessing Officer which was not agitated by the appellant before the ITA T. Hence it has to be construed that the appellant had filed inaccurate particulars as well as concealed the income. In view of the above discussion, the action .....

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2004 to 31.03.2005 and disallowance of ₹ 16,00,000/- was sustained by ITAT out of total ₹ 1,35,00,000/- claimed. Ld. AR further submitted that the tribunal even held that claim for 285 days was not properly calculated and it was never held by the Tribunal that the claim was made of 365 days. As such the counsel submitted that no claim was made for 80 days and hence the penalty levied was not sustainable under law as all the material facts were duly disclosed and this was a bonafide c .....

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pect of entire remuneration of ₹ 1,35,00,000/- but levied for different reasons on a different amount of ₹ 16,00,000/- and as has been held in the case of Triveni Engineering & Industries Ltd. In respect of membership subscription, the ld. AR submitted that amount claimed was ₹ 51,635/- and out of which ₹ 19,175/- was allowed resulting into disallowance to the tune of ₹ 32,460/- consisting of personal expenses of partners of ₹ 23,385/- and prepaid expenses .....

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penses and therefore on this account also penalty was not leviable. The appeal was not filed raising this ground in view of the petty amount involved. Regarding foreign tour expenses, the ld. AR submitted that the amount claimed was ₹ 4,24,000/- whereas the claim allowed was ₹ 1,64,451/- resulting into disallowance to the tune of ₹ 2,59,550/- which included the expenses on the credit card, food, local conveyance and stay. The ld. Counsel submitted that the CIT(A) had failed to .....

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the Act. Finally, the ld. AR vehemently relied on the decision of the Reliance Petroproducts (P.) Ltd. 322 ITR 158 (SC) (ii) Larsen & Toubro 366 ITR 502 (Bom.) (supra) in defence of his arguments and prayed that the order of the CIT(A) be annulled and appeal of the assessee be allowed in the interest of the justice. Per contra the ld. DR on the other hand relied on the orders of the authorities below by submitting that the expenses were incurred by the assessee with a view to evade tax and t .....

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lding that the claim of partners remuneration was incorrectly calculated in respect of 285 days whereas the AO and the CIT(A) had observed that the assessee had claim remuneration for 365 days. In respect of foreign tour expenses claim of the assesee was reduced from ₹ 4,24,000/- to ₹ 1,64,451/- and thus sustained ₹ 2,59,550/- and the other items of disallowance was membership and subscription which was claim at ₹ 51,635/- and allowed by the AO at ₹ 19,175/- and thu .....

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he assessee and were incurred or provided by considering the same to be admissible under the law. The salary of the partners was provided under the expert views however wrongly calculated whereas the amount incurred in respect of foreign tour expenses and subscription and membership were fully and exclusively incurred for the business and is supported by bills and vouchers. This can at the most be regarded a case of difference of opinions where out of huge disallowance a small fraction had survi .....

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