HOMOEO LABORATORIES,PUNE vs. ITO- WD- 20(1)(3), MUMBAI

This appeal filed by the assessee on 25.04.2016 is against the order of the CIT (A)-36, Mumbai dated 2.1.2016 for the AY 2007-2008.

In this appeal, assessee raised five grounds in toto. The core issue involved in this appeal relates to the levy of penalty u/s 271(1)(c) of the Act. Narrating the brief facts, Ld Counsel for the assessee submitted that the assessee claimed advertisement expenses amounting to Rs. 17,87,754/-. Considering the earlier AYs assessment orders, AO proceeded to disallow the entire amount and determined the assessed income of Rs. 26,52,970/- against the returned income of Rs. 8,48,134/-. Matter travelled to the first appellate authority. 3. During the proceedings before the first appellate authority, after considering the submissions of the assessee CIT (A) restricted the disallowance to 4,06,371/-, the cash portion of the payment on account of advertisement expenses on percentage basis. In connection with the said confirmation to the addition on ad- hoc basis, AO levied the penalty amounting to Rs. 1,36,784/-. CIT (A) confirmed the said penalty. Aggrieved, assessee is in appeal before the Tribunal. 4. During the proceedings before us, Ld Counsel for the assessee demonstrated that the disallowance, made by the AO in the assessment over the years on account of cash segment of the advertisements expenses, was based on the ad-hocism giving some relationship to the entire expenditure on one side and turnover on the other side. 5. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. On hearing both the parties, we find, this is a case of adhocism and the same cannot be the basis for determining the concealment at least for the purpose of invoking the provisions of section 271(1)(c) of the Act. Therefore, in our considered opinion, it is not a fit case for levy of penalty. As such there is no any incriminating material to demonstrate that there is deemed concealment of income within the meaning of Explanation-1 to section 271(1)(c) of the Act. Accordingly, grounds raised