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2021 (4) TMI 497 - ITAT DELHIPenalty u/s 271AAA - undisclosed income recovered in search operation u/s 132 - estimation of Gross Profit @ 3.68% - assessment was completed at an income on account of estimation of gross profit rate due to difference in stock as per the books of accounts and the stock as per the physical inventory taken - contention of the assessee that the discrepancy in stock was due to malfunction in the ERP software - HELD THAT:- Though, assessee's explanation was not accepted by the Assessing Officer, the assessee has demonstrated with evidence that due to malfunction of the software, the accounts could not be completed in time and that the assessee had to approach the Company Law Board with a petition to extend the date for adoption of audited accounts. This petition was accepted by the Company Law Board and the offence was compounded. Therefore, in our considered opinion, the assessee had a reasonable explanation for the discrepancy found in stock and due credence should have been given to this explanation. Therefore, it cannot be said that the assessee had no explanation to offer regarding the difference in stock. Further, the amount on which the penalty has been imposed is only an ad-hoc addition based on average gross profit rate and does not relate directly to any undisclosed income unearthed during the course of search. In such a situation, it is our considered opinion that the imposition of penalty u/s 271AAA is not sustainable - Decided in favour of assessee.
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