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Monika Telecom Pipes Pvt. Ltd. Versus ACIT

2016 (4) TMI 1051 - ITAT DELHI

Penalty u/s 271(1)(c) - incorrect valuation of scrap - Held that:- It is an admitted position that the assessee accepted the addition and did not challenge it further. But the mere fact that an addition has been accepted or is confirmed in quantum proceedings cannot be conclusive for the imposition of penalty. Further, the only basis of addition is the estimate of weight made by the Assessing Officer in valuing the scrap. Apart from the estimation made by the Assessing Officer, there is nothing .....

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is issue cannot be sustained. - As far as the penalty on difference in VAT account is concerned, it is seen that the amount of ₹ 1,01,922/- disallowed as expenditure pertains to difference in VAT rates in Delhi and U.P. It is not the case of the Department that the assessee had made a bogus claim of the expense. The disallowance was made on the basis that since the assessee followed mercantile system of accounting, the amount remaining outstanding could not be written off as an expense .....

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f furnishing of inaccurate particulars or concealment is made out. Hence, imposition of penalty on these two issues also cannot be sustained. - Decided in favour of assessee - ITA No. 314/Del/2014 - Dated:- 30-3-2016 - Shri J. S. Reddy, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Petitioner : Shri Anil Jain, Adv For the Respondent : Shri P. Damkanunjna, Sr. DR ORDER Per Sudhanshu Srivastava, Judicial Member This appeal has been filed by the assessee against the order .....

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t of difference in stock Rs.4,21,972/- (ii) On account of VAT difference Rs.1,01,922/- (iii) On account of ESI & PF not paid by due date ₹ 16,946/- (iv) On account of Charity & Donation ₹ 2,500/- Thus, total addition of ₹ 5,43,340/- was made to the returned income and income of the assessee was assessed at ₹ 36,69,852/-. A survey u/s 133 A of the Act was conducted on 16-01-2009, the value of scrap in the books of the assessee was 4.155 Tonnes whereas the survey te .....

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was shown at 4155 Kgs. The Assessing Officer, after considering the reply of the assessee, adopted the weight of scrap at 10,000 Kgs. which resulted in an addition of ₹ 4,21,972/- on account of difference in the value of stock at 5116 Kgs. @ 82 per Kg. Thus, it was held by the AO that the assessee had underestimated the stock of scrap in its books to suppress the profit. According to the Assessing Officer, the assessee was following mercantile system of accounting and the scrap generated .....

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bited to SDE MS (TXP) Store, O/o DET MS(TXP), Lucknow. On verification of the journal voucher, it was gathered by the AO that the amount was reflected due to VAT discount in respect of which the assessee submitted that VAT had been paid on account of BSNL, Lucknow which had not been received back and hence, the impugned sum was debited under the head VAT discount. However, the AO rejected the submissions made by the assessee on the ground that the assessee was following mercantile system of acco .....

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ng grace period). The AO disallowed the impugned sum which was added to the income of the assessee u/s 36(1)(va) of the Act. 5. An amount of ₹ 2,500/- was debited under the head charity & donation but in the absence of any evidence the same could not be verified by the AO. Thus, it was held by the AO that the assessee had deliberately inflated expenses to such extent to reduce profit. 6. The Assessing Officer, on the basis of facts mentioned in the assessment order, held that the asses .....

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u/s 271(1)(c) imposing penalty of ₹ 1,62,656/-. 2. The order of the Ld. CIT(A) is against law and facts of the case. 8. The Ld. AR submitted that as regard addition of ₹ 4,21,972/- on account of difference in the stock, the survey team had found a small heap of scrap which was only about 1500Kg but the survey team wrongly estimated the weight of scrap at 15000 Kgs. It was further submitted that the HDPE Pipe is an excisable item and the assessee had duly maintained stock register of .....

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he assessee was not guilty of fraud or gross or wilful neglect. It was submitted that the addition made by the Ld. AO was arbitrary and without any basis. The Ld. AO has not pointed out any sale and purchase made by the assessee out of books. The assessee had agreed to pay tax just to purchase peace of mind, to cooperate with the department and to avoid litigation. The submissions and explanations given by the assessee were bona fide, and therefore, keeping in view the provision of sec.271(l(c), .....

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. The above expenses are wholly and exclusively for the purpose of business and are allowable as per law. The other addition of ₹ 16946/- is on account of PF & ESI not paid by due date and ₹ 2,500/- on account of nonproduction of proof of payment of charity and donation. The penalty u/s 271(l)(C) is not leviable on account of disallowance of expenses 9. Ld. DR supported the orders of the lower authorities and submitted that the penalty has been rightly levied and deserves to be u .....

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lenge it further. But the mere fact that an addition has been accepted or is confirmed in quantum proceedings cannot be conclusive for the imposition of penalty. Further, the only basis of addition is the estimate of weight made by the Assessing Officer in valuing the scrap. Apart from the estimation made by the Assessing Officer, there is nothing to show that the assessee had valued the scrap incorrectly. It is a settled legal position that when income is estimated, there can be no question of .....

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