TMI Blog2011 (7) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 2003-04 in I.T.A. No. 412/Ahd/2011. The only ground raised by the assessee in this year is as under:- The ITO Ward 4, Valsad has erred in law and on facts to levy penalty of Rs.10,884/- on disallowance of General expenses, maintenance expenses, salary expenses and traveling expenses. Ld. CIT(A) Valsad has also erred in law in directing the A.O. to levy 50% of the said penalty. 3. The brief facts of the case are that it is noted by the A.O. in the penalty order passed by him that the assessment was finalized u/s 144 read with section 147 of the Income tax Act, 1961 on total income of Rs.1,10,775/- as against the returned income of Rs.81,166/-. The addition made by the A.O. of Rs.29,619/- is on account of 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below. 5. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that as per the copy of the assessment order, it is seen that the A.O. has made estimated ad-hoc disallowance on this basis that proper details are not available. It is noted by the ld. CIT(A) in his order in the course of penalty proceedings that the tribunal has restricted the disallowance in quantum proceedings to the extent of 10% of the expenses as against 20% disallowance made by the A.O. The copy of the tribunal order in quantum proceedings in I.T.A. No. 3613, 3514 3615/2007 has been made available before us. In the said order, it is held by the tribunal that the disallowance of 20% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not filed within the meaning of Section 139(4) of the Act, hence a notice u/s. 148 of the Act was issued on 04.11.08. The assessee has requested to treat the return of income filed on 14.07.08 as a return of income in compliance to notice u/s. 148 of the Act. The AO observed that the appellant was engaged in the business of construction, however, has declared Nil income on receipts of Rs.1,80,001/-. The verification revealed that the assessee has neither got his accounts audited within the meaning of section 44AB of the Act nor has declared income u/s. 44AD of the Act as it was engaged in the business of construction. Therefore, assessee's total income was assessed at Rs.14,400/- as per provisions of Section 44AD of the Act and pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent of 8% of receipt, deduction is allowable to the assessee on account of payment of interest and remuneration to the partner as per the provisions of Section 40(b) of the Income tax Act, 1961 and if such deduction is allowed, there will be no taxable income and hence, penalty should not be imposed in the present case for the income assessed by the A.O. at Rs.14,400/- as against nil income declared by the assessee in its return of income filed. At this juncture, a query was raised by the bench as to whether the assessee has made any payment of interest or remuneration to the partner and whether any such payment is authorized by the partnership deed of the assessee firm, it is submitted by the Ld. A.R. that he is not aware about thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total turnover or gross receipt of the assessee or if the assessee has disclosed more income then such income as disclosed by the assessee. As per sub-section (5) of this section, it is open to the assessee to claim that his income is less than 8% of the receipt but in that situation, the assessee has to maintain books of account and other relevant documents as required under sub-section (2) of Section 44AA and get them audited and furnish a report of such audit as required u/s 44AB. In the case before us, this query was also raised by the bench as to whether the assessee has got its accounts audited u/s 44AB and in reply, it was submitted by the Ld. A.R. that although the books of accounts were maintained by the assessee but the same were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. It was also held that mere rejection of explanation would not be a ground for levying penalty. In the present case, the facts are different because in the present case, section invoked by the A.O. is section 44AD and not section 69. Section 44AD is under the heading special provisions for computing profits and gains of business of civil construction etc. whereas Section 69 is under the heading unexplained investments . In our considered opinion, section 69 can be invoked by the A.O. only if he is not satisfied with the explanation of the assessee and the assessee is not required to add such income in the computation suo moto. But as per the provisions of section 44AD, the assessee is required to declare income in the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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