2011 (7) TMI 1397 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to penalty imposition u/s 271(1)(c) of the Income Tax Act, 1961 for disallowance of expenses in assessment years 2003-04 and 2006-07.

Assessment Year 2003-04:
The appellant contested the penalty imposed by the Assessing Officer (A.O.) on disallowance of various expenses, which was reduced by the tribunal from 20% to 10%. The A.O. relied on the judgment of Dharmendra Textile Processors case. The appellant argued that penalty on estimated disallowance is unjustified. The tribunal found the ad-hoc disallowance insufficient for penalty imposition, stating that mere ad-hoc disallowance does not establish concealment. The penalty was deemed unjustified and was deleted.

Assessment Year 2006-07:
The A.O. assessed the appellant's income at 8% of gross receipts u/s 44AD due to non-audit of accounts. The appellant contended that penalty for deeming provisions of Section 44AD is unwarranted, citing a Madras High Court judgment. The tribunal noted that Section 44AD mandates income declaration at 8% of receipts if not audited, and the appellant failed to provide evidence of allowable deductions. The Madras High Court judgment was deemed inapplicable as Section 44AD differs from Section 69. The penalty was upheld, and the appeal was dismissed.