MR. SHALOK HARI NAGPAL,MUMBAI vs. ACIT-CIRCLE-19(3), MUMBAI

Brief facts are, the assessee is an individual. For the assessment year under dispute the assessee filed his return of income on 28th September 2012, declaring total income of ` 46,89,137. During the 2 Shalok Hari Nagpal assessment proceedings, the Assessing Officer noticing that the assessee has claimed various expenditures towards tempo charges, conveyance, petrol, travelling, sundry expenses, etc., called upon the assessee to furnish the supporting details. Though, the assessee furnished certain details, however, the Assessing Officer not being satisfied with the evidences furnished by the assessee, disallowed 20% out of the expenditure claimed of ` 13,35,870, which worked out to ` 2,67,174. Since, an amount of ` 36,177, has already been disallowed, the Assessing Officer made a net disallowance of ` 2,30,997. Contesting the aforesaid disallowance, the assessee preferred appeal before the first appellate authority.

However, learned Commissioner (Appeals) enhanced the income of the assessee by disallowing petrol expenses of ` 82,790 as against the disallowances made by the Assessing Officer on account of petrol expenses. Further, on the basis of such addition learned Commissioner (Appeals) initiated proceeding for imposition of penalty under section 271(1)(c) of the Act alleging concealment of income and ultimately passed an order imposing penalty of ` 30,369. Being aggrieved, the assessee is in appeal before the Tribunal.

The learned Authorised Representative submitted, while deciding assessee’s appeal contesting the aforesaid disallowance made, the Tribunal in ITA no.5466/Mum./2018, dated 15th October 2019, has 3 Shalok Hari Nagpal deleted the enhancement made by the first appellate authority and has granted further relief to the assessee by restricting the disallowance made by the Assessing Officer to 10% of the expenditure claimed. Thus, he submitted, when the addition made has been deleted, penalty under section 271(1)(c) of the Act cannot survive.

The learned Departmental Representative relied upon the observations of learned Commissioner (Appeals).

We have considered rival submissions and perused the material on record. Undisputedly, on the ad–hoc disallowance made of 20% out of the expenditure claimed, the Assessing Officer has not initiated any penalty proceeding under section 271(1)(c) of the Act. While deciding assessee’s appeal contesting the said disallowance learned Commissioner (Appeals) enhanced the income by disallowing the petrol expenses of ` 82,750. On the basis of the aforesaid disallowance, penalty under section 271(1)(c) of the Act has been imposed. However, while considering assessee’s appeal challenging the aforesaid disallowance, the Tribunal has deleted the addition and has further restricted the addition made by the Assessing Officer to 10% of the expenditure claimed. Thus, it is very much clear that the addition on the basis of which penalty under section 271(1)(c) of the Act has been imposed is no more in existence. That being the case, penalty imposed under section 271(1)(c) of the Act cannot survive.

In the result, appeal is allowed. Order pronounced in the open Court on 04.03.2020