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TMI Blog2022 (2) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.01.2013 determining total income at Rs. 1,59,41,190/-. The Assessing Officer invoked penalty proceedings under section 271(1)(c) of the Act and imposed penalty vide order dated 26.07.2013. Both the quantum addition as well as penalty imposed upon the assessee was challenged before the ld. CIT(A). The ld. CIT(A) decided the appeal of the assessee against the order passed under section 271(1)(c) on 25.07.2014. The assessee filed rectification application u/s 154 to CIT(A) against above order dated 25.07.2014 on account of factual mistakes apparent from record. In consequence thereof, CIT(A) passed order u/s 154 of the Act on 17.10.2014. The assessee was aggrieved by the order dated 24.07.2014 vide which the penalty was confirmed and intended to file the appeal against the above order, but inadvertently filed appeal against CIT(A) order dated 17.10.2014. When the appeal against CIT(A) order dated 17.10.2014 came up for hearing before the Income Tax Appellate Tribunal Ahmedabad "A" Bench, Ahmedabad in ITA No.3442/Ahd/2014, the inadvertent mistake came to the notice of Bench. The ITAT vide order dated 4th April, 2018 allowed/directed the assessee to file a separate appeal against CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The learned CIT(A) held that no details were furnished by the assessee either during the course of quantum proceedings or during the course of penalty proceedings to support and substantiate the expenses claimed by it under various heads. He noted that the issue relating to the disallowance of 25% of the expenses was not even pressed by the assessee during the course of quantum appellate proceedings before him. He accordingly confirmed the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act by relying on the decision of Allahabad bench of ITAT in the case of R.K. Brothers (2003) 87 ITD 649 (All) wherein it was held that when concealment of income was apparent from record, penalty could be imposed even on basis of estimate of income. Thereafter, assessee moved an application for rectification u/s. 154 in the quantum proceedings and while allowing the same vide order dated 17.10.2014, the ld. CIT(A) granted certain relief to the assessee. Consequently, the penalty imposed on the assessee u/s. 271(1)(c) was reduced to Rs. 8,26,709/-. Still aggrieved, the assessee has preferred this appeal before the Tribunal. 6. The learned Counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on record. The issue for consideration before us is whether the penalty imposed under Section 271(1)(c) of the Act can be sustained for the disallowance made on account of various expenses on ad-hoc basis. As per the provisions of Section 271(1)(c) of the Act, the assessee is liable for penalty under Section 271(1)(c) of the Act if he is found to have concealed particulars of its income or furnished inaccurate particulars of its income. In this regard, it would be useful to refer to the law laid down by various High Courts as well as the Co-ordinate Benches of this Tribunal on the issue of levy of penalty in the case of ad-hoc addition/disallowance. The propositions laid down in this context in the judicial pronouncements are summarized below:- 9. Their Lordships of Punjab & Haryana High Court in Hari Gopal Vs. CIT [258 ITR 85 (P&H)] held as under:- "In order to attract clause (c) of section 271(1)(c) of the Income-tax Act, 1961, it is necessary that there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of section 271(1)(c) of the Act are not attracted to cases where the income of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance, firstly on the ground that assessee has failed to discharge its onus during the course of assessment proceedings as well as during the course of penalty proceedings; secondly the assessee has failed to comply with the statutory requirements of deducting TDS on the payments which has been claimed as expenses; and lastly the assessee's claim was not legally sustainable in law. 12. The Hon'ble ITAT while vacating the penalty proceedings observed as under:- "We have heard the rival submissions of the parties and also carefully perused the materials placed on record. So far as levy of penalty on disallowance of Rs. 9,83,145/- is concerned, it is seen that the AO has made adhoc disallowance at the rate of 20% of the various expenses without pointing out any specific expenses being in the nature of non business purpose or for personal use. If the accounts have been audited, then the normal presumption is that the expenses are verifiable vis-a-vis the documents maintained by the assessee. Even though disallowances have been made in the quantum proceedings, due to non verifiability of expenses through corroborative eevidences and the same has not been challenged, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income....." 15. The Hon'ble Mumbai Tribunal in the case of Anita L. Ghadge v D.C.I.T. in ITA No.5959 & 5960/MUM/2014, while vacating penalty proceedings initiated on account of disallowance of 70% of commission and 30% of other expenses on an estimate basis for not maintaining proper accounts, observed as under:- "We have heard the rival submissions, perused the orders of the Authorities below. On a perusal of the Assessment Order and the Ld.CIT(A) order, we find that the Assessing Officer disallowed the commission as well as the expenses on an estimate basis which was further reduced by the Ld.CIT(A). None of the authorities below have conclusively proved that there is neither concealment of income nor furnishing of inaccurate particulars by the assessee. It is only a mere disallowance of expenses on estimates on an adhoc basis. Penalty U/s.271(1)(c) of the Act is not attracted when there is an adhoc estimation of disallowance of expenses. Hence, we direct the Assessing Officer to delete the penalty levied U/s. 271(1)(c) of the Act. This ground is allowed." 16. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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