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2010 (12) TMI 875 - AT - Income TaxEstimation of profit - Notional profit - when asked by the AO the assessee could not explain such a presumption that there would have been a loss - assessee itself admitted that there was understanding with the group company to reimburse the cost and pay some reasonable profit but no profit was charged by the assessee - assessee was doing the business of development of project and sale thereof - This is a case of rejection of accounts and estimation of profit which is legally in order - the estimation of profit is held appropriate and the order of CIT(A) is upheld. Expenditure incurred as work-in-progress - there was no dispute that till financial closure the expenditure incurred was shown by the assessee in the balance sheet as advance recoverable. - as and when the project came to financial closure and the revenue was realized from the project, the expenses could be allocated on pro-rata basis depending upon the volume of revenue and other financial parameters. - Decided against the assessee. Regarding penalty - It is a case of estimation of income and addition to total income. Such addition as we have held earlier is covered by the provisions of Explanation 1 to section 271(1)(c) and penalty is leviable. Even the Hon'ble Supreme Court in case of Reliance Petro Products Ltd. (2010 (3) TMI 80 - SUPREME COURT) have held that for levy of penalty it has to be seen that conditions of section 271(1)(c) are applicable. In the present case we have held that the provisions of Explanation 1 are applicable and penalty is leviable. - Decided against the assessee
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