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2012 (2) TMI 467 - ITAT AHMEDABADPenalty levied under section 271(1)(c) - estimation of income by applying flat rate of gross profit - Held that:- Certain defects were found in the account books of the assessee and therefore the same was rejected and flat rate of gross profit was applied by the Department. We find that it is well settled that no penalty under section 271(1)(c) of the Act could be imposed merely on the ground that there were defects in the account books of the assessee and the account books were rejected and the flat rate of the gross profit is applied to arrive at the gross profits of the assessee. Merely because in the case of the assessee a survey action was undertaken, it does not follow that the penalty under section 271(1)(c) was imposable on the estimated trading profit of the assessee. Accordingly, we find no justification for imposition of penalty under section 271(1)(c) of the Act on this issue, which is cancelled. Issue of transaction with "SC" - assessee retained 3 per cent. on account of sales tax - Held that:- We find that the facts of the case may justify the confirmation of the addition made on this count by the Revenue authorities, but are not sufficient for sustaining the penalty imposed under section 271(1)(c) of the Act. We find that no evidence or material was brought on record by the Department to suggest that the assessee has retained 3 per cent. or part thereof on account of sales tax with it. The assessee has filed an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge that any part of 3 per cent. being sales tax on the transaction remained with assessee, we are unable to sustain the penalty imposed under section 271(1)(c) of the Act on the assessee, which is cancelled. Unexplained cash credits under section 68 - Held that:- We find that there was sufficient reason for the assessee for its filing the necessary evidences before the Commissioner of Income-tax (Appeals). In the facts of the case, we consider that it shall be in the interest of justice to set aside the issue of addition of ₹ 8,09,100 under section 68 to the file of the AO with direction to decide the same afresh in accordance with law after allowing reasonable opportunity of being heard to the assessee. We direct accordingly. Excessive or unreasonable payments of job work charges under section 40A(2)(b) -Held that:- We find that the assessee could not lead any evidence to show that the payment for job work were not excessive or unreasonable. The assessee has not given any comparable figures of job work rate prevailing in the market with regard to other parties in similar line of the trade for the relevant period. The assessee has given job work only to M/s. Krishna Organics and M/s. Jyoti Industries and both these firms are admittedly the sister-concerns of the assessee. The comparison of job work rate with the earlier year is not relevant. What is more relevant is the prevailing market rate of similar service rendered by the parties to the unrelated business firm. In the facts of the case, we hold that the pre-dominance of probabilities is against the assessee and accordingly the disallowance made by the AO under section 40A(2)(b) of the Act is confirmed
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