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2014 (11) TMI 1228 - AT - Income TaxPenalty u/s 271(1)(c) - Disallowance of expenses - HELD THAT:- Addition has been made purely on estimate without reference to any clinching evidence/material being on record and therefore, the penalty is not sustainable. This finding of CIT(A) could not be controverted by Revenue. We also find that in the penalty order also, it is noted by the AO that 25% disallowance was made out of various expenses - 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. - 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 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 on account of training fees and similarly has claimed extra expenses under the head direct training expenses. This is also seen that in the original return of income filed by the assessee, deduction was claimed 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 AO that as per the submission of the assessee, some bills and vouchers are not readily available and they are misplaced and cannot be produced. Hence, even if it is held that books of account are not rejected then also, the allowability of expenses has to be examined. CIT(A) should pass necessary order as per law as per above discussion after providing reasonable opportunity of being heard to both the sides.
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