MOHD SALIM HALIM SHAIKH,MUMBAI vs. DCIT 22(1), MUMBAI

The assessee has raised the following grounds:- A.Y.2007-08 “1. The Authorities below have erred in levying / confirming levy of penalty under section 271(4)(c).”

The assessee was asked to give partywise and monthwise details of expenses indicating name and complete address. Since no details were filed by the assessee during the assessment proceedings, therefore, the 2 A.Y.2007-08 genuineness of the expenses were not proved. Name and address of the parties were not produced. In view of the said circumstances 12% of Rs.3,02,47,939/- i.e. Rs.36,29,753/- was added to the income of the assessee. Deduction u/s.80-C claimed to the tune of Rs.1,00,000/- was also rejected in the absence of supportive documents. Thereafter, the assessee filed an appeal and furnished the additional evidence. At the time of remand proceeding the assessee produced bills of the transport expenses only to the tune of Rs.66,25,633/- out of Rs.1,63,61,545/- and claimed that the balance bills were destroyed by white ants. No bills were produced in respect of petrol diesel and oil expenses as the payments were made in cash. Out of the Tyre Replacement expenses the assessee could produce bills to the tune of Rs.4,96,000/- out of Rs.14,58,000/-, 50% of bills were produced in respect of wages and conveyance, only 1/3rd bills relating to vehicle repairs were produced. The CIT(A) sustained 10% of the expenses as under:-

The assessee has challenged the confirmation of the penalty under issue no.1. The learned representative of the assessee has pleaded that the income of the assessee was assessed on the basis of estimation because in support of the claim of expenses the assessee failed to produce some evidence therefore in the said circumstances 3 A.Y.2007-08 no penalty is leviable in view of the law settled by the Hon’ble High Court of Delhi dated 25.01.2010 in case titled as CIT Vs. Aero Traders P. Limited. On the other hand, learned departmental representative has placed reliance upon the order passed by the CIT(A). By giving careful thoughts to the contention raised by the learned representative of the parties and perused the record carefully, it came into the notice that the assessee has claimed the following expenses in the trading and Profit & Loss Account as under:-

However, at the time of assessment before the assessing authority the assessee failed to produce the evidence in support of his claim. The Assessing Officer assessed the income @ 12% of Rs.3,02,47,939/- i.e. Rs.36,29,753/-. Deduction u/s.80-C of the Act to the tune of Rs.1,00,000/- was also rejected. Thereafter, the assessee filed an appeal before the CIT(A), who reduced the tax liability as the assesse succeeded to furnish some details in support of their claims. The CIT(A) assessed the tax liability to the tune of Rs.18,91,883/- 4 A.Y.2007-08 which was @ 10% of the expenses on different accounts such as transportation charges, petrol, diesel and oil, tyre replacement, vehicle expenses and wages. Now it is not in dispute that the assessment of the assessee was finalized on the basis of the estimation as the assessee failed to produce some evidences in support of his claim of expenses. No penalty is leviabel in view of the law settled by the Hon’ble High Court of Delhi dated 25.01.2010 in case titled as CIT Vs. Aero Traders P. Limited wherein it is held that no penalty is leviable when the assessment was finalized on the basis of estimation. Moreover, rejection of the claim by the authority nowhere attract the penalty in view of the law settled by Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340. In view of the above said facts and circumstances and law mentioned above, we are of the view that the penalty is not liable to be sustainable in the eyes of law. Accordingly, we delete the penalty and decided this issue in favour of the assessee against the revenue.