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Disallowance u/s 43B and Levy of Penalty u/s 271(1)(c). (Income Tax)

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( Author )
19 January 2009

The AO disallowed expenses u/s 43B of the Act.for the assessment year 2006-2007 as they were duly mentioned in the Audit Report that Service Tax and other Taxes were not paid till the finalization of the Audit Report and also not paid till the filing of the return of income.
My queries are-
1) Can the AO levy penalty u/s 271(1(c)as we have a plea that there was no concealment of income or any fact and we had duly mentioned about the facts in our audit report. We have a case law too regarding this issue which is as follows-

It was Held, that as material facts necessary for disallowance were duly disclosed in audit report filed with Return of Income,the assessee’s contention was being genuine, bonafide and innocent mistake was accepted, and that penalty cannot be imposed, as there was no malafide intentions on the part of assessee in the case of-

Akshay Enterprises (P) Ltd. vs. ACIT – (2007) 161 Taxman 168 (Amritsar).

I will like to ask here that will this plea work or not for us and are there any other rulings regarding this issue.

2)How will we be able to claim the expenses in assessment year 2007-2008 if we had paid the expenses in the assessment year 2007-2008. The Dis allowance was for the assessment year 2006-2007 and we have received the assessment order only now and its too late for us to revise our return for the assessment year 2007-2008 now that is in the year when we had made the payment for taxes.Is there any method of rectification of mistake u/s 154 regarding this after we receive the assessment order u/s 143(1) for assessment year 2007-2008 or some other way out.

3)If we dont go for appeal against the order for the assessment year 2006-2007 now and accept the dis allowance made by the AO as it is, will we be able to appeal against the penalty u/s 271(1)(c)later if levied by the AO or we will we lose the strength in our case by not appealing against the assessment order passed by the AO.

4) Will this addition be termed as dis allowance or not as it was not a dis allowance perse but the expense or payment was deferred to next year.

Thanks.




B.Chackrapani Warrier

( Expert )
19 January 2009

You may appeal with the cited decision. Also take an alternate ground in the appeal that if not allowed in 2006-07 claim may be allowed in 2007-08. If the alternate ground is allowed in appeal,take proceedings to rectify in 2007-08. Simultaneously move petition for 2006-07 u/s 273B for waiver of penalty.You may be aware that as per the recent decision of Supreme Court mens rea is not required to impose penalty u/s 271(1)(c).


B.Chackrapani Warrier

( Expert )
19 January 2009

Alternate may be read as alternative.


sn

( Author )
19 January 2009


Thanks for the help.. grateful.
My main question at the moment is that as i know i have no chance in the appeal against the assessment order as i wont be able to reverse the dis allowance of the expense and my only chance is against the penalty order if imposed.. should i appeal only the penalty order only later after the penalty is imposed or should i appeal the assessment order too now. If i don't appeal the assessment order now will it spoil my appeal against the penalty later .
I am sorry i dint understand the matter regarding rectification fully.. i will be obliged if you could give a small brief on it .. thanks..


sn

( Author )
19 January 2009


Thanks for the help.. grateful.
My main question at the moment is that as i know i have no chance in the appeal against the assessment order as i wont be able to reverse the dis allowance of the expense and my only chance is against the penalty order if imposed.. should i appeal only the penalty order only later after the penalty is imposed or should i appeal the assessment order too now. If i don't appeal the assessment order now will it spoil my appeal against the penalty later .
I am sorry i dint understand the matter regarding rectification fully.. i will be obliged if you could give a small brief on it .. thanks..


sn

( Author )
19 January 2009

Awaiting for the reply..


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