The Asst. Commission... v. M/S. Max India Ltd. ...

T.S. Kapoor, A.M.:— These are four appeals filed by the Revenue, against the separate orders of CIT(A), Jalandhar, all dated 03.10.2013. The only grievance raised by Revenue in these appeals is deletion of penalty by learned CIT(A), which was imposed by Assessing officer under section 271(1)(c) of the Act. These appeals were heard together, therefore, for the sake of convenience a common and consolidated order is being passed.

2. At the outset, the learned AR invited our attention to an order of Amritsar Tribunal in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of assessee itself, placed at paper book page-38 onwards and submitted that the similar penalty on account of disallowance of expenditure under section 14A was deleted by Hon'ble Tribunal in the case of assessee itself for Asst. Year 2007-08 and as regards other issues on which penalty was imposed, the learned CIT(A) has deleted the same by holding that the quantum was deleted by the Hon'ble Amritsar Tribunal in I.T.A. No. 119(Asr)/2011 & in I.T.A. No. 120(Asr)/2011. Therefore, he heavily placed reliance on the order of CIT(A).

3. The learned DR, on the other hand, placed his reliance on the order of Assessing Officer.

4. We have heard the rival parties and have gone though the material placed on record. We find that the assessee was imposed penalty under section 271(1)(c) on account of disallowances of expenditure under section 14A which was common in all the years. In Asst. Year 2002-03 & 2003-04, the Penalty was also imposed on account of disallowance of legal and professional charges, and in Asst. Year 2004-05 and 2005-06 the penalty was alos imposed, on account of disallowance under section 35D. The year-wise break up of disallowances on which penalty was imposed is as detailed below:

Asst. Year 2002-03 2003-04 2004-05 2005-06 Disallowance U/s 14A 4,52,94,905/- 10,00,000/- 5,84,00,000/- 4,48,00,000/- Disallowance of legal & professional expenses. 1,25,27,450/- 15,44,209/- — — Disallowance under section 35D — — 60,022/- 60,024/-

The learned CIT(A) has deleted the penalties except on disallowances under section 35D of the Act., in various Asst. Years by holding as under:

In I.T.A. No. 759(Asr)/2013 for the Asst. Year 2002-03

“5.2 I have considered the observations of the Assessing Officer made in the penalty order as well as the written submissions filed by the assessee company as reproduced above. I have also considered the various judicial pronouncements relied upon by the assessee company as well as other material brought on record. It has also been noticed that the Hon'ble ITAT, Amritsar Bench, Amritsar has deleted the addition of Rs. 1,25,27,450/- made by the Assessing Officer on account of disallowance out of legal and professional expenses and also reduced the addition made on account of disallowance under section 14A of the Income Tax Act, 1961 from Rs. 4,52,94,905/- to Rs. 20,00,000/- vide their order dated 08.03.2013 in quantum appeal filed by the assessee company against order of the learned CIT(A). As the basis for levy of penalty has gone, the penalty on the amount of additions/disallowances of Rs. 1,25,27,450/- and Rs. 4,32,94,905/- (Rs. 4,52,94,905/- minus Rs. 20,00,000/-), which stands deleted in second appeal by the Hon'ble ITAT, will not survive and it, therefore, directed to be deleted. It has further been noticed that the issue with regard to levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 on the amount of disallowance/additions made under section 14A of the Income Tax Act, 1961 is also squarely covered in favour of the assessee company by the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of the assessee company itself. The relevant paras of the order of the Hon'ble Jurisdictional ITAT dated 19.03.2013 are not being reproduced here for the sake of convenience and repetition as these have already been reproduced by the assessee company in its written submissions dated 04.06.2013. Respectfully the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the A.Y. 2007-08 in the case of assessee company itself, I also deleted the penalty on the amount of disallowance under section 14A of the Income Tax Act, 1961 which has been sustained/confirmed in second appeal. In other words, penalty on the balance addition/disallowance of Rs. 20,00,000/- is also deleted.

5.3 In the above stated facts and in the circumstances of the case, it is held that the Assessing Officer is not justified in levying the penalty under section 271(1)(c) of the Income Tax Act, 1961 and is to deleted the entire penalty of Rs. 2,06,42,580/-. Moreover, the ratio of decision of the Hon'ble Apex Court in the case of Reliance Petroproducts Pvt. Limited [(2010) 189 Taxman 332 (SC) is squarely applicable to the facts of the case of the assessee company. In the result, grounds of appeal No. 2,3,4,4.1 & 4.2 are, therefore, allowed.”

In I.T.A. No. 760(Asr)/2013 for the Asst. Year 2003-04

“5.2 I have considered the observations of the Assessing Officer as made in the penalty order as well as the written submissions filed by the assessee company as reproduced above. I have also considered the various judicial pronouncements relied upon by the Assessing Officer as well as by the assessee company and other material brought on record. It has been noticed that the Hon'ble ITAT, Amritsar Bench, Amritsar has deleted the addition of Rs. 15,44,209/- made by the Assessing Officer on account of disallowance out of legal and professional expenses vide their order dated 08.03.2013 in quantum appeal filed by the assessee company against order of the learned CIT(A). As the very basis for levy of penalty on the additions/disallowances deleted by the Hon'ble ITAT has gone, the penalty on the amount of additions/disallowances of Rs. 15,44,209/-, which stands deleted in second appeal by the Hon'ble ITAT, will not survive and is, therefore, directed to be deleted.

5.3 It has further been noticed that the issue with regard to levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 on the amount of disallowance/addition made by the Assessing Officer and confirmed by learned CIT(A) under section 14A of the Income Tax Act, 1961 is also squarely covered in favour of the assessee company by the order of the Hon'ble ITAT, Amritsar Bench Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of the assessee company itself. The relevant paras of the order of the Hon'ble Jurisdictional ITAT dated 19.03.2013 are not being reproduced here for the sake of convenience and repetition as these have already been reproduced by the assessee company in its written submissions dated 04.06.2013. As the facts and circumstances of the case of the assessee company for the Asst. Year 2007-08 are similar to that of the year under consideration, the ratio of the decision of Hon'ble Jurisdictional ITAT dated 19.03.2013 in the case of the assessee company itself is squarely application to the year under consideration. Respectfully following the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(ASr)/2011 for the Asst. year 2007-08 in the case of the assessee company itself, I also delete the penalty on the amount of disallowance under section 14A of the Income Tax Act, 1961 which has been sustained/confirmed in first appeal. In other words, penalty on the addition/disallowance of Rs. 10,00,000/- is also deleted.

5.4 In the above stated facts and in the circumstances of the case, the entire penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 is, therefore, directed to be deleted. In the result, grounds of appeal No. 2,3,4,4.1 & 4.2 are, therefore, allowed.”

In I.T.A. No. 761(Asr)/2013 for the Asst. Year 2004-05

“5.2 I have considered the observations of the Assessing Officer as made in the penalty order as well as the written submissions filed by the assessee company as reproduced above. I have also considered the various judicial pronouncements relied upon by the Assessing Officer as well as by the assessee company and other material brought on record. It has also been noticed that the Hon'ble ITAT, Amritsar Bench, Amritsar has reduced the quantum of addition made by the Assessing Officer on account of disallowance under section 14A of the Income Tax Act, 1961 and further enhanced by the learned CIT(A) from Rs. 5,84,00,000/- to Rs. 8,80,000/- vide their order dated 08.0-3.2013 (supra) in quantum appeal filed by the assessee company against order of the learned CIT(A). As the very basis for levy of penalty on the amount of addition/disallowances of Rs.,5,75,20,000/-(Rs. 5,84,00,000/- minus Rs. 8,80,000/-), which stands deleted in second which stands deleted in second appeal by the Hon'ble ITAT, will not survive and is, therefore, directed to be deleted.

5.3 It has further been noticed that the issue with regard to levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 on the amount of disallowance/addition made under section 14A of the Income Tax Act, 1961 is also squarely covered in favour of the assessee company by the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr) 2011 for the Asst. Year. 2007-08 in the case of the assessee company itself. The relevant paras of the order of the Hon'ble Jurisdictional ITAT dated 19.03.2013 are not being reproduced here for the sake of convenience and repetition as these have already reproduced here for the sake of convenience and repletion as these have already been reproduced by the assessee company in its written submissions dated 04.06.2013. As the facts and circumstances relating to levy of penalty on the amount of addition/disallowance under section 14A of the Income Tax Act, 1961 in the case of the assessee company fort the Asst. Year 2007-08 are similar to that of the year under consideration, the ratio of the decision of Hon'ble Jurisdictional ITAT dated 19.03.2013 in the case of the assessee company itself for the Asst. Year 2007-08 is squarely applicable to the year under consideration. Respectfully following the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of the assessee company itself, I also delete the penalty on the amount of disallowance under section 14A of the Income Tax Act, 1961 which has been sustained/confirmed in second appeal. In other words, penalty on the remaining addition/disallowance of Rs. 8,80,000/- is also deleted.

5.4 The additions of Rs. 60,024/- made by the Assessing Officer on account of disallowance under section 35D of the Income Tax Act, 1961, which represents amount paid to ROC for the purpose of increasing share capital of the assessee company, has not been contested by the assessee company even before the CIT(A). It has been submitted that the assessee company has made the claim inadvertently without any malafide intention. In my opinion, the issue with regard to claim of expenses relating to increase in share capital has already been settled long time back by the Hon'ble Apex Court and the expenses have been held to be capital in nature and as such these expenses are not allowable as revenue expenses. Even after that the assessee company has claimed expenses which are not allowable as per settled position of law. It means that the assessee company has made a false claim will be certainly tantamount to filing of inaccurate particulars of income by the assessee company. Moreover, the issue regarding claim of expenses under reference cannot be said to be disputed one in view of Hon'ble Apex Court's decisions in various cases including relied upon by the Assessing Officer. Therefore, the penalty levied by the Assessing Officer is held to be justified and is confirmed on the addition/disallowance of Rs. 60,024/-.

5.5 In the above stated facts and in the circumstances of the case, the penalty under section 271(1)(c) of the Income Tax Act, 1961 on an amount of Rs. 5,84,00,000/-, representing disallowance made by the Assessing Officer as per provisions of section 14A of the Income Tax Act, 1961 and further enhanced by learned CIT(A), is directed to be deleted. However, the Assessing Officer is held to be justified in levying penalty on the addition/disallowance of Rs. 60,024/- and penalty is hereby confirmed on this addition/disallowance. In the result, grounds of appeal No. 2 is partly allowed and grounds of appeal No. 3, 3.1 & 3.2 are allowed.”

In I.T.A. No. 762(Asr)/2013 for the Asst. Year 2005-06

“5.2 I have considered the observations of the Assessing Officer as made in the penalty order as well as written submissions filed by the assessee company as reproduced above. I have also considered the various judicial pronouncements relied upon by the Assessing Officer as well as by the assessee company and other material brought on record. It has also been noticed that the Hon'ble ITAT, Amritsar Bench, Amritsar has reduced the quantum of addition made by the Assessing Officer on account of disallowance under section 14A of the Income Tax Act, 1961 and further enhanced by the learned CIT(A) from Rs. 4,48,00,000/- to 8,20,000/- vide their order dated 08.03.2013 (supra) in quantum appeal filed by the assessee company against order of the learned CIT(A). As the very basis for levy of penalty has gone, the penalty on the amount of addition/disallowance of Rs. 4,39,80,000/-(Rs. 4,48,00,000/- minus Rs. 8,20,000/-), which stands deleted in second appeal by the Hon'ble ITAT, will not survive and is, therefore, directed to be deleted.

5.3 It has further been noticed that the issue with regard to levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 on the amount of disallowance/addition made under section 14A of the Income Tax Act, 1961 is also squarely covered in favour of the assessee company by the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of the assessee company itself. The relevant paras of the order of the Hon'ble Jurisdictional ITAT dated 19.03.2013 are not being reproduced here for the sake of convenience and repletion as these have already been reproduced by the assessee company in its written submissions dated 04.06.2013. As the facts and circumstances relating to levy of penalty on the amount of addition/disallowance under section 14A of the Income Tax Act, 1961 in the case of the assessee company for the Asst. Year 2007-08 are similar to that of the year under consideration, the ratio of the decision of Hon'ble Jurisdictional ITAT dated 19.03.2013 in the case of the assessee company itself for the Asst. Year 2007-08 is squarely applicable to the year under consideration. Respectfully following the order of the Hon'ble ITAT, Amritsar Bench, Amritsar dated 19.03.2013 in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of the assessee company itself, I also delete the penalty on the amount of disallowance under section 14A of the Income Tax Act, 1961 which has been sustained/confirmed in second appeal. In other words, penalty on the remaining addition/disallowance of Rs. 8,20,000/- is also deleted.

5.4 The addition of Rs. 60,024/- made by the Assessing Officer on account of disallowance under section 35D of the Income Tax Act, 1961, which represents amount paid to ROC for the purpose of increasing share capital of the assessee company, has not been considered by the assessee company even before the CIT(A). It has been submitted that the assessee company has made the claim inadvertently without any malafide intention. In my opinion, the issue with regard to claim of expenses relating to increase in share capital has already been settled long time back by the Hon'ble Apex Court and the expenses have been settled long time back by the Hon'ble Apex Court and the expenses have been held to be capital in nature and as such these expenses are not allowable as revenue expenses. Even after that the assessee company has claimed expenses which are not allowable as per settled position of law. It means that the assessee company has made a false claim which cannot be considered as an inadvertent error and making a false claim will certainly tantamount to filing of inaccurate particulars of income by the assessee company. Moreover, the issue regarding claim of expenses under reference cannot be said to be disputed one in view of Hon'ble Apex Court's decisions in various cases including relied upon by the Assessing Officer. Therefore, the penalty levied by the Assessing Officer is held to be justified and is confirmed on the addition/disallowance of Rs. 60,024/-.

5.5 In the above stated facts and in the circumstances of the case, the penalty under section 271(1)(c) of the Income Tax Act, 1961 on an amount of Rs. 4,48,00,000/-, representing disallowance made by the Assessing Officer as per provisions of section 14A of the Income Tax Act 1961 and further enhanced by learned CIT(A), is directed to be deleted. However, the Assessing Officer is held to be justified levying penalty on the addition/disallowance of Rs. 60,024/- and penalty is hereby confirmed on this addition/disallowance. In the result, grounds of appeal No. 2 is partly allowed and grounds of appeal No. 3, 3.1 & 3.2 are allowed.”

We find that the learned CIT(A) has followed the Tribunal Order in I.T.A. No. 94(Asr)/2011 for the Asst. Year 2007-08 in the case of assessee company itself for deleting the penalty on account of disallowance under section 14A. The relevant findings of Hon'ble Tribunal Order in I.T.A. No. 94(Asr)/2011 for Asst. Year. 2007-08 as contained in Para 18 onwards are reproduced below:

“18. We have heard the rival contentions and perused the facts of the case. We are of the view that penalty levied u/s. 271(1)(c) of the Act was on the facts of the case and the law has rightly been deleted by the Ld. CIT(A). There is no dispute that the information and details in respect of exempt income and expenses incurred during the relevant year were available in the audited accounts filed with the A.O. The said information and details have not been found by the AO to be false or factually incorrect. The AO made disallowance u/s. 14A on estimate basis and for computing disallowance on such basis, he resorted to the applicability of provisions of Rule 8D of the I.T. Rules. The AO has otherwise not established any proximate nexus between exempt income and the expenditure incurred which he was required to do having regard to the decisions of Hon'ble Mumbai High Court in the case of Godrej & Boyce Co. Ltd. (supra) and and Hon'ble Delhi High Court in the case of Maxopp Investment Ltd. (supra) referred to hereinabove.

19. The Ld. counsel for the assessee is right in stating that Rule 8D has been held by the Hon'ble Courts to be not applicable to the assessment year 2007-08 and the very foundation of levy of penalty in the present case i.e. Rule 8D for making disallowance u/s. 14A in the assessment year under consideration stands demolished and therefore, penalty cannot survive The decision of the ITAT, Delhi Bench in the case of in Tidewater Marine International Inc. v. DCIT (supra) supports the case of the assesse.

20. It is trite law that no penalty can be levied in the case of estimated additions/disallowances. Reference is made in this regard to the decision of this Bench in the case of ITO v. Sukhamrit Singh: I.T.A. No. 451(Asr)/2011. In the present case, since Rule 8D was not applicable, the AO has considered as having made disallowance u/s. 14A on estimate basis. The return filed by the assessee offering no disallowance u/s. 14A is demonstrative of the assessee's stand that no expenditure incurred u/s. 14A of the Act is disallowable under that section. The Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. (supra) observed that in so far as levy of penalty u/s. 271(1)(c) is concerned, furnishing of inaccurate particulars would depend upon the return filed because that is the only document where the assessee can furnish particulars of his income and when such particulars are found to be inaccurate, the liability would arise. Therefore, what is relevant is whether in the return there was furnishing of inaccurate particulars of income or not. The letter dated December 11, 2009 to which repeated reference was made by the Ld. DR is of little consequence and the issue has to be decided with reference to particulars filed in the return of income. In any case, the above letter only indicates that the assessee was of the view while no disallowance was called for in the absence of proximate nexus between the expenditure incurred and the exempt income, at the best disallowance, if any, because of some involvement of treasury department in the investment activity if at all could be made on estimate basis, which may not be appropriate in the Pre-Rule 8D scenario. In our view, nothing turns on the aforesaid letter of the assessee, since the disallowance has been made by the AO on estimate basis and presumption and if the assessee had offered any amount of disallowance u/s. 14A on estimation, variation in such estimation cannot be a ground for levy of penalty u/s. 271(1)(c) of the Act.

21. The contention of the Ld. DR that the assessee had accepted the disallowance made u/s. 14A of the Act to the extent sustained by the Ld. CIT(A) in the earlier years and therefore, assessee was aware that the ITA 16 No. 94(Asr)/2011 disallowance made u/s. 14A of the Act was called for but still did not offer any disallowance is not factually correct, since in those years, assessee has challenged the disallowance sustained u/s. 14A before the Tribunal.

22. The assessee's case is also covered by the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. (supra), wherein too penalty was levied on disallowance u/s. 14A and it was the case of the A.O. to find out that the assessee has filed inaccurate particulars of income by not offering any amount for disallowance under that section. The Hon'ble Supreme Court while holding that the penalty was not leviable made the following pertinent observations in that case:

“A glance at this provision would suggest that in order to be covered there has to be concealment of the particulars of income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of theincome. That is not the case of the Revenue either. However, the ld. counsel for revenue suggested that by making incorrect claim for the expenditure on interest the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word ‘particulars’ is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word ‘particulars’ used in the section 271(1)(c) of the Act would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie the assessee cannot be held guilty of furnishing inaccurate particulars. The ld. counsel argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. We do not think that such can be the interpretation of the concerned words. The words are plain and simple in order to expose the assessee to the penalty. Unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner Of Income Tax, Delhi v. Atul Mohan Bindal . (2009) 9 SCC 589, where this court was considering the same provision, the Court observed that the A.O. has to be satisfied that a person has concealed the particulars of such income. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word “inaccurate” has been defined as:—

“not accurate, not exact or correct, not according to truth, erroneous, as an inaccurate statement, copy or transcript.”

We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words conjunction, they must mean the details supplied in the Return, which are not accurate, no exact of correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty u/s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of

the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends

from the shares did not form the part of the total income. It was, therefore, reiterated before us that that the AO had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree as the assessee had

furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its clai in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue that by itself would not, in our opinion attract the penalty u/s. 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by A.O. for any reason, the assessee will invite penalty u/s. 271(1)(c). That is clearly not the intendment of the Legislature.

In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are, apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed:

“So far as the question of penalty is concerned, the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover, are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.”

The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.

The Tribunal as well as the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and therefore, the appeal filed by the revenue has no merits and is dismissed.”

23. We are of the view that the aforesaid decision squarely applies to the facts of the present case. Even if it is assumed that the assessee made incorrect claim of the expenditure by not offering any amount of disallowance u/s. 14A, the fact remains that there was no filing of inaccurate particulars of income since there was not factual inaccuracy in the information or details regarding various expenses filed alongwith the return of income/or during the assessment proceedings. There is, in fact, no such finding in the assessment order. As held by the Hon'ble Supreme Court that mere making of the claim which is not sustainable in law, will not amount to furnishing of inaccurate particulars of income and such claim made in the return cannot amount to furnishing of inaccurate particulars.

23.1 Further, merely because no appeal was filed by the assessee against AO's order does not lead to any adverse inference that the assessee has filed inaccurate particulars of income relation to addition/disallowance made by the A.O. There is sufficient authority for the proposition to which reference has been made by the ld. counsel for the assessee herein above.

23.2 Accordingly, we are of the view that penalty levied under section 271(1)(c) is not sustainable and we find no infirmity in the order of the ld. CIT(A), who has rightly cancelled the penalty levied by the A.O. Thus, all the grounds of the Revenue are dismissed.”

As regards deletion of quantum of legal and professional expenses are concerned, the Hon'ble Tribunal vide its order dated 08.03.2013 in I.T.A. No. 119(Asr)/2011 and in I.T.A. No. 120(Asr)/2011 in a consolidated order has deleted the same vide Para 64 in Asst. Year 2002-2003 & Para 85 in Asst. Year 2003-04. The assessee had claimed to have paid an amount of Rs. 1,25,27,450/- in Asst. Year 2002-03 and Rs. 15,44,209/- in Asst. Year 2003-04 to Max UK Limited for providing various business support services which the Assessing Officer had disallowed. The ground of appeal in I.T.A. No. 119(Asr) 2011 & I.T.A. No. 120(Asr)/2011 along with their adjudication are reproduced below.

I.T.A. No. 119(Asr)/2011 for Asst. Year 2002-03

“Ground No. 3- That the learned CIT(A) erred on facts and in law in confirming the disallowance of legal and professional expenses of Rs. 1.25,27,450/- made by the AO being the retainership fees paid to MAX UK Limited for providing various business support services.

64. We have heard the rival contentions and perused the facts of the case. We find that the impugned payment has been made pursuant to agreement entered into between the assessee and the foreign party. It is not the case of the AO and Ld. CIT(A) that the aforesaid agreement is bogus and that the payment has not been made by the assessee to the aforesaid party. The nature of services rendered by the foreign party is also supported with invoice raised by the said party and the agreement. In our view, considering that the nature of services provided by the foreign party, which were in the nature of liaison services, it is difficult for the assessee to provide evidence of rendering of such services. The assesse has, in fact, pointed out it is able to achieve the export turnover of Rs. 29 crores which prima facie demonstrate that the services were rendered by the foreign party. The AO apart from alleging that no documentary evidence could be furnished by the assessee has not provided any evidence like obtaining confirmation from the foreign party etc., before making disallowance after the initial onus placed on the assesse by bringing on record the agreement with foreign party and invoice raised by that party was discharged by the assessee.

64.1. In view of the matter for the aforesaid cumulative reasons, we reverse the action of the AO/Ld. CIT(A) in disallowing the aforesaid expenditure and accordingly, we direct the deletion of the said disallowance. Thus, ground No. 3 of the assessee is allowed.”

I.T.A. No. 120(Asr)/2011 for Asst. Year 2003-04

“85. In ground of the assessee, the assessee has challenged the order of the ld. CIT(A) in confirming the disallowance of Rs. 15 lacs on account of legal and professional fee paid to Max UK Limited.

85.1 The aforesaid ground of appeal is identical to ground of appeal No. 3 in assessee's appeal for the assessment year 2002-03 where we have decided the aforesaid issue in favour of the assessee and has allowed the ground raised by the assessee in the assessment year 2002-03. Both the parties also did not address any additional argument with respect to the aforesaid ground in the present appeal and agreed that the facts of this ground are identical to the ground of appeal for the assessment year 2002-03. Accordingly, following our own order for the assessment year 2002-03 in assessee's own case decided hereinabove, the disallowance made in the assessment order is directed to be deleted. Thus, of appeal of the assessee in the present year is allowed.”

5. The learned DR could not controvert the above facts and therefore, we do not find any infirmity in the orders of learned CIT(A), who has followed the Tribunal Orders in the case of assessee itself. In view of the above, the appeals filed by the Revenue are dismissed.

6. In the result, the appeals filed by the Revenue are dismissed.