TMI Blog2012 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ri S.K.Ambashta, DR ORDER PER D.KARUNAKARA RAO, AM: This appeal by the assessee directed against order of the Commissioner of Income-tax (Appeals)- II, Pune dated 28/01/2010 which in turn, has arisen from penalty order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act 1961 ( in short the the Act ), pertaining to the assessment year 2006-07. 2. The Grounds of appeal, as raised by the Revenue, read as under: 1. The learned Assessing Officer having failed to record his satisfaction for initiation of penalty proceedings during the course of assessment proceedings, the impugned penalty levied is bad in law, null and void and without jurisdiction and hence the learned C.I.T.[A] ought to have dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires that the assessee gave revised calculations of his income based on rough records maintained by him as well as the entries appearing in the bank passbook and accordingly, the Assessing Officer determined the net income from business at Rs.37,25,096/- and a net taxable income of Rs.39,24,680/-, as against business income of Rs.1,94,861/- and net taxable income of Rs.3,94,441/- declared in the return. 4. Thus, the assessee furnished the profits and gains from business or profession at Rs .1,94,861/-. However after the assessment, the AO assesseed said business income at Rs 37,25,096/-. This variance is attributable to the following adjustment, namely,- 1) Section 44AF of the Act: Rejection of the assessee s claim on the applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same holding that the assessee is not a retail businessman . Consequent to the same, the AO attempted to examine the genuineness of the expenditure claims. The details of the said expenditure are as under. INCOME Brokerage Commission 35,82,917 TOTAL 35,82,917 EXPENDITURE Labour (On Contract) 1,85,450 Travelling Conveyance 3,30,570 Postage Telephone 37,135 Engineering Services 2,87,500 Printing Stationery 18,530 Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has furnished inaccurate particulars as per the discussion given in para 3 of the impugned order. Aggrieved with the said order of the CIT(A), the assessee filed the present appeal before us. 7. During the proceeding before us, the Learned Counsel for the assessee made various submissions to demonstrate that the present case is not fit case for levy of penalty. Regarding the invoking of provisions of section 44AF of the Act, the Learned Counsel mentioned that the assessee is under bona fide belief that he falls under the ambit of provision of the said section. In this regard, he mentioned that the very fact he applied the rate of 5% scrupulously to the receipts earned on account of commission and brokerage confirms the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the disallowance of the claims of said expenditure, the Learned counsel argued stating that the disallowance made is merely the result of an arbitrary decisions of the AO. The assessing officer failure to bring any direct evidences against the assessee to establish the assessee s mala fide in making such claims. No penalty should be attracted in respect of the additions based on adhoc disallowances and estimations. The Learned Counsel filed a copy of the judgment of Apex Court in the case of Reliance Petro Products Pvt Ltd., [2010] 322 ITR 0158 for the proposition that mere incorrect claims of the assessee in the return does not attract the penalties u/s 271(1)(c) of the Act. 8. On the other hand, the Learned DR for the revenue ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipts are not reflect in the income of said company. Therefore, we give a benefit of doubt to the assessee on this issue too considering the fact, the subject matter has to be decided under the penalty provisions in view its damaging consequences to the assessee. Regarding expenditure related to the additions, it is a prima facie evident that the claims were disallowed by the AO on adhoc basis and merely for want of evidences. It is not the case that the revenue is in possession of some information evidencing their falsity. In our opinion, such disallowances are not attract the penal provisions more so when there are no direct incriminating evidences against the assessee to prove the claims made by the assessee are false. As such it is a dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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