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TMI Blog2014 (11) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... osed only on ad hoc disallowance. This is by now a settled position of law that on ad hoc and estimated disallowance/addition, without bringing any clinching material on record suggesting concealment of income or furnishing of inaccurate particulars of income, imposition of penalty u/s 271(1)(c) is not justified. - Decided in favour of assessee. Rejection of books of accounts - net profit @8.28% of the training fee received by the assessee - HELD THAT:- Rejection of books of account is not proper then he can examine the allowability of various expenses claimed by the assessee under various heads as noted by the AO the assessment order particularly in view of this fact that the amount of income and expenditure along with net profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s common order for the sake of convenience. 2. First we take up the appeal of the Revenue for assessment year 200607. In this appeal, the Revenue has raised the following grounds: 1. That the Ld. CIT(A) has erred in law and on facts in allowing the relief of ₹ 6,00,000/- without appreciating that the disallowances of expenses were made as claims for deductions made by assessee on account of expenses could not be substantiated by him. 2. That the Ld. CIT(A) has erred in law and in facts in holding that disallowances made were merely guesswork when CIT(A) himself has held that disallowance of expenses was called for establishing thereby that the assessee had filed inaccurate particulars and concealed its income. 3. That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer that 25% disallowance was made out of various expenses totaling to ₹ 4,15,95,755/-. It is also noted in the penalty order that the CIT(A), Kanpur after considering the facts of the case has restricted the disallowance to 5% of direct expenses which was worked out at ₹ 16 lac. This goes to show that the penalty was imposed only on ad hoc disallowance. This is by now a settled position of law that on ad hoc and estimated disallowance/addition, without bringing any clinching material on record suggesting concealment of income or furnishing of inaccurate particulars of income, imposition of penalty u/s 271(1)(c) is not justified. Hence, we decline to interfere in the order of CIT(A). 5. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten submissions of Learned A.R. of the assessee submitted before the CIT(A) are also regarding rejection of books of account. But CIT(A) has not decided this aspect i.e. rejection of books of account aspect and he has decided the issue on the basis that he has asked the assessee to prepare a chart of expenditure incurred in absolute numbers as well as in percentage terms for the current year and also the preceding year. He has reproduced the chart submitted by Learned A.R. of the assessee before him and thereafter, he has decided the issue as per para 3.2.2 to 3.2.5 of his order, which are reproduced below for the sake of ready reference: 3.2.2 Having gone through the aforesaid chart, I find that the Training Receipts have reduced si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire increase of Director's remuneration amounting to ₹ 10.80 lakhs was totally unjustified, excessive, unreasonable and for extra-commercial consideration therefore, such excessive amount being ₹ 10.80 lakhs is being disallowed u/s 40A(2)(b) of the Act. 3.2.4 Still further, the A.O. has stated in his order that some bills vouchers which were readily not available with the appellant had not been produced. Thus, there remains some amount of expenditure which is unverifiable. The onus is always on the assessee to prove the factum of expenditure with sufficient proof and evidences. In this view of the matter, I am of the considered view that a lump-sum disallowance of ₹ 5 lakhs in this regard would meet the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and expenditure along with net profit as per return filed by the assessee and as per revised return filed by the assessee are different. In the revised return, the assessee has declared extra income of ₹ 94,78,258/- on account of training fees and similarly has claimed extra expenses of ₹ 94,82,258/- under the head direct training expenses. This is also seen that in the original return of income filed by the assessee, deduction was claimed of ₹ 7,95,910/- on account of depreciation and in the revised return, no deduction was claimed under the head depreciation. It is also seen that in the assessment order, it is noted by the Assessing Officer that as per the submission of the assessee, some bills and vouchers are not rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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