I-T relief for Balaji Telefilms, Rs 10 crore penalty dropped

MUMBAI: In a relief for

Balaji Group

, the Income Tax Appellate Tribunal (ITAT) on Friday deleted, as legally unsustainable, the income tax penalty of Rs 10 crore against

Balaji Telefilms

Ltd. The penalty was levied after a massive raid conducted in 2013.


The ITAT bench of Mahavir Singh and

Manoj Kumar Aggarwal

observed that "failure of assessing officer to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself." Such failure deprives the department from levying any penalty, it said.

The Income Tax department had carried out a three-day raid starting April 30, 2013 on the Balaji Group. During the search and seizure operation, a voluntary disclosure of Rs32 crore was made by Balaji Telefilms for "bogus payments" and "bogus expenses" between 2007-08 and 2014-15.

The disclosure led to penalty proceedings. The group's legal counsel Snehal Shah contested the validity of the penalty arguing that facts were not appreciated in the "right perspective". He raised an additional ground and argued that as the assessing officer did not specify the charge on which he intended to initiate penalty proceedings, the notice stands vitiated.

For the revenue department, Bharti Singh and Kavita Kaushik opposed grant of any relief and said such additional arguments cannot be accepted in appeal when they were never raised earlier. The major allegations against Balaji Group were that it "inflated purchases by obtaining accommodation entries from bogus parties and had debited bogus consultancy and other charges". The department also submitted that the disclosure was made only after the raid began and, hence, under the Income Tax Act, the penalty was "clearly leviable".

The ITAT said, "The revenue department is unable to demonstrate that specific charge was ever framed." Based on binding judicial precedents, it thus dropped the penalty altogether.