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2016 (9) TMI 695 - ITAT CHENNAIPenalty u/s 271(1)(c) - estimate income on sale of yarn - Held that:- In the present case, the assessee has taken a plea as stated above that addition was made on estimate basis. The Assessing Officer placed reliance on the survey report collected during the course of survey and also inspection report of sales tax authorities and central excise authorities. However, the material brought on record that the gross profit rate of every year is not constant, it depends upon various factors like demand and supply, inflation situation and production capacity, variable factors like change in direct labour cost and material cost. The lower authorities went on the premise that these facts which determine the gross profit is constant. Being so, various High Courts, held that whenever the addition is sustained on account of estimation basis, penalty cannot be levied. The judgments relied upon by the ld. AR laid down the same principles. In our opinion, since there is no concrete evidence of concealment of sale of yarn, levying penalty in this case cannot be sustained. Accordingly, this is not a fit case for levy of penalty u/s 271(1)(c) of the Act. We are inclined to delete the penalty in respect of estimate income on sale of yarn. Aaddition sustained u/s 68 - Held that:- After going through the explanation of the assessee, we are of the opinion that the explanation given by the assessee was a possible one though it was not satisfactory. The Tribunal has noticed these facts in the quantum appeal and confirmed the addition to that extent on account of unsatisfactory explanation given by the assessee in respect of the credits outstanding in the books of account. But it is not good enough for imposition of penalty because it relates to lack of tendering explanation to the satisfaction of the Assessing Officer and not disproving the contention of the assessee about the genuineness of the receipts. Accordingly, in our opinion, this issue is not a fit case for levy of penalty u/s 271(1)(c) of the Act. Disallowance u/s 40A(3) - Held that:- There is a judgment of the Delhi High Court in the case of CIT vs Vatika Construction Pvt. Ltd. [2012 (10) TMI 808 - DELHI HIGH COURT] wherein held that when there is addition u/s 40A(3) of the Act levy of penalty on this disallowance u/s 271(1)(c) of the Act is not justified. Further, in our opinion, disallowance u/s 40A(3) cannot be construed as concealment of income and furnishing inaccurate particulars of income. In view of the judgment of the Deli High Court, we are inclined to delete the penalty. Claiming wrong short term capital gain - Held that:- The assessee, while preparing the income tax return, adopted the cost of assets as per the book value instead of cost after WDV as per IT depreciation statement. This is an error committed by the assessee and this cannot be a reason for levy of penalty u/s 271(1)(c) of the Act as held by the Supreme Court in the case of Price Water Coopers Pvt. Ltd vs CIT, [2012 (9) TMI 775 - SUPREME COURT ], wherein held that imposition of penalty would be unwarranted in case the assessee has committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars of income. Merely because the assessee claimed deduction of interest expenditure which had not been accepted by the Assessing Officer, penalty u/s 271(1)(c) of the Act is not attracted, merely making a claim which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. See CIT vs Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of assessee
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