Penalty u/s 271 on disallowance u/s 40(a)(ia)

Brief- Penalty under section 271(1)(c)- Concealment- Dis allowance of expenses due to delay in payment of TDS- The dis allowance of expenditure does not amount to concealment of income or furnishing of inaccurate particulars of income.

Citation :

2010) 34 (II) ITCL 552 (Mum `B’-Trib)

ACIT Vs. Bhoruka Logistics (P) Ltd.

Court : ITAT Mumbai

This is an appeal filed by the revenue directed against the order of the Commissioner (Appeals)- VI, Mumbai dated 12-05-2009 for the assessment year 2005- 09 on the following grounds :

“On the facts and in the circumstances of the case, the Ld. Commissioner (Appeals) has erred in cancelling the penalty levied depending on the decision of the Honorable Apex court in the case of Dilip N. Shroff Vs. JCIT (2007) 16 (I) ITCL 246 (SC) : (2007) 291 ITR 519 (SC) ignoring the decision of the Honorable Apex court in the case of UOI Vs. Dharmendra Textile Processors and others (2008) 306 ITR 277 (SC).”

2. None appeared on behalf of the assessee despite visual of notice. A letter dated 7th May, 2010 was filed by the Chartered Accountant firm requesting for adjournment. As no power of attorney has been filed, no cognizance is taken of this letter. As nobody has filed a power of attorney, and as none appeared on behalf of the assessee, we dispose of the case exparte, qua the assessee, on merits, after hearing the learned DR.

3. Facts in brief :

The assessee is a company and is engaged in the business of transporter and public carrier. During the course of assessment proceedings, the assessing officer made a dis allowance under section 40(a)(ia) of the Act by observing that the assessee had deducted tax at source but there was some delay in payment of TDS in the Govt. Treasury. The assessing officer asked the assessee to file details of party-wise freight rate, with corresponding details of TDS deducted and the date on which the amount was credited in the Govt. Treasury. The assessee admitted delay and requested the assessing officer to disallow the amount under section 40(a)(ia) of the Act. He requested that the amount in question should be allowed as an expenditure in the assessment year 2006- 07, as the payment of TDS was made in that year. The assessing officer disallowed this amount of Rs. 56,38,686/- under section 40(a)(ia) in this year and also levied a penalty under section 271(1)(c) by observing that the assessee had made a mention about the delay in TDS payment in the audit report, while at the same time, he did not disallow the amount in the computation of income filed by it. Thus he concluded that the assessee had furnished inaccurate particulars of income. He levied a penalty under section 271(1)(c) of the Act. Aggrieved, the assessee carried the matter in appeal.

4. The first appellate authority agreed with the submissions of the assessee that the dis allowance of expenditure does not amount to concealment of income or furnishing of inaccurate particulars of income. He held that the assessee had made full disclosure. He deleted the penalty. Aggrieved, the revenue is in appeal before us.

5. We have heard Mr. M. Jagdish and Mr. S.S. Rana, the learned representatives appeared on behalf of the revenue.

6. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below, we hold s follows.

7. This is a case where the dispute arose against the dis allowance of expenditure in view section 40(a)(ia) of the Act. The assessee had in fact paid TDS and it is not in dispute that the expenditure should be allowed in the subsequent year in which the TDS has been paid to the Govt. Treasury. The first appellate authority, in our considered opinion, has rightly relied upon the judgment of the Honorable Punjab & Haryana High Court in the case of CIT Vs. Ajain Singh & Co. (2002) 253 ITR 630, wherein it is held that mere dis allowance of expenditure will not per se amount to furnishing of inaccurate particulars of income. At para 4 page 3 of his order, the first appellate authority rightly held as follows :

” Once the explanation of the assessee is not considered false and explanation has been given, the penalty can only be levied if the explanation is not bona fide and full details for the computation of income has not been given by the appellant. It may be noted that Rajasthan High Court decision in (2001) 251 ITR 373 has enunciated the principle of bona fide, wherein it has been held that there is presumption that explanation given is bona fide unless proved to be otherwise.”

We uphold this finding of the first appellate authority.

8. In the result, the appeal of the revenue is dismissed.

NF