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Shri Usman Faheed Fayaz Versus The Assistant Commissioner of Income Tax, Company Circle I (3) , Chennai

2016 (3) TMI 866 - ITAT CHENNAI

Penalty levied under section 271(1)(c) - disallowance of expenditure - Held that:- Other than particulars furnished by the assessee in the return of income, the Revenue does not have any other material to substantiate that the assessee has concealed the particulars. It is established law that not all additions would justify penalty as a matter of course. But addition is the basis for penalty. Mere admission does not justify penalty even in the light of the Explanation to section 271(1)(c) of the .....

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see was not rejected by the Assessing Officer, but the assessee could not file any valid evidence for claiming the expenditure before the Assessing Officer and therefore by disallowing 80% of the claim, the Assessing Officer has allowed 20% of expenditure attributable to earn the business income. Thus we are of the opinion that levy of penalty is not warranted in the present case and accordingly, we delete the penalty levied by the Assessing Officer - Decided in favour of assessee - I.T.A.No.108 .....

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in short]. The only effective ground raised in the appeal of the assessee is with regard to confirmation of penalty levied under section 271(1)(c) of the Act. 2. Brief facts of the case are that the assessee is an Individual and Director of M/s. Clement Ventures Pvt. Ltd. engaged in the business providing consultancy. The assessee filed his income declaring total income of ₹.41,21,450/-. The return filed by the assessee was processed under section 143(1) of the act and subsequently selecte .....

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ture. The Assessing Officer also made disallowance of depreciation @ 20% as attributable to personal use of car and interest on car loan. Thereby, the Assessing Officer made a total disallowance of ₹.52,73,764/-. Since the assessee has not produced any proper evidence in support of the expenditure claimed by him, the Assessing Officer has opined that the assessee has concealed the taxable income by furnishing inaccurate particulars of income. Accordingly, the Assessing Officer has initiate .....

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evy of penalty under section 271(1)(c) of the Act and by relying on the decision in the case of CIT v. Durr India Pvt. Ltd. [2014] 97 DTR (Mad) 160 and in the case of CIT v. Ajaib Singh & Co. 253 ITR 630 (P&H), pleaded that the penalty levied under section 271(1)(c) of the Act may be deleted. 5. Per contra, by supporting the orders of authorities below, the ld. DR by relying on the decision in the case of ACIT v. Harvey Heart Hospitals Ltd. [2013] 32 taxmann.com 348 (Chennai) and Sanghvi .....

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the assessee has not produced any evidence during the course of assessment proceedings and therefore, the Assessing Officer, by allowing 20% of the said expenditure, disallowed 80% of the expenditure which comes to ₹.52,73,764/-. The Assessing Officer also disallowed depreciation @ 20% as attributable to personal use of car and interest on car loan and thereby the Assessing Officer enhanced the assessed income to ₹.94,80,777/-. Against the additions made by the Assessing Officer, th .....

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has submitted that he has not concealed any details and disallowance of expenditure was made out of the details available in the return of income filed by him. Therefore, he has submitted that imposition of penalty is not warranted and prayed that penalty should not be levied under section 271(1)(c) of the Act. However, the Assessing Officer has not accepted the explanation given by the assessee and thus, levied penalty under section 271(1)(c) of the Act, which was confirmed by the ld. CIT(A) du .....

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4 (All.). 8. Mere claiming deduction per se would not invite penalty in view of the legal preposition laid down by the Hon ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158. Without incurring any expenditure, no business income would have earned by the assessee and in view of this the Assessing Officer has not out-rightly rejected the books of accounts, but, allowed 20% of expenditure claimed by the assessee. 9. Other than particulars furnished by the ass .....

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e, the penalty order passed by the Assessing Officer is purely based on the assessment made under section 143(3) of the Act. 10. The reliance placed by the Department in the case of ACIT v. Harvey Heart Hospitals Ltd. (supra) has no application to the facts of the present case because in that case, no business was carried out by the assessee during the relevant assessment year but deduction on account of expenditure was claimed and in the absence of any evidence to support its claim of incurring .....

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