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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SHRI R. S. SYAL & SMT. BEENA A. PILLAI
Date of hearing: 15.09.2016 Date of Pronouncement: 19.09.2016 ORDER
PER BEENA A. PILLAI, JM:
The present penalty appeal has been filed by the assessee against order dated 06.06.2013 passed by Ld. CIT(A) IV, New Delhi for the Assessment Year 2003-04 on the following grounds of appeal:
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] confirming the penalty under section 271 (1 )(c) levied by the AO is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty of Rs.55,655/- under Section 271 (1 )(c) on account of disallowance of diesel expenses.
2 I.T.A.No.5580./Del/2013
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that there is neither concealment nor furnishing of inaccurate particulars of income.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that mere rejection of claim of an expense does not lead to levying penalty.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty under section 271 (1 )(c) of the Act ignoring the fact that the CIT(A) himself has given partial relief to the assessee on the same issue.”
The brief facts of the case are as under: 2.1 The assessee is engaged in the business of manufacturing PVC profiles used in automobiles, refrigeration and other white good industry. It filed its return of income on 19.11.2003 declaring total income of Rs.7,10,42,560/- and the same was processed u/s 143(1) and assessment was carried out u/s 143(3) of the Act. The Assessing Officer completed assessment at an income of Rs,7,40,52,000/- after making disallowance on account of purchase of diesel. 2.2 Aggrieved by the order of Ld. A.O., assessee preferred appeal before Ld. CIT(A). Before Ld. CIT(A), assessee gave detailed explanation including additional evidence u/s 46A. Ld. CIT(A) called for remand report and after considering the submissions in the remand report and that made by the assessee, various additions were 3 I.T.A.No.5580./Del/2013 deleted except restricting the disallowance amounting to Rs.1,51,438/- on account of unexplained diesel expenses. It has been submitted by the Ld. A.R. that considering the smallness of the amount involved, the assessee did not file appeal before this Tribunal against this disallowance. 2.3 Ld. A.O. initiated penalty proceedings u/s 271(1)(c) of the Act and levied penalty amounting to Rs.55,655/- on the addition of Rs.1,51,438/- sustained by Ld. CIT(A). Aggrieved by the penalty order passed by Ld. A.O., the assessee preferred appeal before Ld. CIT(A). Ld. CIT(A) upheld the penalty levied by Ld. A.O. and relied upon the order of appellate authority in the quantum proceedings. Aggrieved by the order of Ld. CIT(A), assessee is in appeal before us now.
Ld. A.R. submitted that assessee had incurred an amount of Rs.12,15,647/- for purchase of diesel in cash from M/s. Chaudhary Automobiles and M/s. Jai Sai Motors. He submitted that it was on the basis of documents filed during the quantum proceedings obtained from these parties along with confirmation that addition was reduced by Ld. CIT(A). He referred to the findings of Ld. CIT(A) in quantum proceedings which is placed at page 39 of the Paper Book which reads as under: “I have considered the submission made by the assessee as well as made by the AO and also perused the material on record. On going through the same I notice that there is no adverse observation or finding by the A.O so far as accounts of this year are 4 I.T.A.No.5580./Del/2013
concerned except the fact in the assessment order that the assessee could not produce for the cash purchases to the extent of Rs.1,51,438/- though the assessee has fired the certificates and evidences in support thereof. The AO has simply relied upon the observation made in the earlier years assessment order. Each year is an independent year and this issue is an issue of facts not of law. As such the A.O was not justified in applying this reasoning for disallowing the expenditure. I am in agreement with the contention of the assessee that there is no restriction in law for making purchases in cash except as restricted by Section 40A(3). It is not the case of the AO that these cash purchases are hit by the provision of Section 40A(3). The assessee is maintaining regular books of accounts and no discrepancies have been pointed out in these books of accounts which are duly audited and certified. The assessee has placed sufficient details in the paper book in support of its contention that all these purchases are genuine. The A.O. could not point out any mistake either in the assessment order or in the remand report in respect of these evidences and the contention of the assessee. The fact that M/s. Chaudhary Automobiles is known to the assessee cannot be a ground that the purchases made from them in cash are not genuine. The AO has failed to bring any material to negate the claim of the assessee. In view of these facts the AO was not justified in disallowing the entire claim of Rs.12,15,,647/- being the cost of the diesel purchased by the assessee in cash. However, I am in agreement with the AO so far as disallowance of Rs.1,51,438/- is concerned. Therefore, the disallowance made by the AO is restricted to Rs.l,51,148/- The assessee gets a relief of Rs.10,64,209/-. Accordingly, this ground of appeal is partly allowed.”
3.1 He submitted that Ld. CIT(A) was satisfied with the reply and the evidences submitted by the assessee and has also ob served that the assessee is maintaining its 5 I.T.A.No.5580./Del/2013 regular books of account and that the Ld. A.O. has not made any adverse observation in respect of the same. He submitted that the disallowance was restricted to Rs.1,51,438/- only for the reason that the bills for cash purchase to this extent could not be produced by the assessee. He submitted that initiation of penalty on this amount confirmed by the Ld. CIT(A) is unjustified as the assessee itself has not concealed any income or filed inaccurate particulars of income. He placed his reliance upon various judgements and of Hon'ble Jurisdictional High Court as well as the Coordinate Benches of this Tribunal wherein it has been held that mere rejection of a claim for want of evince would not amount to levy of penalty u/s 271(1)(c) of the Act.
On the contrary, Ld. D.R. relied upon par 4.3 of Ld. CIT(A)’s order. Assessee emphasized that since the addition to an extent of Rs.1,51,438/- has been confirmed by Ld. CIT(A) against which the assessee has not preferred any appeal before this Tribunal, penalty levied by Ld. A.O. has to be upheld.
We have perused the relevant material placed on record as well as the arguments advanced by both the parties. On going through the same, we agree with the contention raised by Ld. A.R. that there is no adverse observation or finding by Ld. A.O. so far as on account for the year under consideration is concerned, except for the fact that assessee could not produce bills for cash purchases to an extent of Rs.1,51,438/-. In the paper
6 I.T.A.No.5580./Del/2013 book filed before us, assessee has produced confirmation and certificate from the parties who had sold diesel to assessee. Neither from the assessment order nor from the remand report, it can be discerned that the assessee has furnished inaccurate particulars of income.
The fact that M/s. Chaudhary Automobiles is known to the assessee, cannot be a ground that the purchases made by them in cash are not genuine. The Assessing Officer has failed to bring any material to negate the claim of the assessee. It is also not the case of Ld. A.O. that these cash purchases are hit by the provisions of Section 40A(3) of the Act. Merely because certain expenses that have been claimed by the assessee, are not supported by the documentary evidence to the satisfaction of the authorities below, it cannot be said that the Revenue has proved such expense claimed by the assessee to be non genuine. We are, therefore, of the considered opinion that the penalty needs to be deleted. Accordingly, grounds raised by the assessee stand allowed. Order pronounced in the open court on 19th Sep., 2016.
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