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2016 (10) TMI 690 - ITAT MUMBAIPenalty levied u/s. 271(1)(c) - cash expenditure incurred - estimation of the profit rate -Held that:- Lower authorities have not made any addition on the basis of these cash expenditure but estimated the profit rate on gross receipts as the assessee is engaged in the business of the construction activity, i.e., the Civil Contractor. Even the Tribunal has accepted the estimation of income and reduced the profit rate from 25% to 23%. The observations of Tribunal in quantum appeal is reproduced in above para 5 of this order. In all, now the issue arises whether the estimate on penalty can be levied because assessment is finally made on estimating the profit rate. The lower authorities has initiated the penalty for the reason that the assessee has incurred cash expenditure and for this, evidences were found during the search proceedings on Chartered Accountant firm of the assessee. We also find that the profit rate applied on cost of sale as per the working of sale adopted by the Department can at the best be the basis for quantum addition but it cannot attract penalty for furnishing of inaccurate particulars of income because the assessment is made not on the issue of unaccounted cash expenditure but on estimate of profit rate. Accordingly, in our view, as per rule of evidence there is distinction between set of facts not proved and facts disproved and facts proved. Here we have to give benefit to the assessee because there is a doubt for the reason that mere non-satisfactory explanation furnished by the assessee cannot amount proof of falsity of explanation furnished. Accordingly, we are of the view that the lower authorities have erred in levying penalty for furnishing of inaccurate particulars of income on income estimated after applying profit rate. We delete the penalty and allow the appeal of the assessee.
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