M/S. AMBARWADIKAR & COMPANY,AURANGABAD vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 3, AURANGABAD

This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 2, Aurangabad (‘CIT(A)’ for short) dated 27.10.2017 for the assessment year 2007-08 levying the penalty u/s 271(1)(c) of the Income Tax Act, 1961 (‘the Act’).

Briefly, the facts of the case are as under :- The appellant is a firm constituted under Partnership Act. It is engaged in the business of acquisition of Government Contract. The return of income for the assessment year 2007-08 was filed on 31.10.2007 declaring total income of Rs.1,06,54,558/-. The said return of income was processed u/s 143(1) of the Act accepting the returned income. Subsequently, on Tata Motors Finance Ltd. of Rs.4,95,412/- and paid interest on the same and no tax was deducted thereon. Accordingly, notice u/s 148 of the Act was issued on 27.03.2014 and the assessment was completed by the Assessing Officer vide order dated 30.03.2015 passed u/s 143(3) r.w.s. 147 of the Act after making the following two additions :- (i) Addition based on the entries in a diary which are unrecorded in the regular books of account aggregating to Rs.21,07,120/- (20% of Rs.1,05,35,600/-). (ii) Addition of Rs.4,95,413/- on account of interest paid to Tata Motors Finance Ltd. 3. Being aggrieved, an appeal was filed before the ld. CIT(A). During the course of proceedings before the ld. CIT(A), he formed the opinion that the amounts mentioned in the diary, the entire sum should be assessed tax instead of 24% of aggregate amounts mentioned. Accordingly, he issued a show-cause notice for the enhancement. In response to the said show-cause notice, it was explained that the entries in the diary does not indicate that it was receipt of incur but it was expenditure. However, rejecting the contention of the explanation of the appellant, the ld. CIT(A) enhanced the addition and issued a show-cause notice for levying of penalty. Accordingly, penalty was levied by ld. CIT(A) vide impugned order dated 27.10.2017 u/s 271(1)(c) of the Act. 4. Being aggrieved, the appellant is before us in the present appeal. 5. The ld. AR submitted that this Tribunal in the quantum appeal of the assessee in order dated 27.05.2021 had set-aside