2018 (7) TMI 375 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - We are of the view that in the quantum appeals the issues in dispute has been set aside and restored back to the AO for denovo proceedings and some of the issues were allowed and dismissed, in the aforesaid manner, therefore, the penalty in question involved in both the appeals are set aside to the file of the AO with the liberty to initiate the fresh penalty proceedings, if any, as per Rules in both the appeals and pass a speaking orders. Appeals of the Assessee stand allowed for statistical purposes.

Issues Involved:
1. Legality of the order passed by CIT(A) Rohtak.
2. Confirmation of penalty under Section 271(1)(c).
3. Non-consideration of additional explanations and documentary evidence.
4. Disallowance of payments under various heads, including inland haulage and freight expenses.
5. Additions on account of unexplained cash payments.
6. Disallowance of expenses under Section 40(a)(ia).
7. Disallowance of 50% of certain expenses.
8. Addition on account of notional interest.
9. Addition of household expenses.

Detailed Analysis:

1. Legality of the Order Passed by CIT(A) Rohtak:
The assessee contended that the orders dated 23.1.2014 and 29.1.2015 passed by CIT(A) Rohtak were "bad in law" and contrary to the facts and submissions on record. The Tribunal noted that the assessee did not appear despite notices and decided to proceed ex parte.

2. Confirmation of Penalty under Section 271(1)(c):
The penalties of ?12,40,582/- for AY 2007-08 and ?16,18,000/- for AY 2009-10 were contested. The Tribunal found that the quantum appeals had been partly allowed and restored to the AO for fresh examination, thus setting aside the penalties for denovo proceedings.

3. Non-Consideration of Additional Explanations and Documentary Evidence:
The assessee argued that CIT(A) ignored explanations and documentary evidence regarding payments made under inland haulage and other heads. The Tribunal observed that the CIT(A) and AO had made additions due to the non-production of evidence by the assessee.

4. Disallowance of Payments under Various Heads:
The Tribunal discussed the disallowance of ?18,72,599/- under Section 40(a)(ia) due to non-deduction of TDS. It referred to precedents like CIT vs. Gujarat Narmada Valley Corporation and ACIT vs. Minpro Industries, concluding that most payments were reimbursements and not subject to TDS. The addition was deleted.

5. Additions on Account of Unexplained Cash Payments:
For AY 2007-08, the AO added ?12,67,193/- and ?3,86,041/- due to unexplained cash payments. The Tribunal directed the AO to re-examine the evidence, including affidavits and revised cash books, and restored the issue for denovo examination.

6. Disallowance of Expenses under Section 40(a)(ia):
The Tribunal found that the payments made were reimbursements and not subject to TDS under Section 194C. The addition of ?18,72,599/- was deleted.

7. Disallowance of 50% of Certain Expenses:
The AO disallowed 50% of expenses amounting to ?1,54,665/- due to unverifiable vouchers. The Tribunal upheld this disallowance, agreeing with the CIT(A) that the AO's action was justified.

8. Addition on Account of Notional Interest:
The Tribunal allowed the ground related to notional interest, citing the Gauhati High Court's ruling in Highways Constructions Co. Pvt. Ltd. vs. Commissioner of Income Tax, which held that notional interest cannot be charged.

9. Addition of Household Expenses:
The AO added ?20,000/- to household expenses, estimating them at ?10,000/- per month. The Tribunal found the CIT(A)'s estimation reasonable and upheld the addition.

Conclusion:
The Tribunal set aside the penalties and some additions for fresh examination, upheld certain disallowances, and deleted others based on precedents and factual analysis. The appeals were partly allowed for statistical purposes.

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