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2016 (12) TMI 607 - AT - Income TaxPenalty u/s 271(1)(c) - adhoc disallowance of expenses - Held that:- In the present case, the income of the assessee was assessed after rejection of books of accounts and 10% of certain expenses have been disallowed on estimate basis. What is relevant is finding of fact or bringing on record any evidence supporting the estimate. If there is none, it is only a matter of one’s person estimate against the other. In the instant case, there is no positive evidence as to why only 10% of the expenses have been disallowed. The AO has stated that since these expenses are not verifiable, he disallows 10% of these expenses and also made the basis for levy of penalty. This rather shows that the AO has not disputed the very incurrence or genuineness of the expenses at the first place. The non-verifiability of the expenses can be the basis for disallowance of expenses but the same cannot form the basis for levy of penalty without bringing on record any concrete evidence of furnishing inaccurate particulars of income or concealment of income. Further, the estimation done by the AO have been partially confirmed by ITAT by taking a macro view in terms of N. P rate instead of individual expenses and is again an estimation and nothing more. The Hon’ble Rajasthan High Court in case of CIT vs. Mahendra Singh Khedla (2012 (3) TMI 568 - RAJASTHAN HIGH COURT) has held that the additions have been sustained by the Tribunal only on estimation and a fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, penalty was wrongly levied by the AO. - Decided in favour of assessee.
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