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2016 (5) TMI 922 - AT - Income TaxPenalty u/s 271(1)(c) - whether the penalty can be imposed on the basis of estimated addition by applying the gross profit on the basis of immediate preceding year’s gross profit on the estimated turnover? - Held that:- AO has proceeded to pass the assessment order with biased mind that the raid was conducted on the premises of the assessee on1 2.09.2004 and FIR was registered regarding seizure of three trucks of spurious cement. But, merely on the basis of registration of FIR, no order to the prejudice to the assessee can be passed that he had been making sales and purchases outside the books of accounts. Undisputedly, no such material has been brought on record by the AO nor called upon by the CIT (A) during appellate proceedings, if the allegations levelled in the said FIR have been proved in the court. AO proceeded to adopt the estimated gross profit at 33% on the ground that, “in the assessment year 2000-01, a TEP was received by the department wherein it was informed that the appellant had indulged in making sales and purchases outside the books. Such old habits seldom vanish and the same is indicated in terms of discrepancies pointed out by the AO in the books of accounts and the Excise Department has also reported evasion of tax.” These observations of the AO are based upon conjecture and surmises without having any cogent material on record which have been confirmed by the CIT (A) in mechanical manner and then the said order has been blindly adopted by the AO to pass the penalty order. Merely on the basis of the fact that the Excise Department has conducted raid on the business premises of the assessee and detected tax evasion, the assessment order cannot be passed that too on the basis of estimated turnover and estimated gross profit in the face of books of accounts which have never been rejected by the revenue authorities - Decided in favour of assessee
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