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Before: Shri H.S. Sidhu. & Shri T.S. Kapoor
ORDER Per T.S. Kapoor, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-2, New Delhi dated 24.06.2016. The assessee has raised following grounds of appeal :
“ 1. That the CIT (A) erred in confirming penalty of Rs. 2,71,920/-u/s. 271 (1 )(c) of the IT Act 1961.
2. That the CIT (A) passed an illegal order since there was neither concealment of income nor furnishing of inaccurate particulars of income on the part of the appellant.
3. That there was no specific charge whether the penalty imposed was for concealment of income or for furnishing of inaccurate particulars of income ; hence the AO as well as the CIT (A) passed orders u/s 271(1)(c) on vague charges , thus passing an illegal order that deserves to be quashed.
ITA No. 4900/Del./2016 2
4. That the disallowance of part of expenses was made by the AO on sheer estimate basis, and that would not mean concealment of income or furnishing of inaccurate particulars of income; hence no penalty was impossible on that basis.”
During the course of hearing, the ld. AR of the assessee did not press grounds Nos. 1 to 3. The same are accordingly dismissed as not pressed.
Addressing to ground No. 4, the ld. AR submitted that partial disallowance of expenses, that too on estimate basis, would not constitute furnishing of inaccurate particulars of income and therefore, the penalty imposed and confirmed by the authorities below is not justified in view of several decisions relied by him in the following cases: (i). Shiela Jain vs. ITO (ITAT Delhi Bench – ITA No. 4007/Del./2016) (ii). Manmohan Jain vs. ITO(ITAT Delhi Bench – ITA No. 315/Del./2015) (iii). Rajiv Kumar Garg vs. ITO (ITAT Delhi Bench – ITA No. 519/Del./2014) (iv). CIT vs. Aero Traders Pvt. Ltd., 322 ITR 316 (Del.)
4. The learned DR, on the other hand, submitted that the ld. CIT(A) was justified in confirming the penalty. It was submitted that the assessee had made wrong claim of expenditures and the AO had made partial disallowance thereof, which stood confirmed in appeal. The assessee did not challenge the said addition. Therefore, the penalty, imposed by the authorities below is liable to be sustained.
5. We have heard the rival parties and gone through the material placed on record and we find no justification to sustain the penalty confirmed by the ld. CIT(A) in the instant case. It is notable that the partial disallowance of ITA No. 4900/Del./2016 3 various expenditures claimed by the assessee, was made by the AO on estimate basis without pointing out any particular expenditure of disallowable nature. Therefore, in our considered opinion, disallowance made on the basis of estimate does not constitute concealment of income or furnishing of inaccurate particulars thereof by the assessee, entailing penalty u/s. 271(1)(c) of the Act. Similarly, merely, because the adhoc disallowance was not challenged by the assessee, would also not constitute furnishing of inaccurate particulars of income to impose penalty u/s. 271(1)(c) of the Act. For this view, stand fortified by the decision of Delhi Tribunal in the case of Rajiv Kumar Garg vs. ITO (supra), wherein it has been held as under :
“3. I have heard the Id. DR and perused the relevant material available on record. There is no appearance from the side of the assesses despite notice. As such, I am proceeding to dispose of this appeal ex parte qua the assessee. It is noted that the penalty u/s 271(1)(c) has been imposed on the basis of difference in the value of stock shown by the assessee and as estimated by the AO by applying the rate of last purchase bill dated 28.3.2009. But, for that, there is nothing to show that the assessee, in fact, concealed his income or furnished inaccurate particulars of income. There can be several reasons for a different valuation. It is not necessary that all the bags are always of good quality. Some of the cement bags may have leaked, spoilt or fixed.
It is an admitted position that the assessee accepted the addition and did not challenge it further. But the mere fact that an addition has-been accepted or is confirmed in quantum proceedings cannot be conclusive of the imposition of penalty. The Hon'ble Calcutta High Court in Durga Kamal Rice Mill vs. CTT (2004) 265 ITR 25 (Cal), has held that quantum proceedings are different from penalty proceedings. The Hon'ble Kerala High Court in CIT vs. P.K. Narayanan (1999) 238 ITR 905 (Ker.), has held that despite the addition being confirmed by the Tribunal in quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify.
It is noticed that the only basis of addition is the estimate of valuation made by the AO in valuing the closing stock @ Rs,200.50 per bag, being the cost price of cement bags vide last purchase bill dated 28.3.2009. Apart from this ITA No. 4900/Del./2016 4 estimate made by the AO, there is nothing to show that the way in which the assessee valued its dosing stock was incorrect. This divulges that the addition has been made only on the basis of estimate made by the AO. It is settled legal position that when income is estimated, then, there can be no question of imposing penalty u/s 271(1)(c) of the Act. The Hon'ble Delhi High Court in CIT vs._Aero Traders Pvt. Ltd.(2010) 322 ITR 316 has held that no penalty u/s 271(1)(c) can be imposed when income is determined on estimate basis. Similar view has been taken by the Hon'ble P&H High Court in Harigopal Singh vs CIT (2002) 258 ITR 85 (P&H) and the Hon'ble Gujarat High Court in CIT vs. Subhash Trading Company, 221 ITR 110 (Guj). In view of the foregoing precedents including the one from the Hon'ble jurisdictional High Court, it is apparent that when the bedrock of instant penalty is the estimate of valuation of closing stock, the same cannot be sustained. Overturning the impugned order, I order for the deletion of penalty amounting to Rs.45,100/-.”