Shri Minesh Natubhai Patel, Baroda V. The Income tax Officer,Ward-2(1), Baroda

ITA 3399/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6258 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 06-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Gift; Business expenditure; Question of law; Set aside
• Section: 143(3); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.3399/AHD/2007 A. Y.: 2001-02 SHRI MINESH NATUBHAI PATEL, PROP. M. M. SECURITIES, 47/B, ARUNODAY SOCIETY, ALKAPURI, BARODA PA NO. AEVPP 0238C VS THE INCOME TAX OFFICER, WARD-2(1), AAYAKAR BHAVAN, BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI JAIMIN GANDHI, AR RESPONDENT BY SHRI C. K. MISHRA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, BARODA DATED 0 4-05-2007 FOR ASSESSMENT YEAR 2001-02 CHALLENGING LEVY OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. 3. THE RETURN OF INCOME WAS FILED ON 29-08-2001 DEC LARING A TOTAL INCOME OF RS.1,87,630/-. ASSESSMENT WAS COMPLETED U /S 143(3) OF THE IT ACT ON 26-02-2004 AT A TOTAL INCOME OF RS.11,96,920 /-. NO APPEAL WAS FILED BY THE ASSESSEE AGAINST THE ADDITIONS MADE IN THE ASSESSMENT ORDER. THE ASSESSEE IS MAINLY SUB BROKER FOR JHAVERI SECUR ITIES PVT. LTD., KETAN SHAH & CO. AND SDFC SECURITIES LTD. AS AGAINST BROK ERAGE RECEIPT OF RS.51,27,000/- THE ASSESSEE CLAIMED EXPENSES OF RS. 54,19,0000/- WHICH INCLUDE BESIDES TRADING LOSS OF RS.30,00,000/-, BUS INESS PROMOTION EXPENSES OF RS.5,86,000/-. IT WAS SEEN THAT THE ASS ESSEE INCURRED NOT 2 ONLY A HUGE TRADING LOSS BUT ALSO NET LOSS IN RESPE CT OF BROKERAGE BUSINESS. ON SCRUTINY OF THE BUSINESS PROMOTION EXP ENSES, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD CLAIMED DED UCTION OF PERSONAL AND CAPITAL NATURE TOTALING TO RS.3,55,300/- AS PER PARA 3 OF THE ASSESSMENT ORDER. THE AO FOUND THAT BILLS IN RESPEC T OF THE EXPENSES EXCEPT FOR AN EXPENSE OF RS.23,000/- WERE NOT PRODU CED DURING THE ASSESSMENT PROCEEDINGS. FURTHER FINDING IS GIVEN BY THE AO THAT THE ASSESSEE ALSO FAILED TO FURNISH BILLS AND VOUCHERS IN RESPECT OF THE CLAIM OF OFFICE EXPENSES OF RS.7,84,334/- DESPITE SPECIFI C REQUEST BY THE AO. AN ANALYSIS OF THE EXPENSES EXCEEDING RS.5,000/- WHICH TOTALED TO RS.6,74,075/-, BASED ON THE DETAILS AND EXPLANATION FURNISHED BY THE ASSESSEE IS GIVEN IN PARA 5 OF THE ASSESSMENT ORDER . LOOKING TO THE NATURE OF THE EXPENSES AND WANT OF BILLS AND VOUCHE RS THE AO ALLOWED 30% OF THE RENOVATION EXPENSES, FOOD EXPENSES, PETT Y EXPENSES AND 100% OF ADVERTISEMENT EXPENSES. AS REGARDS EXPENSES NOT EXCEEDING RS.5,000/- WHICH TOTALED TO RS.1,10,258/- THE SAME WAS FULLY ALLOWED BY THE AO. THUS, A TOTAL DISALLOWANCE OF RS.4,99,076/- WAS MADE OUT OF OFFICE EXPENSES OF RS.7,84,334/-. IN RESPONSE TO TH E PENALTY NOTICE IT WAS EXPLAINED THAT DISALLOWANCE OF THE EXPENDITURE WAS MADE FOR WANT OF VERIFICATION AND NOT ON ACCOUNT OF ANY WRONG OR BOG US BILLS. IT WAS SUBMITTED THAT NON-ACCEPTANCE OF THE EXPLANATION FO R CLAIM OF THE EXPENDITURE MAY NOT CONSTRUE AS HAVING CONCEALED AN Y PARTICULARS OF INCOME. THE EXPLANATION OF THE ASSESSEE WAS NOT ACC EPTED AND VIDE SEPARATE ORDER PENALTY WAS IMPOSED ON THE AFORESAID AMOUNTS. 4. IT WAS BRIEFLY EXPLAINED BEFORE THE CIT(A) THAT MEMBERSHIP FEES FOR CLUB IS ALLOWABLE EXPENDITURE BECAUSE IT HELP THE A SSESSEE TO ENLARGE CLIENT BASE. THE ASSESSEE RELIED UPON CERTAIN DECIS IONS IN SUPPORT OF THE CONTENTION. IT WAS FURTHER SUBMITTED THAT GIFT ITEM S WERE DISTRIBUTED TO THE CLIENTS WHICH IS ALLOWABLE EXPENDITURE AND IT I S CLARIFIED IN THE AUDIT REPORT THAT PERSONAL EXPENDITURE HAS BEEN SHOWN AS NIL. AS REGARDS 3 PURCHASE OF PROJECTOR, IT WAS CONTENDED THAT IT BEC AME OBSOLETE AND WAS NOT HAVING DURABLE LIFE. THEREFORE, EXPENDITURE ON PURCHASE OF PROJECTOR WAS CLAIMED AS REVENUE IN NATURE CONSIDERING THE NA TURE OF THE BUSINESS OF THE ASSESSEE. RENOVATION EXPENSES WERE ALSO CLAI MED AS BUSINESS EXPENSES AS ALLOWABLE U/S 30 OF THE IT ACT AND SEVE RAL DECISIONS IN SUPPORT OF THE CONTENTION WAS RELIED UPON. FOOD EXP ENSES WERE SPENT FOR SPECIAL OCCASIONS SUCH AS MUHURAT ETC. IT WAS FURTH ER PLEADED THAT MERE DISALLOWANCE OF THE EXPENDITURE WOULD NOT PER SE PR OVE THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT EXPLANATION OF THE ASSESSEE W AS NOT FOUND TO BE FALSE. THE ASSESSEE DUE TO NON-AVAILABILITY OF THE VOUCHERS COULD NOT SUPPORT THE EXPENDITURE. THEREFORE, MERE DISALLOWAN CE OF THE EXPENDITURE, PENALTY MAY NOT BE LEVIED. THE LEARNED CIT(A) HOWEVER, DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 4 AND 5 ARE REPRODUCED AS UNDER: 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. CO UNSEL AND FACTS OF THE CASE. THE FINDING GIVEN BY THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER THAT NO BILLS OR VO UCHERS WERE PRODUCED BEFORE HIM EXCEPT FOR SILVER GIFT ARTICLES WORTH RS.23,000/- IS NOT REBUTTED. IT HAS BEEN CLEARLY ST ATED A NUMBER OF TIMES IN THE ASSESSMENT ORDER THAT THE CL AIM OF EXPENSES IS NOT SUPPORTED BY BILLS AND VOUCHERS. IT IS SEEN THAT DURING THE PENALTY PROCEEDINGS IT WAS NEVER PL EADED BEFORE THE ASSESSING OFFICER THAT BILLS AND VOUCHER S WITH RESPECT TO EXPENSES UNDER CONSIDERATION WERE PRODUC ED DURING THE ASSESSMENT PROCEEDINGS. IN FACT, THE APP ELLANT PLEADED DURING THE PENALTY PROCEEDINGS THAT DISALLO WANCE OF EXPENSES WAS MADE FOR WANT OF VERIFICATION OF EXPEN SES AND NOT ON ACCOUNT OF ANY WRONG OR BOGUS BILLS. THE PEN ALTY ORDER, A PORTION OF WHICH IS EXTRACTED EARLIER, ALSO REITE RATES THE FACT THAT THE BILLS AND VOUCHERS WERE NOT PRODUCED BEFOR E THE ASSESSING OFFICER. THUS, THE CLAIM OF THE LD. COUNS EL DURING THE APPELLATE PROCEEDINGS THAT BILLS AN VOUCHERS WE RE PRODUCED DURING THE ASSESSMENT PROCEEDINGS IS NOT O NLY UNSUBSTANTIATED BUT IS ALSO CONTRARY TO THE FACTS B ROUGHT ON RECORDS AS STATED ABOVE. 4 4.1 THE BILLS AND VOUCHERS ARE PRIMARY EVIDENCES IN SUPPORT OF CLAIM OF HAVING INCURRED EXPENSES. UNLESS SUCH P RIMARY EVIDENCES ARE PRODUCED, THE CLAIM OF EXPENSES REMAI NS UNSUBSTANTIATED. IT IS ONLY AFTER ESTABLISHING THAT THE EXPENSES WERE, IN FACT, INCURRED, THE QUESTION OF T HEIR NATURE ARISES. IN THE PRESENT CASE, THE APPELLANT IS SEEN TO HAVE MEASURABLY FAILED AT THE FIRST STEP ITSELF. THE REV ERSE ARGUMENT ADVANCED BY THE LD. COUNSEL THAT THE ASSESSING OFFI CER WOULD HAVE DISALLOWED THE EXPENSES IN ENTIRELY IF THE BIL LS AND VOUCHERS HAD NOT BEEN PRODUCED BEFORE HIM, IS NOT A T ALL CONVINCING. IT HAS BEEN CLEARLY STATED BY THE ASSES SING OFFICER IN THE ASSESSMENT ORDER THAT WITHOUT PREJUDICE TO V ERIFICATION OF EXPENSES IN THE ABSENCE OF BILLS AND VOUCHERS, H E THOUGHT IT REASONABLE TO ALLOW A PORTION OF THE EXPENSES CLAIM ED CONSIDERING THE APPELLANTS BUSINESS. THE PARTIAL R ELIEF ALLOWED BY THE ASSESSING OFFICER EVEN IN THE ABSENC E OF BILLS AND VOUCHERS CANNOT BE TWISTED AND TAKEN AS A GROUN D THAT THE BILLS AND VOUCHERS WERE, IN FACT, PRODUCED BEFO RE THE ASSESSING OFFICER. 4.2 IN VIEW OF THE DISCUSSIONS GIVEN ABOVE, I INTEN D TO AGREE WITH THE ASSESSING OFFICER THAT NO BILLS AND VOUCHE RS WERE PRODUCED EXCEPT FOR THE BILL OF SILVER ARTICLES WOR TH RS.23,000/- EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE PEN ALTY PROCEEDINGS. IN THE ABSENCE OF PRIMARY EVIDENCE, TH E CLAIM OF EXPENSE UNDER CONSIDERATION (EXCEPT FOR GIFT ARTICL ES WORTH RS.23,000/-) IS NOT SUBSTANTIATED AND SINCE NO EXPL ANATION IS FORTHCOMING AS TO WHY THE BILLS AND VOUCHERS, AS ST ATED ABOVE, WERE NOT PRODUCED, THE DISALLOWANCES MADE BY THE AS SESSING OFFICER ARE IN ORDER. COPIES OF SOME BILLS AND VOUC HERS ARE FURNISHED DURING THE APPELLATE PROCEEDINGS. THESE A RE FRESH EVIDENCES SINCE THE SAME WERE NOT PRODUCES, AS STAT ED ABOVE, EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE PEN ALTY PROCEEDINGS. NO REQUEST HAS BEEN MADE BY LD. COUNSE L TO ADMIT THESE FRESH EVIDENCES. IT IS NOT APPELLANTS CASE THAT THE BILLS AND VOUCHERS WERE NOT AVAILABLE WITH HIM DURI NG THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS. THE ONLY PLAUSIBLE REASON FOR NOT PRODUCING THE BILLS AND VO UCHERS BEFORE THE ASSESSING OFFICER SEEMS TO PRECLUDE HIM FROM MAKING ANY INVESTIGATING INTO THE GENUINENESS OR TH E PURPOSE OF THE AFORESAID EXPENSES. NONE OF THE CIRCUMSTANCE S AS MENTIONED IN RULE 46A EXISTS IN THE PRESENT CASE AN D HENCE FRESH EVIDENCES PRODUCED DURING THE APPELLATE PROCE EDINGS CANNOT BE ADMITTED. 5 4.3 NONE OF THE CASE LAWS RELIED UPON BY THE LD. CO UNSEL IS APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE APPELLANT HAS FAILED IN ITS INITIAL ONUS TO SUB STANTIATE THE FACTUM OF HAVING INCURRED THE ALLEGED EXPENSES, EXC EPT FOR RS.23,000/- TOWARDS GIFT ARTICLES, AND SINCE NO EXP LANATION IS FORTHCOMING FOR THIS FAILURE, THE PROVISIONS OF SEC TION 271(1) ( C ) READ WITH EXPLANATION 1 ARE CLEARLY HIT. HENC E, I DO NOT INTEND TO INTERFERE WITH THE ACTION OF THE ASSESSIN G OFFICER IN IMPOSING PENALTY OF RS.2,82,336/- U/S. 271 (1) ( C ). THE ASSESSING OFFICER IS, HOWEVER, DIRECTED TO RE-COMPU TE THE QUANTUM OF PENALTY AFTER GIVING DEDUCTION OF RS.23, 000/- FROM THE ADDITIONS MADE AS STATED ABOVE. 5. IN THE RESULT, THE APPEAL IS DISMISSED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD. 322 ITR 158 AND THE DECISION OF THE HONBLE GU JARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILLS VS CIT 252 ITR 417 A ND SUBMITTED THAT THE ABOVE DECISION IS CONFIRMED BY THE HONBLE SUPREME COURT. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE ANY VOU CHERS AND BILLS BEFORE THE AO AT THE ASSESSMENT STAGE, THEREFORE, P ENALTY IS RIGHTLY IMPOSED IN THE MATTER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS A BROKER AND FILED RETURN OF INCOME CLAIMING DEDUCTION OF CERTAI N EXPENDITURE. THE AO ON SCRUTINY FOUND THAT CERTAIN EXPENDITURES WERE FO R PERSONAL IN NATURE AND SOME WERE CAPITAL IN NATURE. THE AO ALSO ON CON SIDERATION OF THE OFFICE EXPENSES FOUND THAT CERTAIN BILLS AND VOUCHE RS HAVE NOT BEEN PRODUCED. THEREFORE, PART OF THE EXPENDITURE HAS BE EN DISALLOWED. THE ASSESSEE HOWEVER, CLAIMED THAT THESE EXPENDITURES W ERE INCURRED FOR BUSINESS PROMOTION AS WELL AS OFFICE EXPENSES FOR T HE PURPOSE OF BUSINESS. IT IS, THEREFORE, NOT A CASE WHERE THE AS SESSEE FAILED TO OFFER 6 EXPLANATION AND OFFERED EXPLANATION WHICH IS FOUND BY THE AO TO BE FALSE. THEREFORE, AO COULD NOT HAVE INVOKED EXPLANATION TO SECTION 271 (1) ( C ) OF THE IT ACT IN THIS CASE. THE DISALLOWANCE OF EXP ENSES PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS OF INCOME. THE AO HAS NOT BROUGHT ON RECORD THAT THE ASSESSEE HAS DELIBERATELY CLAIMED THE DEDUCTIONS OF THE EXPENDITURE WHICH ARE FALSE IN NATURE. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANC E PETROPRODUCTS PVT. LD. (SUPRA) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) ( C ) WOULD EMBRACE THE DETA ILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISH ING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THA T EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO B E INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRE CT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTIO N OF INVITING THE PENALTY UNDER SECTION 271(1) ( C ). A MERE MAKING O F A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOU NT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH 7 A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIG H COURT AFFIRMED. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RAJA STHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS AJAIB SINGH AND CO . 253ITR 630 HELD AS UNDER: DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULA RS OF ITS INCOME. CONCEALMENT INVOLVES PENAL ACTION. IT H AS TO BE PROVED AS A CONSCIOUS ACT. THE ESSENTIAL PRE- CONDITION FOR INVOKING EXPLANATION 1 TO SECTION 271 (1) ( C ) OF THE INCOME-TAX ACT, 1961, IS THAT THE ASSE SSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANA TION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) TO BE FALSE. IT IS ONLY IN SUCH A SITUATION THAT THE ASSESSING OFFICER CAN INVOKE THE EXPLANATION TO SECTION 271(1) ( C ) AND IMPOSE PENA LTY. HELD, DISMISSING THE APPEAL, THAT, IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND THAT THE ADDITION OF RS.40,000 HAD BEEN SUSTAINED ON ESTIMATE BASIS. SIMILARLY, IT WAS FOUND THAT EVEN THE ADDITION OF RS.4,200 ON ACCOUNT OF SALES TAX LIABILITY INVOLVED A MATTER OF DEBATE. IT HELD THAT THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE SALES TAX MAY HAVE BEEN UNDER ERRONEOUS UNDERSTANDING OF LAW BUT IT CANNOT LEAD TO THE CONCLUSION OF CONCEALMENT ON THE PART O F THE ASSESSEE. THUS, IT WAS HELD THAT PENALTY WAS NOT LEVIABLE. THE TRIBUNALS DECISION WAS CORRECT AND N O SUBSTANTIAL QUESTION OF LAW AROSE FROM IT. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS NEPANI BIRI COMPANY TRUST 190 ITR 402 HELD THAT HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND THAT CERTAIN EXPENSES CLAIME D BY THE ASSESSEE WERE DISALLOWED BY THE INCOME-TAX OFFICER WHICH LED TO THE DIFFERENCE BETWEEN THE INCOME RETURNED AND THE INCO ME ASSESSED. THE TRIBUNAL WAS JUSTIFIED IN CANCELING THE PENALTY . THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILL S VS CIT 252 ITR 417 8 HELD THAT HELD, THAT THE INCOME-TAX OFFICER AFTER PROCESSING THE SEIZED MATERIAL MADE FURTHER ESTIMATES THEREFROM AN D HENCE THE ADDITION MADE AND SUSTAINED ON THE BASIS OF SUCH ES TIMATE COULD NOT BE SAID TO RESULT IN A SITUATION WHERE IT WOULD BE POSSIBLE TO ASCRIBE THE FAILURE TO RETURN THE CORRECT INCOME TO THE ASSESSEE ON ACCOUNT OF ANY FRAUD, OR ANY GROSS OR WILLFUL NEGLE CT. IF THAT BE THE CASE, THE EXPLANATION TO SECTION 271(1) ( C ) COULD NOT BE INVOKED AGAINST THE ASSESSEE AND PENALTY LEVIED COULD NOT B E SUSTAINED. EVEN IF THE EXPLANATION TO SECTION 271(1) ( C ) OF THE ACT WERE HELD TO BE APPLICATION IT COULD BE SAID THAT THE ASSESSE E HAD REBUTTED THE PRESUMPTION, I.E. DISCHARGED THE BURDEN. THE TR IBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE PENALTY OF RS.10,400 IMPOSED UNDER SECTION 271(1) ( C ) OF THE ACT WAS JUSTIFIED ON TH E BASIS OF EXPLANATION TO SECTION 271(1) ( C ). 7. CONSIDERING THE FACTS OF THE CASE AND IN THE LIG HT OF THE ABOVE DECISIONS, IT IS CLEAR THAT CERTAIN EXPENSES CLAIME D BY THE ASSESSEE HAVE BEEN DISALLOWED BY THE AO WHICH LED TO THE DIFFEREN CE BETWEEN THE INCOME RETURNED AND THE INCOME ASSESSED. THEREFORE, NO PENALTY WAS LEVIABLE IN AS MUCH AS THERE WAS NO CONCEALMENT OF INCOME OR WILLFUL NEGLIGENCE ON THE PART OF THE ASSESSEE. IT IS A CAS E OF MERE DISALLOWANCE OF EXPENDITURES WHICH WERE DISALLOWED BY THE AO FOR WANT OF VOUCHERS AND BILLS ETC. CONSIDERING THE FACTS OF THE CASE AN D NATURE OF THE BUSINESS OF THE ASSESSEE IT IS CLEAR THAT SALES PRO MOTION EXPENSES AND OFFICE EXPENSES SHALL HAVE TO BE SPENT BY THE ASSES SEE FOR THE PURPOSE OF BUSINESS. THEREFORE, MERE NON-PRODUCTION OF BILLS A ND VOUCHERS, WOULD NOT LEAD TO THE PRESUMPTION THAT THE ASSESSEE CONCE ALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND C ANCEL THE PENALTY. 9 8. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 14-05-2010 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 14-05-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD