INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D ": NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No.433/Del/2011
(Assessment Year: 2001-02)
Yum ! Restaurants (India) Pvt. Vs. ITO,
Ltd, Ward-18(4),
2nd Floor, Tower D, Global New Delhi
Business Park, MG Road,
Gurgaon
PAN: AAACY4188E
(Appellant) (Respondent)
Assessee by : Shri Salil Kapoor, Adv
Revenue by: Smt Naina Soin Kapil, Sr. DR
Date of Hearing 03/04/2019
Date of pronouncement 25/06/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
1. This appeal is filed by the assessee against the order of the ld CIT(A)-XXI,
New Delhi dated 01.11.2010 for the Assessment Year 2001-02, wherein, the
penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 by the Income Tax
Officer, Ward-18(4) of Rs. 2993984/- is confirmed. The assessee has raised
the following grounds of appeal:-
1. That on the facts and circumstances of the case and in law, the Ld.
Commissioner of Income tax (Appeals) [,,CIT(A)] erred in upholding the
order passed by the Ld. Assessing Officer [,,AO] even though it was
time barred under the provisions of Section 275 of the Income tax Act,
1961 (,,the Act).
2. That on the facts and circumstances of the case and in law, the Ld.
CIT(A) erred in upholding the order of the Ld. AO stating that the
appellant intended to defraud taxes while claiming the amount of Rs.
3,64,239 paid to Rites Equipment Limited as expenditure. The Ld.
CIT(A) thereby erred in upholding penalty on the appellant under
Section 271(l)(c) of the Act amounting to Rs. 1,44,057.
3. That on the facts and circumstances of the case and in law, the Ld.
CIT(A) erred in upholding the order of the Ld. AO stating that the
appellant intended to defraud taxes while claiming the amount of Rs.
27,61,882 as expenditure being the accrued marketing expenditure
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under the development initiative scheme. The Ld. CIT(A) thereby erred
in upholding penalty on the appellant under Section 271(1)(c) of the Act
amounting to Rs. 10,92,324.
4. That on the facts and circumstances of the case and in law, the Ld.
CIT(A) erred in upholding the order of the Ld. AO stating that the
appellant intended to defraud taxes while claiming the amount of Rs.
44,44,002 paid as advertising, marketing and promotions contributions
to Yum! Restaurants Marketing Private Limited, i.e. appellants wholly
owned subsidiary company. The Ld. CIT(A) thereby erred in upholding
penalty on the appellant under Section 271(1)(c) of the Act amounting to
Rs. 17,57,603."
2. During the course of hearing the assessee furnished an application for
admission of additional grounds of appeals raising following grounds:-
"Ground 5: "That the notice issued under section 271(1)(c)/ 274 of the Act,
and the order passed under section 271(l)(c) of the Act are illegal,
bad in law and without jurisdiction. "
Ground 6: "That no satisfaction has been recorded while completing the
assessment proceedings, hence the notice issued under section
274 of the Act, and the order passed under section 271(1)(c) of
the Act are illegal, bad in law and without jurisdiction. "
Ground 7: "That the penalty has been initiated vide notice under section
271(l)(c)/ 274 of the Act without any specific charge, hence, the
said notice and the order passed under section 271(1)(c) of the
Act are illegal, bad in law and without jurisdiction. "
Ground 8: "That the levy of penalty is illegal, unjust and not in accordance
with law as the mandatory requirements of Section 271(1)(c) have
not been met in the instant case. "
Ground 9: "That the AO/CIT(A) erred in levying penalty on disallowance
made on account of contributions made to YRMPL and on account
of accrued marketing expenditure and erred in not appreciating
that the claim of the assesse is a debatable issue and as such no
penalty is leviable. "
Ground 10: "That the said additions made by the AO are based on difference
of opinion on account of allowability of the claim of the assesse,
and as such no penalty can be levied in such cases. "
3. Ld AR submitted that the above grounds are purely legal and does not
require any fresh investigation of facts. It is further mentioned that they got
to the root of the matter and therefore, same may be admitted.
4. The ld DR vehemently objected to the application for admission of additional
grounds and submitted that they were not raised before the lower
authorities. Hence, they should not be admitted.
5. We have carefully considered the rival contentions and found that additional
grounds raised by the assessee are purely legal in nature and goes to the
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root of the subject matter of the appeal. As the issues are raised with
respect to the initiation of penalty proceedings on jurisdictional matters the
additional grounds are therefore, admitted.
6. The brief facts of the case shows that the assessee is a company, filed its
return of income on 31.10.2001 declaring income of Rs. 4723300/- under
the head income from other sources. The income under the head "profits
and gains" of business were computed at Rs. 9207745/- and were reduced
to Nil after setting off brought forward losses. Assessment u/s 143(3) of the
Act was completed on 31.03.2004 at Rs. 472330/- under the head from
other sources. However, the business income was determined at Rs.
18106601/- by making an addition of Rs. 8898856/-. The disallowances
were of sales tax, marketing expenses and contribution towards AMP
activities.
7. The assessee preferred an appeal before the ld CIT(A) who deleted the
disallowance to the extent of Rs. 12.50 lacs out of total addition of Rs.
8898856/-. The assessee has filed an appeal before ITAT which confirmed
the addition of Rs. 2761882/- towards marketing expenses under
Development Initiative Scheme and Rs. 4444002/- on account of
contribution towards AMP activities to Yum Restaurants Marketing Private
Limited (YRMPL).
8. Therefore, the penalty proceedings were initiated on these two issues. The ld
AO issued show cause notice to the assessee which was replied by the
assessee. However, the ld AO rejected the contention of the assessee and
levied a penalty of Rs. 2993984/- stating that the assessee has filed
inaccurate particulars of his income. In the assessment year the ld AO did
not initiate any penalty proceedings with respect to accrued marketing
expenditure of Rs. 2761882/-/ However, with respect to the contribution of
AMP expenditure the AO initiated the penalty proceedings.
9. On appeal before the ld CIT(A) the penalty levied by the ld AO was upheld.
10. Adverting to the additional ground, the ld AR produced the notice dated
31.03.2004 issued u/s 274 read with section 271 of the Income Tax Act and
submitted that none of the charges mentioned in the above notice has been
struck off by the ld AO and therefore, the penalty itself becomes void ab
initio and deserves to be quashed. It was further stated that on identical
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facts and circumstances the additional ground raised by the assessee in the
case of the assessee's sister concern in ITA No. 6598/Del/2015 for
assessment year 2000-01, the penalty was deleted. He therefore, submitted
that on this issue the matter is squarely covered in favour of the assessee.
He also raised issues on the merits of the case.
11. The ld DR vehemently supported the order of the lower authorities.
12. We have carefully considered the rival contentions and found that the
penalty notice have been issued without striking off one of the twin charges
for levy of the penalty. As held by the Hon'ble Supreme Court in CIT Vs. SSA
Emerald Meadows 242 Taxmann 180 (SC), wherein, it has been held that
notice issued by the ld AO u/s 274 read with section 271(1)(c) is bad in law
as it did not specified as to which limb of that section the penalty
proceedings have been initiated. In view of this, and respectfully following
the decisions of the coordinate bench in case of sister concern of the
assessee, we cancel the penalty as none of the charges of the twin charges
were struck off. Accordingly, additional grounds raised by the assessee are
allowed and appeal of the assessee succeeds on this ground. Accordingly,
additional ground Nos. 5 to 10 of the appeal are allowed. As we have
quashed the penalty on the issue of validity of notice, other, issues in the
appeal becomes academic. Accordingly, appeal of the assessee is allowed
quashing penalty levied of Rs. 29,93,984/- u/s 271(1)(c) of the Act.
13. In the result appeal of the assessee is allowed.
Order pronounced in the open court on 25/06/2019.
-Sd/- -Sd/-
(BHAVNESH SAINI) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25/06/2019
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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