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2023 (6) TMI 566 - AT - Income TaxEstimation of income on Cash Deposited in Bank Account - Estimation of Net Profit (NP) @ 5% instead of 1% as claimed by the assessee - appellant being a Kachha Arahtiya - Addition made assuming the total cash deposited as turnover without giving the benefit of rotation of funds - HELD THAT:- Appellant is not making independent sale and is only acting as an agent on behalf of the principle. The said contention of the appellant is further proved from the fact that the cash has been deposited at different locations where the buyer is placed and the payment is made to the vendor in Mandi on behalf of buyer. In these circumstances, the turnover of a Kachha Arhtiya would not include the sale consideration and only includes the commission earned by him. CBDT circular No 452 dated 17.03.1986 make it apparently clear that in the case of Kachha Arhtiyas, only the commission has to be considered while working out the turnover, as above. In our view, so far as kachha arahtias are concerned, the turnover does not include the sales affected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB. Thus admittedly, the appellant being a Kachha Arahtiya, it would be justified to apply a net profit rate of 1.5% as against 5% applied by the AO, on the Total Turn Over estimated. Levy of penalty u/s 271(1)(b) - non-compliance of notices u/s 142(1) - HELD THAT:- It is settled law that the imposition of penalty u/s 271(1)(b) is not mandatory rather is discretionary provided the appellant proves that there was a reasonable cause for the said failure of non-compliance. In the present case, it was duly informed to the AO that the appellant was not served with any notice u/s 142(1) of the act and moreover, the email id given on the online portal was that of the accountant who was expired on 19.04.2021. The Parliament has used the words "may" and not "shall", thereby making legislative intention clear in as much as that levy of Penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act which provides that “Penalty not to be imposed in certain cases”. Thus considering the nationwide COVID Pandemic and death of the account whose email ID was given for correspondence, certainly demonstrate reasonable cause on the part of the appellant assessee for the said non-compliance of notices issued u/s 142(1) - levy of penalties u/s 271(1)(b) set aside. Decided in favour of assessee.
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