SHRI RAJESH JAIN,DEHRADUN vs. ACIT, DEHRADUN

ORDER

PER BEENA PILLAI, JUDICIAL MEMBER:

1. “That on the facts and circumstances of the case and in law, the order dt. 16.11.2011 (hereinafter referred to as the ‘impugned appellate order’), passed u/s 250(6) of the Act by the ld. CIT(A)-II, Dehradun is erroneous, arbitrary, without jurisdiction, illegal and bad in law.

2. That on the facts and circumstances of the case, the ld. CIT(A) has erred in holding that the appellant deliberately submitted inaccurate particulars of his income and confirming the penalty imposed u/s 271(1)(c) of the IT Act, 1961 on addition made by ld. Assessing Officer in assessment order passed u/s 143(3) of the Act. 2.1 That the CIT(A) failed to appreciate that there was no concealments on the part of the appellant in his return of income nor has the appellant furnished inaccurate particulars of the income. 2.2 That the CIT(A) have ignored the fact that the addition of Rs. 42,302 (being 50% of 86405, on account of purchases), 53000 (being 1% of total expenses on running of trucks), 57000 (on account of agriculture income) made by ld. Assessing Officer were on adhoc basis or same was on account of difference in opinion on interpretation on law. There was no evidence to suggest either concealment of income or furnishing inaccurate particulars by Appellant. 2.3 It was incumbent upon the ld. Assessing Officer to take cognizance of the various judicial pronouncement supporting the appellants contention which were duly brought to the notice at the time of hearing but have been totally disregarded and ignored by him. Merely mentioning that “case law expound general principles which are not germane for the issues at hand”. The ld. CIT(A) has not absolved himself of the onus to prove how those judgment were not applicable to the Appellant case. 2.4 That the appellant was under a bona fide belief that all the expenditure claimed was in normal course of business and should be allowed. The above grounds of objections are without prejudice to each other. That the Appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing.”

2. The assessee had filed its return of income on 31/10/1997 declaring the total income of Rs. 3,03,440/-. This case was selected for scrutiny and notices u/s 143(2) was issued. It was found during the assessment proceedings that the assessee derives its income from salary, house property as well as business income from its proprietary ship concern namely M/s Bick Ford Fuses Company, Garuda Shakti Transport Company. In the assessment proceedings the AO had made an adhoc disallowance of expenses claimed by the assessee to an extent of Rs. 43,302/- in the books of Brick Ford Fuses Company and an amount of Rs. 53,000/- being 1% of the total expenses on running of trucks in the books of Garuda Shakti Transport Company.

3. Aggrieved by the order of the ld. AO the assessee went into appeal before the ld. CIT(A). The ld. CIT(A) confirmed the adhoc additions made by the AO against the ld. CIT(A) the assessee preferred an appeal before this Tribunal which was dismissed ex- parte and no miscellaneous application has been preferred by the assessee considering the amount of addition being very less. The ld. AO simultaneously had initiated penalty proceedings against the said additions made in the assessment order. In the penalty order the AO levied a penalty of Rs. 3,30,000/-.

4. Aggrieved by the penalty order of the ld. AO, the assessee went into appeal before the ld. CIT(A). The ld. CIT(A) confirmed the addition made by the ld. AO on the basis that assessee has deliberately submitted inaccurate particulars of income.

5. Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us.

6. We have perused the order of the authorities below and the arguments placed by the assessee in respect of the penalty levied. The ld. AR submitted that the AO has made adhoc additions. The Ld.AR submitted that the assessee at the time of assessment proceedings had furnished all the factual details in respect of the said additions. He also submitted that the assessee was under a bonafide belief that all the expenditures claimed by the assessee was in the normal course of the business. The ld. AR placed its reliance upon the judgments of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. Reported in 322 ITR 158 and the decision of Hon’ble Jurisdiction High Court in the case of Miss Madhushree Gupta vs. Union of India reported in 317 ITR 107. 6.1. It is observed that the AO has disallowed the expenditure claimed by the assessee and has made an adhoc disallowance. It is not a case that the assessee has filed inaccurate particulars of income. Merely because the expenditure claimed by the assessee is not acceptable to the AO does not amount to concealment of income or furnishing of inaccurate particulars. It is observed from the order of the assessment u/s 143(3) that the ld. AO has simply initiated penalty proceedings u/s 271(1)(c) of the Act without recording any satisfaction as to under which limb the penalty could be sustained. Even from the penalty order passed by the ld. AO the said satisfaction has not been recorded. The ld. AO has merely initiated the penalty proceedings on an unacceptable expenditure claimed by the assessee. In our view this does not amount to filing of wrong particulars of income or concealment of income by the assessee.

7. The assessee under bonafide belief had claimed these expenditures in the normal course of the business. Further the Hon’ble Jurisdictional High Court in the case of Madhushree Gupta (supra) has held that the AO will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars before he initiates the penalty proceedings. The prima facie satisfaction by the AO that the case may deserve imposition of penalty should be discernable from the order passed during the course of the proceedings. The Hon’ble Court has further held that a due compliance would be required to be made in respect of the provisions of sections 274 and 275 of the Act.

8. We, therefore, following the decision of the Hon’ble Jurisdictional High Court and on the basis of discussion held above allow the ground raised

by the assessee.