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2017 (2) TMI 1214 - AT - Income TaxEstimation of GP on suppressed sales - search proceedings - Held that:- The unaccounted sales were modified by the CIT(A) in the earlier proceeding which has not been disputed by the AO. Further, no such dispute has arisen in the grounds of appeal also. Therefore, there is no occasion for us to examine the aforesaid issue raised orally by the ld.AR in the course of hearing. Thus, this point in issue cannot be entertained. Whether CIT(A) has committed error in modifying the GP rate at 03.56% as against 07.29% applied by the AO on suppressed sales? - Held that:- We note that GP rate on the accounted sales estimated by the assessee himself stands at 07.29%. We thus fail to understand as to how the GP for the unaccounted sale should be so lower at 03.56% which is less than half of the GP rate declared by the assessee himself on accounted sales. We appreciate the contention of the AO that the GP on accounted sales are likely to be on higher side as various fixed costs have already been fully claimed. The GP arrived at in the subsequent assessment year can probably give rise to some basis only when the GP of the current year is not available on records. The GP on accounted sales is available in the present case which forms sound basis for applying the same towards unaccounted sales. Therefore, the order of the CIT(A) granting concession to the assessee on estimation of GP on suppressed sales found as a result of search based on some other assessment year cannot be approved. The relief granted by the CIT(A) is therefore reversed. Penalty u/s.271(1)(c) - defective notice - Held that:- A perusal of notice issued under s.274 read with s.271(1)(c) shows that the relevant part of the notice has not been struck off. Thus, it can be inferred that there is lack of application of mind by the AO. The vagueness and ambiguity is claimed to have prevented the Assessee of reasonable opportunity to defend its case. Thus, definite prejudice has caused to the Assessee. It is the requisite of law that the notice to the assessee should be specific. The Revenue has not been able to point out that the so-called ambiguous notice has not impaired or prejudiced the right of the assessee to reasonable opportunity of being heard. It therefore must follow that the notices issued proposing penalty were illusory and the assessee was incapacitated to defend its case. The decisions quoted on behalf of the assessee in the case of Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT) & Manjunatha Cotton (Karnataka) [2013 (7) TMI 620 - KARNATAKA HIGH COURT] are applicable to the facts of the case. The penalty notices, thus, issued are rendered invalid and cannot be sustained. - Decided in favour of assessee.
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