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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI R. K. PANDA & MS SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by the assessee against the order dated 17/06/2014 passed by CIT(A), XI, New Delhi for Assessment Year 2008-09.
The grounds of appeal
are as under:-
1. On the facts and in the circumstances of the case the Ld.CIT(A) has erred in law in deleting the penalty of Rs. 24,90,696/- imposed by A.O u/s 271(1)(c) on account of disallowance of expenditure of Rs. 73,99,575/-.
3. The return declaring income of Rs.16,02,820/- was filed by the assessee on 30.09.2008. The assessment was completed u/s 144/147 r.w.s 143(3) of the Act at an income of Rs. 90,02,395/-, after making an addition of Rs. 73,99,575/- on account of disallowance of expenditure made on estimated basis by applying a ratio of 4% of turnover. Penalty proceedings u/s 271 (l)(c) were also initiated during the assessment proceedings. Aggrieved with such an order, the assessee preferred an appeal before the CIT(A), where the appeal was dismissed confirming the additions made by the Assessing Officer. On receipt of such order, the Assessing Officer proceeded to complete the penalty proceedings after issuing notice u/s 271(l)(c) of the Act. The Assessing Officer, imposed penalty u/s 271 (l)(c) of the Act for furnishing inaccurate particulars of his income.
Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A) and CIT(A) allowed the appeal of the assessee.
The Ld. DR submitted that the CIT(A) erred in deleting the penalty imposed by the Assessing Officer u/s 271(1)(c) on account of disallowance of expenditure. The Ld. DR further submitted that penalty can be imposed on estimated basis addition as well.
The Ld. AR relied upon the order of the penalty and assessment order as well as order of the CIT(A).
We have heard both the parties and perused the material available on record. The CIT(A) held as under:- “7.2. I have considered the facts of the case as well as the submissions furnished by the appellant at every stage of the proceedings. The past history of the appellant’s case is also kept in mind. It is a fact that the appellant has not produced books of accounts at any stage of proceedings including the present appellate proceedings. Therefore, the claim made by the appellant that duly audited accounts were submitted by it on the basis of regular books of accounts is a hollow claim which cannot be substantiated by producing even the ledger and cash book by the appellant. This could have been an appropriate case where the AO should have invoked the provisions of section 145 of the Act and estimated the profit on the basis of a comparable case. However, to my utter dismay, the AO has proceeded in making a disallowance of expenditure claimed by the appellant by estimating the quantum of disallowance @ 4% of turnover. Without prejudice to the quantum of addition made by the AO, the appellant's Ease of penalty is viewed from the nature of addition. The Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products [2010] 322 ITR 158 (SC) has held:
We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. ”
7.3. In the appellant’s case, the AO has merely disallowed the expenses claimed by it in its Profit & Loss Account. Such disallowance of expenses has been made on estimate basis and no reasons have been given by the AO for adopting '4% of turnover’ as a method of disallowance of expense. The appellant’s case is squarely covered by the decision of Hon'ble Supreme Court. The disallowance of expenditure on estimated basis cannot be termed as furnishing of inaccurate particulars of income and therefore imposition of penalty u/s 271 (1 )(c) of the Act in the case is not justified. The AO’s action in imposing the penalty of Rs. 24,90,696/- is therefore, not justified and the same is directed to be cancelled. Grounds of appeal are allowed.
8. In the result, the appeal is allowed.”
It is held in various decisions of the Hon’ble Apex Court and Hon’ble High Courts that penalty cannot be levied on addition on account of estimated disallowance. We, therefore, uphold the order of the CIT(A) in deleting the penalty which was levied on account of additions made on ad-hoc disallowance of expenses. Hence, the appeal of the Revenue is dismissed.
In result, appeal of the Revenue is dismissed. Order pronounced in the Open Court on 12th June, 2019.