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