TOMAR & BROTHERS,ETAWAH vs. INCOME TAX OFFICER 2(2)(5) ETAWAH, ETAWAH

At the time of hearing, learned AR of the assessee submitted that in the quantum appeal, preferred by the assessee before ITAT, it had reduced the estimation of expenditure disallowed by the Assessing Officer @ 5%. Following the same, learned CIT(A) in appeal preferred by the assessee against the penalty order u/s. 271(1)(c) of the Income-tax Act, 1961 (“the Act” for short), deleted the penalty levied by the Assessing Officer on the basis of estimation and rest of the penalty levied by the Assessing Officer was remitted back to the Assessing Officer to modify the penalty levied. In this regard, he submitted that the Assessing Officer has made three disallowances – (A) adhoc disallowance of expenditure, which learned CIT(A) has deleted the addition, having been made on the basis of estimation. (B) Disallowance u/s. 40(a)(ia) of the Act. In this regard, he submitted that there are several decisions of coordinate benches, wherein it has been held that no penalty can be levied towards disallowance of expenses u/s. 40(a)(ia) of the Act. (C) Addition of Rs.10,54,363/- of sundry creditors/debtors. In this regard, he submitted that the addition was made u/s. 41(1) and not u/s. 68 of the Act to invoke the provisions of section 271(1)(c) of the Act to impose penalty.

On the other hand, learned DR relied on the findings of lower authorities.

Considered the rival submissions and the material placed on record.

We observe that various courts have held that penalty cannot be imposed u/s. 271(1)(c) of the Act for determination of income/expenditure on the basis of estimation. With regard to disallowance u/s. 40(a)(ia), we 2 | P a g e observe that in view of decision of ITAT Agra Bench in the case of ACIT vs. Shri Ramendra Singh Kushwah, no penalty u/s. 271(1)(c) is attracted on disallowance of expenditure u/s. 40(a)(ia) of the Act. With regard to disallowance made by the Assessing Officer towards sundry creditors/debtors, we observe that the Assessing Officer has not quoted the relevant section, under which he has made the addition. We infer that the Assessing Officer has made addition u/s. 41(1) of the Act. Since the information have already been placed on record, it cannot be termed as concealment of income or inaccurate particulars of income.

In the result, the appeal preferred by the assessee is allowed.