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2015 (10) TMI 1493 - AT - Income TaxPenalty levied u/s 271(1)(c) - enhancement of net profit on account of unproved labour payment - Held that:- As the notice u/s 271(1)(c) of the Act was not served on the assessee, the assessee could not be expected to offer any plausible explanation before the Assessing Officer. When he started investigation, it was noted by him that letters u/s 133(6) of the Act could not be served on the labourers. However, no disallowance of labour expenses claimed was made by the Assessing Officer despite the non-verification of labour expenses. Instead of disallowing labour expenses, the Assessing Officer preferred to estimate Net Profit rate of 5%. Apart from the discussion on labour expenses in the assessment order, there is no reference to detection of any concealment of facts or income. In appeal, the CIT(A) reduced the addition made by the Assessing Officer. In Second Appeal, ITAT also reduced the Net Profit rate to 3%. Reduction in the rate of profit itself shows the fact that nothing could be certain with regard to profit which ipsofacto could not tantamount to concealment of income. The assessee cannot be said to have concealed the particulars of income merely because the books of accounts were rejected by the Assessing Officer and subsequently, the Assessing Officer and CIT(A) applied different Net Profit rate to estimate the income. In diamond job work, labourers keep on migrating one place to another and in most cases, they are not traceable as they normally do not have permanent establishment. In absence of details of labourers, it cannot be inferred that how much services have been rendered by them to the assessee. In the case before us, the assessee had submitted a party-wise list of sub-contractors with details of TDS. So, the expenses incurred cannot be said to be bogus; however, here in the case before us, the recourse of estimation of Net Profit was made because the assessee could not provide certain facts/details about labourers which cannot be a sound basis for levying penalty u/s 271(1)(c) - Decided in favour of assessee.
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