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Case Law Details

Case Name : DCIT Vs Shriram Chits Maharashtra Ltd (ITAT Mumbai)
Appeal Number : ITA No. 729/M/2023
Date of Judgement/Order : 31/05/2023
Related Assessment Year : 2014-15
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DCIT Vs Shriram Chits Maharashtra Ltd (ITAT Mumbai)

ITAT Mumbai held that penalty levied for late filing of Profession Tax Return is penal in nature accordingly is not allowable as business expenditure.

Facts- The assessee company is into the business of chit fund. The assessee by running this chit fund business has been earning 5% of the chit fund as its commission claimed as income under the head “Foreman Commission”. AO by following A.Y. 2010-11 to 2013-14 proceeded to hold that the assessee has given understatement of income from foreman commission and computed the same at Rs.30,46,66,310/- against which the assessee has shown corresponding income of Rs.21,00,000/- thus understatement of income of Rs.8,96,22,310/- which the assessee was required to credit to the profit & loss account. AO thereby made addition of Rs.8,96,22,310/- to the total income of the assessee being the foreman commission received during the year under consideration. AO also noticed from the profit & loss account that amount of Rs.11,000/- has been debited on account of penalty on account of late filing of profession tax return. On admission of the assessee that the same has been debited to profit & loss account due to oversight, the AO made addition thereof to the income of the assessee.

The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A) the Revenue has come up before the Tribunal by way of filing present appeal.

Conclusion- Held that the assessee has not filed the profession tax return it was charged with late fee which is penal in nature and cannot be considered as a compensatory in nature. So the disallowance of Rs.11,000/- made by the AO being penal in nature is liable to be sustained but the Ld. CIT(A) has erred in deleting the same. Hence, deletion of disallowance made by the Ld. CIT(A) is hereby set aside and order passed by the AO qua this addition is restored.

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