|The Tax Publishers2021 TaxPub(DT) 0220 (Ahd-Trib)
INCOME TAX ACT, 1961
Where assessee had filed the relevant documentary evidences to support its claimed towards job work expenses and plea of the assessee that without the RCC work for block numbers A to E of the project, the building construction work cannot be completed and building cannot be sold, appears to be quite compelling to support the factum of rendering of jobwork/ labour work and assessee proved overall bona fides of the expenses actually incurred in relation to construction of project, therefore, penalty under section 271(1)(c) was to be deleted.
Penalty under section 271(1)(c) - Disallowances incurred towards job-work/labour work expenses - Bona fide claim made by assessee -
Assessee claimed expenses on account of job-work/labour work paid to one Shri Kailash Sukhlal Mandal. To support the expenses claimed, the assessee, on its part, filed a copy of ledger account of contractor Kailash Sukhlal Mandal. AO observed that the contractor committed default and did not file return of income for assessment year 2011-12. AO observed that while assessee had submitted copy of bills, copy of ledger account of the contractor, it had failed to prove the genuineness of the expenses and thus failed to substantiate the claim made. AO thus rejected the claim of the job-work expenses primarily on the ground that complete reply was not filed by the contractor and the assessee could not produce the party for verification of genuineness of expenses. AO disallowed the said claim and imposed penalty under section 271(1)(c). CIT(A) held that it was not a simple case where idle money was part fixed deposits and the assessee had earned income, that the idle money was made productive itself by investing, that assessee was an enterprise of government of India, that it was under direct control of the Ministry of Information and Broadcasting, that the Government of India was 100% shareholder of the assessee-company, that the object of the company was to plan, promote, organize and integrate the activities of development of film industry, as per the policy of the government, that various amounts were received as advances by the assessee from Ministry of Culture, Ministry of Information and Broadcasting, Department of Land resources, Ministry of Environment and Forests, District water and Sanitation Department, that advances were received for production of films, regional language films for restoration of various regional films as per policy of 11th 5-year plan, that various advances were received by it for the business purposes, that for production of such films adequate time was required, that there were lots of complications, activities and techniques related issues for production of films, that the advances received by it could not be utilised for that reason, that with a view to safeguard the advances the company decided to deposit the money with the banks, that a general approach for taxing interest income earned on fixed deposit as income from other sources could not become a prevailing force.Held: Assessee had filed the relevant documentary evidences to support its claim. The plea of the assessee that without the RCC work for block numbers A to E of the project, the building construction work cannot be completed and building cannot be sold, appears to be quite compelling to support the factum of rendering of jobwork/ labour work. AO himself had made an averment to the effect that partial/incomplete reply was received from the contractor. However, it is not known as to on what aspects, reply was not adequately received. Assessee proved overall bona fides of the expenses actually incurred in relation to construction of project. Penalty under section 271(1)(c) automatically gets obliterated and the same stands deleted.
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