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2015 (6) TMI 925 - AT - Income TaxPenalty u/s 271(1)(c) - whether penalty cannot be levied in respect of the addition made on estimate basis by applying the gross profit rate? - CIT(A) deleted penalty levy - Held that:- In the instant case, in pursuance to notice under section 148, revised return of income was filed in which entire income was surrendered with an explanation. The revised assessment was regularized by the revenue. AO had failed to take any objection that declaration of income made by assessee in his revised return and his explanation were not bona fide. Therefore, impugned order of Tribunal was held justified and accordingly upheld. In this background, CIT(A) rightly observed that case of assessee is squarely covered in case of CIT vs. Rajiv Garg [2008 (7) TMI 363 - PUNJAB AND HARYANA HIGH COURT] wherein it was held that the revised return filed by the assessee was accompanied by a note in which he had submitted that he had surrendered the entire amount of sale proceeds of shares to buy peace of mind and to avoid hazards of litigation and also to save himself from any penal action. CIT(A) rightly held that Assessing Officer was not justified in levying penalty u/s 271(1)(c) of the Act on the additional income of ₹ 20.00 lacs so disclosed in the return of income furnished in response to notice issued u/s 148 of the Act. Without prejudice to above, CIT(A) observed that Assessing Officer vide para-5(3) of penalty order had observed that both the ingredients (20,00,000 and ₹ 3,63,275) get merged at the end because the basis of concealment of income is admittedly suppressed sales. If it is considered, then the whole of the addition was made by applying the particular profit rate and the said addition is only on estimated basis. The penalty cannot be levied on estimated income as held n case of CIT vs. Subhash Trading Co. (1995 (11) TMI 37 - GUJARAT High Court). Addition made on account of profit on suppressed sales - Assessing Officer had made addition of ₹ 10,90,436/- by applying the profit rate of 8.5% on the unaccounted sales. In appeal, CIT(A) had restricted the profit rate at 6.5%. In appeal before the Tribunal, the profit rate of 6.5% was held reasonable by ITAT, Rajkot. Thus, addition made for ₹ 10,90,436/- by Assessing Officer came to ₹ 3,63,275/- after appellate order of CIT(A) and same had confirmed by Tribunal as stated above. In view of above, CIT(A) justified in deleting penalty of concealment of income on additional income disclosed for ₹ 20 lacs as well as on estimated income of ₹ 3,63,275/- which was rightly deleted by CIT(A). - Decided in favour of assessee.
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