TaxTMI 
TaxTMI 
2012 (10) TMI 1062
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....g in view this fact, a special audit u/s 142(2A) was ordered 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 Rs. 6,22,29,314/-. On appeal, the learned CIT(Appeals) allowed relief of Rs. 3,85,41,616/- to the assessee and sustained the additions/disallowances made by the AO to the extent of Rs. 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 Repairs to Assets 101,324 - 101,324 Sundry Creditors 14,413,143 14,412,143 1,000 Disallowance of various expenses 3,021,579 225,385 2,796,194 Non-Gen....
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....riod, 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 statutory authority before whom the evidences are required to be produced for satisfying him regarding the correctness of claim made in the books of accounts. However, during appellate proceedings, the CIT(A) directed the AO to admit and verify such evidences. Many of the evidences in the form of bills/vouchers were produced by appellant before AO during remand report proceedings and the additions/disallowances were deleted by CIT(A) to that extent. It is worth to mention here that the CIT(A) upheld the additions/disallowances of expenses/claim in respect of which the appellant failed to produce evidence even during appellate proceedings. Thus, it was a fact on record that the appell....
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.... 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 evidence before the special auditors in respect of various expenses as mentioned in above paras. The claim of such expenses was based on the entries made on the books of accounts. The question for consideration is whether non-production of bills and vouchers, which were entered into books of accounts, amounts to concealment of income or furnishing inaccurate particulars of such income. In my considered view, in normal circumstances where there is no case of existence of such evidences or in case of false claim, non production of such evidences leads to presumption that income was concealed/inaccurate particulars were filed on account of excess claim of expenses. However, in the pecu....
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....sition 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, the penalty provisions were not attracted. Similarly, the disallowance of depreciation was also not attracting penalty provisions. The mistake of adopting incorrect profit in the computation of income was apparently a clerical mistake since the details of same were available in the P & L account enclosed with the return of income. Therefore, the same was a bonafide mistake not attracting the penalty provisions. In respect of foreign travel expenses, the bills and supporting were available but, the issue was debatable one as to whether the expenses were incurred for the purposes of business or not. In respect of foreign travel expenses for which the bills were not available, the pe....
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....t of special auditors aggregating to Rs. 40,39,518/- out of which additions/disallowances to the extent of Rs. 12,57,205/- and Rs. 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 Rs. 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 Relief allowed by ITAT Order dated 15.10.2008 Disallowed accepted by appellant. Add Disallowance u/s 14A 315,350 152,779 162,571 Consumption of Raw Material 33,206 Not pressed 33,206 Genuineness of Stores & Spares 112,214 Not pressed 112,214 Repairs to Building 137,996 Not pressed 137,996 Foreign exchange fluctuation 259,500 Not pressed 259,500 Waiver of liability u/s 28(iv) 1,104,426 1,104,426 - Expenses Booked through journal Entries 193,835 Not pressed 193,835 Foreign Travelling Expenses 549,665 Not pressed 549,665 Disallow....
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....y the senior officer of the company with the help of his subordinates. iii. Crime was detected in 2005 and complaint against the employees was lodged by the assessee company with police authorities. iv. As soon as the assessee came to know about the defalcation, it informed the Departmental authorities. v. Accounts of the assessee company were audited as per the provisions of Sec. 142 (2A) of the Act. vi. AO had allowed defalcation amounting to Rs. 19.04 crores, while passing the assessment order for the A.Y. 2006-07. vii. Return of income for the A.Y. under consideration had already been filed by the assessee before the fraud was detected. viii. AO had levied penalty on account of additions/disallowances. ix. FAA deleted the penalty imposed by the AO. x. AO has preferred second appeal for 4 additions/disallowances out of the 9 items. 5.1 Considering the above factual matrix, we are of the opinion that it is not a fit case for imposing penalty u/s. 271 (1)(c) of the Act for furnishing inaccurate particulars / concealing the particulars of income. Penalty is imposed where an assessee conceals his income....