Delhi H.C : The AO also initiated penalty proceedings under s. 271(1)(c)

High Court Of Delhi

CIT vs. Freementle India Television

Section 271(1)(c)

Asst. Year 1997-98

Madan B. Lokur & Vipin Sanghi, JJ.

IT Appeal No. 485 of 2006

20th July, 2006

Counsel Appeared : Ms. P.L. Bansal, for the Appellant : None, for the Respondent


By the court :

The Revenue is aggrieved by an order dt. 27th April, 2005 passed by the Tribunal, Delhi Bench ‘C’ in ITA 2607/Del/2001 for the asst. yr. 1997-98. A penalty of Rs. 4,58,393 was levied against the assessee under s. 271(1)(c) of the IT Act, 1961. This has been set aside by the impugned order. The assessee produces TV serials and returned a total income of Rs. 15,60,920, which was assessed to Rs. 24,94,950 under s. 143(3) of the Act. The assessee claimed a deduction of Rs. 10,66,029 as format fee. The AO did not allow this deduction and, therefore, this amount was added to the total income. The AO also initiated penalty proceedings under s. 271(1)(c) of the Act for furnishing inaccurate particulars. According to the assessee, it had sent a letter on 2nd June, 1999 giving its recomputation in which it had withdrawn its claim regarding format fee. It was also contended by the assessee, based on the audit report submitted on 24th Dec., 1999 that the amount towards format fee had already been offered for tax in the asst. yr. 1997-98 in its return of income filed as far back as on 30th Nov., 1997. This fact appears to have been overlooked by the AO in the penalty proceedings. In appeal, the CIT(A) in his order dt. 22nd March, 2001 relied upon the audit report and held that correct particulars were given by the assessee for the year under consideration. He was of the view that assessment proceedings were different from penalty proceedings and since the assessee had revised its computation of income even before the AO had started assessment proceedings, there was no concealment of facts or furnishing of inaccurate particulars by the assessee. The CIT also held that the assessee was maintaining its accounts under the mercantile system and, therefore, it was entitled to take into account its contractual liability to pay format fees to foreign collaborator on accrual basis.

The Revenue went up in appeal before the Tribunal which passed the impugned order. The Tribunal accepted the finding of the CIT that the revised computation has been sent well in advance of the assessment order being passed in March, 2000 and even before the controversy arose some time in October, 1999. On these facts, the Tribunal came to the conclusion that the recomputation given by the assessee was not an afterthought but was genuine and made well in time. The Tribunal also accepted the view that since the assessee was following the mercantile system of accounting the liability had accrued and the assessee was entitled to claim a deduction during the relevant year. After hearing learned counsel for the parties and considering the facts and circumstances of the case, we are of the view that no substantial question has arisen. The only issue is whether the assessee had withdrawn its claim well in time so as not to attract the penal provisions of s. 271(1) (c). The record suggests that the assessee had withdrawn the claim for deduction and had offered the amount for lax in November, 1997 well in time. In view of the above facts, we are of the view that no substantial question of law has arisen for our consideration. Dismissed.

[Citation : 294 ITR 88]

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