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2019 (4) TMI 704 - ITAT DELHIPenalty u/s 271(1)(c) - Defective notice - 50% disallowance of Sales Promotion expenses - quantum proceedings qua addition of on account of disallowance of Sale Promotion expenses is pending before High Court - HELD THAT:- we are of the considered view that in the instant case, not only the notice issued to the assessee u/s 274 read with section 271(1)(c) is defective but AO has not even made himself satisfied at the time of making disallowance / addition in assessment order if the assessee has furnished inaccurate particulars of income or has concealed particulars of his income rather to be on the safer side he has invoked both the limbs of section 271(1). In the instant case also assessee claimed sale promotion expenses which have been disallowed by the AO as well as Ld. CIT(A) specifically on the ground that the assessee has failed to furnish the supporting details to sustain its claim. But at no point of time AO has declared the claim as bogus rather observed that expenses incurred on boarding and lodging and traveling of doctors are neither business expenses nor ethical in natures. We are of the considered view that mere disallowance of sale promotion expenses claimed by the assessee does not amount to concealment of income or furnishing of inaccurate particulars of income and as such penalty cannot be levied. Further more when it is not in dispute that the question as to disallowance of 50% of expenditure claimed by the assessee under the head “Sale Promotion expenses’ is pending adjudication before the Hon’ble High Court. So, when, the question of disallowance of sale promotion expenses is “debatable one penalty cannot be imposed. in view of what has been discussed above, the case of Sundaram Finance Ltd. [2018 (5) TMI 259 - MADRAS HIGH COURT] and other decision, as relied upon by ld. DR for the Revenue are not applicable to the facts and circumstances of the case. However, decision rendered by Hon’ble Apex Court in CIT vs. SSA’s Emerala Meadows [2016 (8) TMI 1145 - SUPREME COURT] and Hon’ble Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] are applicable to instant case. In view of discussion made in the preceding paras AO/CIT(A) have erred in levying /confirming the penalty in this case which is not sustainable in the eyes of law. Consequently penalty stands deleted
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