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2018 (7) TMI 69 - AT - Income TaxPenalty u/s 271(1)(c) - rejection of books u/s. 145(3) of the Act and applied the GP rate of 4% - Held that:- Mere basis for penalty by AO is on the basis of his estimation of GP rate of the assessee and AO has rejected the books of accounts of the assessee without pointing out any particular defect in the same and the CIT(A) and ITAT have also confirmed the part of the addition merely on an estimate basis. GP rate has been estimated and no defect has been pointed out by the AO in the books of accounts of the assessee which could lead to the fact that particulars of income have not been disclosed by the assessee. It is a settled law that in case where the income has been estimated by applying a flat estimated rate of profit, and no other specific defects have been established which lead to concealment or furnishing of inaccurate particulars of income, no allegation could be made out against the assessee, making the conduct of assessee punishable with penalty. Case of CIT vs. Metal Products of India [1984 (1) TMI 36 - PUNJAB AND HARYANA HIGH COURT] wherein it has been observed that the addition if made on estimation under the proviso of Section 145(1) of the Act by adopting the view that GP shown in the books of accounts was too low, does not automatically lead to the invocation of penalty. - Decided in favour of assessee.
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