TMI Blog2012 (10) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO initially for assessment year 2003-04 with the permission of the concerned CIT (Administration). The special auditors submitted their audit report on the basis of which various additions/disallowances were made by the AO to the total income of the assessee for assessment year 2003-04 aggregating to ₹ 6,22,29,314/-. On appeal, the learned CIT(Appeals) allowed relief of ₹ 3,85,41,616/- to the assessee and sustained the additions/disallowances made by the AO to the extent of ₹ 2,36,87,698/-. The details of the relief allowed by the learned CIT(Appeals) and additions and disallowances sustained by him are as under : Disallowances Head 143(3) r.w.s. 142(2A) Relief Allowed by CIT(A) Order dt.15- 05-2008 Disallowed accepted by the assessee. Add:- Purchase of Raw Material Packing Material 7,506,173 6,875,096 631,077 Purchase of Stores Spares 31,956 - 31,956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant claimed various expenses in the P L account based on the entries in the books of accounts. A special audit was directed by the AO in this case u/s 142(2A) of the Act. Before the special auditors the appellant could not produce supporting vouchers/bills/evidences in respect of such claims/expenses. Therefore, the special auditors expressed their inability to comment on the genuineness of the claim/expenses to the extent of the bills/evidences were not produced. The reasons/facts/circumstances for non production of such evidences by the appellant before special auditors are discussed in subsequent para. It is also worth to mention here that during post-special audit period, the appellant could locate/search the remaining bills/vouchers and were produced before AO. However, the AO did not admit such bills/vouchers on the ground that the same were not produced before special auditors. In my considered view the AO was not correct in not admitting such evidences. There is no bar in the Act that if an evidence has not been produced before special auditor, the assessee will be debarred from producing the same before AO during assessment proceedings. In fact, the AO is the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is whether the appellant s claim was bonafide or otherwise. The assessment year under consideration is A.Y. 2003-04 relevant to previous year 2002-03. Shri S.G.Teredesai was in the service of appellant till 2006. The appellant filed return of income of year under consideration on 27.11.2003 along with Tax audit Report. This shows that at that point of time, the vouchers/bills were in existence, since the auditors verified the same and furnished Tax audit Report. The said return of income was based on the entries made in the books of accounts. Therefore, the claim of expenses etc. made in return was correctly made under a bonafide belief. Moreover, the claim made in return of income was also bonafide since the return was filed in 2003 whereas the defalcation was noticed in F.Y. 2005-06. The defalcation had taken place from A.Y. 2001-02 to 2006-07. The appellant came to know the said defalcation when Shri S.G.Teredesai was on leave in the month of June 2005. It is worth mention here that the appellant suo-moto informed to the department in respect of defalcation committed by the said S.G. Teredesai. During special audit, the appellant failed to produce supporting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri S.G.Teredesai. Such claims were made on the basis of entries made in the books of accounts wherein the full particulars/details of name and address of the parties, number and date of invoice, particulars of subsequent payments were available on the basis sof which the inquiry/verification could have been made by the AO directly from such parties. Though the primary onus was on the appellant for producing the evidences/challans/bills, but in a peculiar circumstances of the case, the appellant was having a justified and bonafide explanation for failure to produce such evidences. In respect of appellant s claim of loss on account of foreign exchange fluctuation, the legal position upto A.Y. 2002-03, was that this claim was allowable whether or not the payment had actually been made or not. From A.Y. 2003-04, the amendment was made allowing such loss on exchange fluctuation in the year of payment only. However, the Courts have held that such loss was not notional as held by AO and CIT(A). In any case, such claim was a alegal claim and was also a debatable issue. The particulars of such claims were fully disclosed in the return of income/accounts. However, being a legal claim, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract the penalty u/s. 271(1)(c). 4. For the reasons given above and keeping in view the decision of learned CIT(Appeals)-24, in the case of M/s Universal Medicare Pvt.Ltd. for assessment years 2003-04 and 2004-05 cancelling the penalties imposed u/s 271(1)(c) in the similar facts and circumstances, the learned CIT(Appeals) cancelled the penalty imposed by the AO u/s 271(1)(c) for assessment year 2003-04. In so far as assessment year 2004-05 is concerned, similar additions/disallowances were made by the AO to the total income of the assessee on the basis of report of special auditors aggregating to ₹ 40,39,518/- out of which additions/disallowances to the extent of ₹ 12,57,205/- and ₹ 10,52,079 were deleted by learned CIT(Appeals) and the Tribunal respectively in the quantum proceedings reducing the total amount of additions/disallowances to ₹ 17,30,234/-. The details thereof are as under : Disallowances Head 143(3) r.w.s. 142(2A) Relief Allowed by CIT(A) order dtd. 15.10.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(Appeals) cancelled the penalty imposed by the AO for assessment year 2004-05. Aggrieved by the orders of the learned CIT(Appeals) cancelling the penalties imposed by the AO for assessment years 2003-04 and 2004-05, the Revenue has preferred these appeals before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material on record. As pointed out by the learned counsel for the assessee, penalty u/s 271(1)(c) was imposed in the case of M/s Universal Medicare Pvt. Ltd., an assessee belonging to the same group, in similar facts and circumstances and the order of the learned CIT(Appeals) cancelling the said penalty was challenged by the Revenue in an appeal filed before the Tribunal. He has submitted that the said appeal has been dismissed by the Tribunal vide its order dated 10th August, 2012 passed in ITA No. 6078/Mum/2010 upholding the order of the learned CIT(Appeals) cancelling the penalty imposed by the AO u/s 271(1)(c) in the similar facts and circumstances. A copy of the said order is placed on record before us and a perusal of the same shows that penalty imposed u/s 271(1)(c) in the case of M/s Universal Medicare Pvt.Ltd. involving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions. In our opinion, in the case under consideration it cannot held that there was any omission or commission on part of the assessee-company for which it should have been visited by penalty u/s. 271(1)(c) of the Act. 5.2. After deliberating upon the facts and circumstances of the case, we are of the opinion that order passed by the FAA does not suffer from any legal infirmity. He has rightly relied upon the case of Reliance Petro Chemicals (supra).We are of the opinion that deletion of penalty by him is fully justified. Details filed by the assessee-company with regard to four items discussed in para No.3 was result of a crime committed upon the assessee-company. In these circumstances Grounds of Appeal filed by the AO stand rejected. As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of M/s Universal Medicare Pvt. Ltd. decided by the Tribunal, we respectfully follow the decision rendered by the coordinate bench of this Tribunal in the said case and uphold the impugned orders of the learned CIT(Appeals) cancelling the penalties imposed by the AO u/s 271(1)(c). 6. In the result, both the appeals of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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