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 Attachment on Cash Credit of Assessee under GST Act: Delhi HC directs Bank to Comply Instructions to Vacate
 Income Tax Addition Made Towards Unsubstantiated Share Capital Is Eligible For Section 80-IC Deduction: Delhi High Court

Harisons Diamonds P. Ltd. 2606/4, Shop NO. 101, 1st Floor, Soliator Plaza, Karol Bagh, New Delhi-110005 vs DCIT Circle-11(1) New Delhi
May, 21st 2019
                               1                   ITA No. 7388/Del/2018


                      ITA No.7388/Del/2018

                  Assessment Year: 2014-15

  Harisons Diamonds P. Ltd.        DCIT
  2606/4, Shop NO. 101, 1    st Vs Circle-11(1)
  Floor, Soliator Plaza, Karol     New Delhi
  Bagh, New Delhi-110005
  (APPELLANT)                      (RESPONDENT)

  Appellant by                     Sh. Pranshu Singhal, CA &
                                   Ms. Mansi Jain, CA
  Respondent by                    Sh. S. L. Anuragi, Sr. DR

  Date of hearing:                 06/05/2019
  Date of Pronouncement:           21/05/2019



  1.     This appeal filed by the assessee is directed against the
  order dated 15th September, 2018 of the CIT(A)-4, New Delhi for
  A. Y 2014-15.
                                   2                   ITA No. 7388/Del/2018

2.     Levy of penalty of Rs.82,000/- lacs u/s 271(1)(C)         by the
Assessing Officer and upheld in the CIT(A) is the only issue raised
by the assessee in the various grounds of appeal:-

3.   Facts of the case, in brief, are that the assessee is a Private
Limited Company and engaged in the business of jewellery items
like gold, diamonds etc. It      filed its return of income on 24th
September, 2014, declaring total income of Rs. 40,76,950/-. The
A.O during the course of assessment proceedings observed from
the details filed by the assessee that it has debited interest
expenses incurred in relation to a car which was purchased in the
name of the Director. Further, assessee also debited Motor Car
Repairs and Maintenance and depreciation.        The total of such
expenditure debited to profit and loss account was Rs.2,51,941/-.
Since, the vehicle was not registered in the name of the Company,
the A.O asked the assessee to explain as to why these expenses
should not be disallowed.       The assessee agreed for the above
disallowance for which the A.O made the addition of Rs. 2,51,941/.
Similarly,   out   of   total   business   promotion    expenses        of
Rs.10,23,919/-, the A.O disallowed an amount of Rs. 1,02,392/-
on ad-hoc basis @ 10% of such expenses on the ground that the
assessee failed to justify with documentary evidence regarding the
claim of such expenses for the purpose of business.

4.       The assessee did not challenge the above additions. The
A.O initiated penalty proceedings u/s 271(1)(c) of the Income Tax
Act. Rejecting the various explanations given by the assessee, the
                                   3                   ITA No. 7388/Del/2018

A.O levied penalty of Rs. 82,000/- being 100 % of tax sought to be
evaded u/s 271(1)(c) of the I.T Act. While doing so, he relied on the
decision of Hon'ble Delhi High Court in the case of CIT Vs. Zoom
Communication Pvt. Ltd reported in 327 ITR 510 Del.

5.      Before the CIT(A), it was submitted that the business was
carried on by Mr. Ashwani Singla (Proprietor) under the name and
style of M/s Harisons Diamonds, which was taken over by the
assessee   company, M/s Harisons Diamonds Private Limited on
1/11/2009.    Upon such take over, the proprietor Mr. Ashwani
Singla became the director of the assessee company. Although all
these details were furnished before the A.O, however, he ignored
such details and levied penalty.       So far as, the disallowance of
expenses on ad-hoc basis is concerned it was argued that penalty
cannot be levied on estimated addition.       The assessee drew the
attention of the CIT(A) to the notice issued by the A.O and it was
submitted that no specific charge has been mentioned in the show
cause notice as the inappropriate words have not been struck off.
The decision of the Hon'ble Karnataka High Court in the case of
CIT Vs. Manjunatha Cotton & Ginning Factory reported in 359 ITR
565, the decision of Hon'ble Supreme Court in the case of CIT Vs.
SSA's Emerald Meadows wherein the Hon'ble Supreme Court has
dismissed the SLP filed by the Revenue and various other decisions
were brought to be notice of the CIT(A).
                                    4                    ITA No. 7388/Del/2018

6.   However, the Ld.CIT (A) was not satisfied with the arguments
advanced by the assessee and upheld the penalty levied by the A.O
u/s 271(1)(c) of the I.T Act.

7.     Aggrieved of such order of the CIT (A), the assessee is in
appeal before the Tribunal.

8.        I have considered the rival arguments made by both the
sides and perused the material available on record.              It is an
admitted fact that the assessee during the course of assessment
proceedings has agreed for the addition of the motor car expenses,
depreciation and interest on such loan totaling to Rs.2,51,941/-.
Further, the A.O has made another addition of Rs. 1,02,392/- on
account of ad-hoc disallowance of business promotion expenses
being 10% of the total expenditure for which the assessee is not in
appeal.   I   find   assessee   during   the   course   of   assessment
proceedings as well as appellate proceedings had categorically
stated that the business of the assessee which was earlier carried
on by the proprietor in the name and style of M/s Harisons
Diamonds was taken over by the assessee company M/s Harisons
Diamonds Pvt. Ltd on 1/11/2009.            Upon such take over the
proprietor Mr. Ashwani Singla became the director of the assessee
company w.e.f. 1/11/2009. There is no such disallowance of such
depreciation and motor car expenses and interest on loan from
Assessment Year 2010-11 to 2013-14. Although, the vehicle was
registered in the name of the Director of the assessee Company,
however, the expenses were incurred by the assessee company
                                  5                   ITA No. 7388/Del/2018

itself and the vehicle was used for the business of the assessee
Company.    Further, all particulars were made available before the
A.O and there was no such concealment. Hon'ble Supreme Court
in the case of CIT (A) Vs. Reliance Petro Products Pvt. Ltd. 321 ITR
158 has held that merely because the assessee has claimed the
expenditure which claim was not acceptable or was not accepted
by the revenue that by itself could not attract the penalty u/s
271(1)(c) of the I.T Act. In my opinion merely because the assessee
in the instant case, has accepted the disallowance during the
course of assessment proceedings that by itself will not preclude
the assessee from taking an alternate argument before the Tribunal
during penalty proceedings. In view of the above discussion and
since full particulars are available before the A.O during the course
of assessment proceedings, therefore, penalty u/s 271(1)(c) in my
opinion is not attracted on motor car expenses and depreciation of

9.      So far as the other addition is concerned, i.e. disallowance
of ad-hoc expenses of Rs. 1,02,392 out of the business promotion
expenditure, I find, the same is on ad-hoc basis. It has been held
in various decisions that penalty u/s 271(1)(c) of the I.T Act is not
sustainable on ad-hoc disallowance of expenses. In view of the
above discussion, I am of the considered opinion that it is not a fit
case for levy of penalty u/s 271(1) (c) of the I.T Act. The grounds
raised by the assessee are accordingly allowed.
                                                  6                          ITA No. 7388/Del/2018

10. In the result, the appeal filed by the assessee is allowed.

   The decision was pronounced in the open court at the time of
   hearing itself i.e., on 21 .05.2019.

                                                           (R.K PANDA)
                                                        ACCOUNTANT MEMBER
   Date:- 21 .05.2019

   Copy forwarded to:

   1.                              Appellant
   2.                              Respondent
   3.                              CIT
   4.                              CIT(Appeals)
   5.                              DR: ITAT

                                                               ASSISTANT REGISTRAR
                                                                  ITAT NEW DELHI

             Date of dictation                                         08.05.2019
             Date on which the typed draft is placed before the         08.05.2019
             dictating Member
             Date on which the approved draft comes to the
             Date on which the fair order is placed before the
             Dictating Member for Pronouncement
             Date on which the fair order comes back to the Sr.       21.05.2019
             PS/ PS
             Date on which the final order is uploaded on the            21.05.2019
             website of ITAT
             Date on which the file goes to the Bench Clerk           21.05.2019
             Date on which file goes to the Head Clerk.

             The date on which file goes to the Assistant Registrar
             for signature on the order
             Date of dispatch of the Order
7   ITA No. 7388/Del/2018
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