Case Law Details
M/s. Gujrani & Co. Vs. Income Tax Officer (ITAT Kolkata)
It is observed that the audit expenses of Rs. 5,19,238/- were claimed to be incurred by the assessee- company towards traveling and conveyance of the Articled Clerks, who were C.A. students receiving training from the assessee- firm. It was contended by the assessee during the course of assessment proceedings as well as during the course of penalty proceedings that there being no employer-employee relationship between the assessee- firm and the Articled Clerks, the audit expenses did not fall under the ambit of FBT. Although this claim of the assessee was not accepted by the Assessing Officer on the ground that it was specifically submitted by the assessee earlier that the audit expenses were incurred by its Audit staff and Audit Clerks without any reference to the Articled Clerks undergoing training with it, it is observed that nothing has been brought on record by the Assessing Officer to establish that the claim of the assessee was wrong and the audit expenses in question were incurred on the Audit staff, which did not include Articled Clerks undergoing training with the assessee- firm as per the stipulation of the ICAI. No doubt, the assessee- firm also failed to bring anything on record to support and substantiate its explanation but such failure, in our opinion, can justify the addition made by the Assessing Officer to the value of Fringe Benefit but not the imposition of penalty under section 271(1)(d), especially when the audit expenses were separately debited by the assessee- firm in its Profit & Loss Account and all the relevant details of the same were fully and truly furnished by the assessee during the course of assessment proceedings before the Assessing Officer. Keeping in view all these facts and circumstances of the case, we are of the view that it is not a case where the assessee can be said to have furnished inaccurate particulars of Fringe Benefits to justify the imposition of penalty under section 271(1)(d). We, therefore, cancel the said penalty and allow this appeal of the assessee.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-21, Kolkata dated 16.03.2016, whereby he confirmed the penalty of Rs. 35,298/- imposed by the Assessing Officer under section 271(1)(d) of the Income Tax Act, 1961.
2. The assessee in the present case is a partnership firm of practicing Chartered Accountants. The return of income for the year under consideration was filed by it on 28.09.2009 declaring total income of Rs. 6,35,470/-. In the Profit & Loss Account filed along with the said return, a sum of Rs. 5,19,238/- was debited by the assessee on account of audit expenses. On verification of the said expenses, it was found by the Assessing Officer that the said expenses were incurred by the assessee on account of traveling and conveyance of its Audit Staff and Audit Clerks. According to the Assessing Officer, the said expenses were liable to be taken into account while calculating the value of Fringe Benefit and since it was not done by the assessee, he required the assessee to offer its explanation in the matter. In reply, it was submitted by the assessee that the audit expenses were incurred for Articled Clerks, who were C.A. students receiving training and since there was no employer-employee relationship between the assessee and the said Articled Clerks, the audit expenses did not fall under the ambit of FBT. This explanation offered by the assessee was not found acceptable by the Assessing Officer keeping in view that it was specifically submitted by the assessee during the course of assessment proceedings that the audit expenses were incurred by its Audit Staff and Audit Clerks while conducting the Audit assignments at client’s office or work place. He, therefore, included the audit expenses of Rs. 5,19,238/- while calculating the value of Fringe Benefit and also initiated penalty proceeding under section 271(1)(d). In reply to the show-cause notice issued by the Assessing Officer during the course of penalty proceedings, it was submitted by the assessee that there was no attempt made by it to furnish inaccurate particulars of Fringe Benefits, inasmuch as the expenses incurred on audit were properly and clearly shown in the Profit & Loss Account. This explanation of the assessee was not found acceptable by the Assessing Officer and he proceeded to impose penalty of Rs. 35,298/- under section 271(1)(d) on account of FBT sought to be evaded by the assessee.
3.. The penalty imposed by the Assessing Officer under section 271(1)(d) was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), the following submission was filed by the assessee in writing in support of its case on the issue:-
“For that the Ld. ITO ignored the fact that concerned audit expenses which were fully disclosed in the profit & loss account without furnishing of inaccurate particulars, in imposing penalty u/s.271)1)(d). Thus levying penalty u/s. 271(1)(d) on Audit Expenses on the grounds of furnishing of inaccurate particulars and concealment of FBT is against the spirit of law & unjustified.
For that the matter in the Ld. I.T.O’s order was one pertaining to point of law where there is difference of opinion, but the same cannot be fit for application of penalty.
It may be noted that penal provisions of 271(1)(d) is applicable where the assessee “has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits”. In this case, no such furnishing of inaccurate particulars or concealment of particulars of fringe benefit was made as the concerned expenses were debited and properly shown in Profit & Loss Account.
In the instant case your good self will appreciate from the perusal of the above fact that the assessee did not have any intention to conceal any fact or furnish any inaccurate particular. In this regard reliance may be placed on the decision of Hon’ble Supreme Court in the case of K. C. Builders and Anr. Vs. ACIT (2004) 135 Taxman 461, wherein apex court has held as under :-
“The word ‘concealment.’ as used in section271(1)(c) inherently carried with the element of mens rea, therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, it cannot be itself take out the case from the purview of ‘furnishing inaccurate particulars, more omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of accurate particulars of income unless ‘and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax there on, in order that a penalty under section 271(1)(iii) may be imposed, if has to be proved that the assessee consciously made the concealment or furnished inaccurate particulars of his income.
Further the Income Tax Appellate Tribunal Delhi Bench ‘C’, New Delhi in the case of Hindustan Coca-Cola Marketing Company Private Ltd, Vs. Dy. Commissioner of Income Tax, Circle-12(1), New Delhi held that, “In view of the above facts, provisions of law and the above decision of apex court, we respectfully submit that captioned proceedings u1s.271(1)(d) of the Act be dropped as the addition made by Ld AO was consequent to the suo moto acceptance of the assessee that the above said mistake was a casual mistake made while calculating/he value for the purpose of FBT and was not due to the detection of any concealment of facts or the inaccurate particulars by the Ld AO. “
Reliance is also placed in the judgment passed by the Income Tax Appellate Tribunal Delhi Bench ‘A’, New Delhi in the case of Ahaar Consumer Products Pvt. Ltd. Vs. Income Tax Officer, Ward-l(2), New Delhi wherein it was held that, “We have considered rival contentions and have gone through the entire material available on record In case of concealment penalty, though the establishment of wilful concealment is not necessary nevertheless Hon’ble Courts have held that the explanation furnished by the assessee is to be judged on the test of bona fides and substantiation. Looking from these parameters, the conduct of the assessee does not deserve for concealment penalty inasmuch as all the details about expenditure liable for FBT benefit were incorporated in the return of the assessee along with the statement of accounts. It has not been disputed that the assessee paid advance FBT tax and it has not been claimed as refund of such tax. In the entirety of facts and circumstances the default becomes technical in nature and not the one intended to derive any undue advantage. Since the assessee has been able to substantiate its stand about bona fide omission, we see no justification for levy of the penalty which is deleted”.
In the light of the aforesaid judgments the appellant begs to state that there is no furnishing of inaccurate particulars or concealing FBT in question and the appellant himself has accepted the levy of FBT on Audit Expenses by the Ld. ITO to avoid any further litigation considering the fact that on the point of law, there could be two different opinions. The appellant has shown its bona fide on the count that, appellant aid the tax levied and did not carry out the issue in further litigation.
Under facts and circumstances as stated above, the penalty levied by the Ld. AO is unjustified.
4. The above submission filed by the assessee was not found acceptable by the ld. CIT(Appeals) and he proceeded to confirm the penalty imposed by the Assessing Officer under section 271(1)(d) for the following reasons given in paragraph no. 5 of his impugned order:-
“5. I have duly considered the submission of the assessee in the light of the facts of the case and the judicial pronouncements relied upon. The assessee had debited expenses of Rs. 5,19,238/- as audit expenses in the return. However, the AO found the same as fringe benefit to the employees after examination of accounts and the assessee had not disputed AO’s decision. The issue in hands is to decide whether the assessee had any intention to conceal the facts or furnish inaccurate particulars. The assessee incurred the expenses for conveyance, food, remuneration etc. of its auditing article clerks and staff but debited the same against ‘audit expenses’. So the assessee had indeed furnished inaccurate particulars of accounts in its return. The case laws referred by the assessee do not come in help of the assessee as those are distinguishable on facts as mentioned by the AO in the penalty order. This is not a case where the AO disallowed a portion of the fringe benefit expenses and initiated penalty. In this case, assessee had concealed the facts by claiming fringe benefit to the employees as audit expenses. So the AO was correct in his decision in imposing penalty. In view of such, penalty levied by the AO is upheld”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the audit expenses of Rs. 5,19,238/- were claimed to be incurred by the assessee- company towards travel ling and conveyance of the Articled Clerks, who were C.A. students receiving training from the assessee- firm. It was contended by the assessee during the course of assessment proceedings as well as during the course of penalty proceedings that there being no employer-employee relationship between the assessee- firm and the Articled Clerks, the audit expenses did not fall under the ambit of FBT. Although this claim of the assessee was not accepted by the Assessing Officer on the ground that it was specifically submitted by the assessee earlier that the audit expenses were incurred by its Audit staff and Audit Clerks without any reference to the Articled Clerks undergoing training with it, it is observed that nothing has been brought on record by the Assessing Officer to establish that the claim of the assessee was wrong and the audit expenses in question were incurred on the Audit staff, which did not include Articled Clerks undergoing training with the assessee- firm as per the stipulation of the ICAI. No doubt, the assessee- firm also failed to bring anything on record to support and substantiate its explanation but such failure, in our opinion, can justify the addition made by the Assessing Officer to the value of Fringe Benefit but not the imposition of penalty under section 271(1)(d), especially when the audit expenses were separately debited by the assessee- firm in its Profit & Loss Account and all the relevant details of the same were fully and truly furnished by the assessee during the course of assessment proceedings before the Assessing Officer. Keeping in view all these facts and circumstances of the case, we are of the view that it is not a case where the assessee can be said to have furnished inaccurate particulars of Fringe Benefits to justify the imposition of penalty under section 271(1)(d). We, therefore, cancel the said penalty and allow this appeal of the assessee.
6. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 17th day of January, 2018.
