MAHESH WOOD PRODUCTS PVT. LTD.,NEW DELHI vs. ACIT, CENTRAL CIRCLE-13, NEW DELHI

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals]- XXVI, New Delhi dated 09.02.2018 pertaining to assessment year 2006-07.

The solitary grievance of the assessee is that the CIT(A) erred in confirming the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act]'.

The root for levy of penalty lie in the assessment order framed u/s 143(3) r.w.s 153A of the Act.

During the course of scrutiny assessment proceedings, the Assessing Officer noticed that under the head ‘freight expenses’, the assessee has incurred a sum of Rs. 47,87,272/- as cash payment exceeding Rs. 20,000/- on day to day basis and, therefore, has violated the provisions of section 40A(3) of the Act. The Assessing Officer, accordingly, disallowed 20% of Rs. 47,87,272/- and made an addition of Rs. 9,57,454/-.

The addition was confirmed by the first appellate authority and the assessee did not prefer any further appeal before the Tribunal.

The Assessing Officer was of the firm belief that the assessee has filed inaccurate particulars of income and invoking the provisions of section 271(1)(c) of the Act, the Assessing Officer issued a show cause notice to the assessee asking it to explain as to why penalty should not be levied u/s 271(1)(c) of the Act.

The assessee filed detailed reply strongly objecting to the proposed levy of penalty. The assessee strongly contended that it has not furnished any inaccurate particulars of income nor has concealed any income and, therefore, no penalty is leviable.

Explanation of the assessee did not find favour with the Assessing Officer who levied penalty of Rs. 3,22,279/-.

The assessee carried the matter before the CIT(A) but without any success.

Before me, the ld. AR reiterated what has been stated before the lower authorities.

Per contra, the ld. DR strongly supported the findings of the Assessing Officer.

I have carefully considered the orders of the authorities below. There is no dispute that the additions have been made u/s 40A(3) of the Act. I find that there is no allegation against the assessee that the assessee concealed any particulars of income or furnished any inaccurate particulars of income thereof. The disallowance of expenditure u/s 40A(3) of the Act was only based on the particulars furnished by the assessee. In my considered opinion, on the given facts and circumstances of the case, i do not find it to be a fit case for levy of penalty. Accordingly, the Assessing Officer directed to delete the penalty so levied.

In the result, the appeal filed by the assessee in is allowed.