C&C Construction Ltd Vs CIT (Appeals) (ITAT Delhi)
ITAT Delhi held that the law is very well settled that there cannot be any levy of penalty on an estimated addition on ad hoc disallowances of expenses. Accordingly, penalty proceedings initiated under section 271(1)(c) of the Income Tax Act quashed.
Facts- The issue to be decided in this appeal is as to whether CIT(A) was justified in upholding the ad hoc disallowance of 10% out of repairs and maintenance expenses of plant and machinery, travelling and conveyance expenses, telephone expenses, repairs and maintenance of vehicles and security service charges, in the facts and circumstances of the instant case. The interconnected issue involved therein is whether CIT(A) was justified in enhancing the income of ₹4,96,84,717/- on account of reimbursement of expenses received from Oman Branch.
Conclusion- With regard to ad hoc disallowances of expenditure, it is a fact that assessee had agreed for 10% disallowance of expenses in the assessment proceedings due to paucity of time for furnishing all details before AO. Admittedly, AO had sought for other details only on 26.12.2017. The assessment finally stood completed on 28.12.2017. It is a fact that the assessee work sites are located at 20 locations and spread over all over the country and also in abroad. Hence, it would be practically impossible to collect all the details and submitted the same before AO within 2 days and assessee further collected the details and submitted the same to the extent of 80% of the expenditure before CIT(A) in the form of additional evidences. CIT(A) had not given any finding with regard to those additional evidence and merely sustained the disallowances on the ground that assessee had agreed for the same in the assessment proceedings forgetting the circumstances under which the assessee had agreed for the same. Considering the principle that there is no estoppels against the statute and income is to be determined based on the provisions of the Act and not by concession given by the parties, we deem it fit and appropriate to restore this issue to the file of AO for de novo adjudication in accordance with law.
