Case Number: ITA 5059/DEL/2019
Appellant: A.R. Chadha & Co. India Pvt. Ltd., New Delhi
Respondent: DCIT Circle-1(1), New Delhi
Assessment Year: 2010-11
Result: Final Tribunal Order
Case Filed On: 2019-05-31
Date of Order: 2022-06-07
Pronounced On: 2022-06-07
The appeal was filed by A.R. Chadha & Co. India Pvt. Ltd. against the order of the Commissioner of Income Tax (Appeals)-1, New Delhi, dated 18.04.2019, for the assessment year 2010-11. The primary issue in this appeal was the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, related to the disallowance of advertisement expenses amounting to Rs. 10,87,618.
The assessee, A.R. Chadha & Co. India Pvt. Ltd., is engaged in the business of dealership for products of JCB India Ltd., including sales, services, and spares, as well as share trading. The assessee filed its return of income electronically on 27.09.2010, declaring a total income of Rs. 12,42,24,920. The case was selected for scrutiny, and the assessment was framed under Section 143(3) of the Income Tax Act, 1961, on 31.01.2013, determining the total income at Rs. 14,67,58,880, including various additions and the disallowance of advertisement expenses amounting to Rs. 10,87,618. Subsequently, the Assessing Officer (AO) levied a penalty of Rs. 3,58,914 under Section 271(1)(c) of the Income Tax Act, 1961, through an order dated 27.02.2018.
The appellant’s counsel argued that the assessee had furnished full particulars before the AO regarding the claimed expenditure and had not concealed any particulars of income. It was further contended that the AO had not recorded any satisfaction regarding the disallowance of advertisement expenses in the penalty order. Additionally, the notice under Section 274 r.w.s 271(1)(c) of the Income Tax Act did not specify whether the penalty was being imposed for concealment of income or for furnishing inaccurate particulars of income.
The appellant’s counsel relied on the Supreme Court’s decision in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC), arguing that mere disallowance of expenses would not attract penalty under Section 271(1)(c) of the Income Tax Act.
The respondent, represented by the Senior Departmental Representative (DR), supported the orders of the lower authorities and argued that the penalty was rightly imposed by the AO.
The Tribunal, comprising Shri Anil Chaturvedi, Accountant Member, and Shri N.K. Choudhary, Judicial Member, examined the submissions and material on record. The Tribunal observed that the AO had not recorded any specific finding in the assessment order regarding whether it was a case of concealment of income or furnishing inaccurate particulars of income. Additionally, the notice under Section 274 r.w.s 271(1)(c) of the Income Tax Act did not specify the ground for imposing the penalty.
The Tribunal referred to the Delhi High Court’s decision in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. (2021) 432 ITR 84 (Del), where it was held that a penalty under Section 271(1)(c) was not leviable when the notice issued by the AO did not specify whether the proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. The Tribunal also cited the decisions of the Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Kar) and CIT vs. SSA’s Emerald Meadows (2016) 73 Taxman.com 241 (Kar), which were affirmed by the Supreme Court.
Considering the totality of the facts and relying on the decision in the case of Sahara India Life Insurance Co. Ltd., the Tribunal concluded that the AO was not justified in levying the penalty under Section 271(1)(c) of the Income Tax Act. The Tribunal set aside the penalty levied by the AO, and the appeal of the assessee was allowed.
The order was pronounced in the open court on the date of hearing, i.e., 07.06.2022, by Shri Anil Chaturvedi, Accountant Member, and Shri N.K. Choudhary, Judicial Member.
A.R. Chadha & Co. India Pvt. Ltd. vs. DCIT: Penalty Dispute Over Advertisement Expenses
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