TMI Blog2007 (5) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Revenue. In fact, there is no material on record to show that assessee has consciously made concealment or furnished inaccurate particulars of its income. There is no dispute that gross receipt of Rs. 1,63,53,985 shown by the assessee has been accepted by the Department. In our view, merely (because) books of account of the assessee were rejected, it could not be held that assessee was guilty of fraud or gross or willful neglect. Therefore, the decision of Hon'ble Supreme Court of India in the case of K.C. Builders vs. Asstt. CIT is not applicable to the facts of the present case. In the result, we cancel penalty of Rs. 1.50 lakhs imposed by the AO and confirmed by the learned CIT(A) and allow appeal of the assessee. - H. L. Karwa Judicial Member And S. V. Mehrotra Accountant Member For the Appellant : Kanchan Kaushal For the Respondent : Smt. Mini Sinha Verma ORDER- H.L. KARWA, J.M.: This appeal filed by the assessee is directed against order of the CIT(A)-I, Lucknow, dt. 14th July, 2006 in confirming penalty of Rs. 1.50 lakhs imposed under s. 271(1)(c) of the IT Act, 1961 relating to asst. yr. 2001-02. 2. Briefly stated, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and found not completely verifiable and therefore net profit rate of 7 per cent was applied on total gross receipts of Rs. 1,63,53,985 and thus he completed assessment at Rs. 11,44,780. The AO also stated that net profit rate to the extent of 6 per cent of gross receipts was upheld by the learned CIT(A). It was also observed by the AO that the conscious effort of the assessee not to furnish books of account for verification tantamounts to concealment of income. While relying on the decision of the Hon'ble Supreme Court of India in the case of K.C. Builders vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 265 ITR 562 (SC), the AO took the view that penalty can be imposed if the conduct of the assessee is 'conscious'. According to the AO, in this case the conduct of the assessee was conscious and deliberate while not producing the books of account and bills. The AO held that assessee has concealed its particulars of income deliberately and therefore he imposed penalty of Rs. 1.50 lakhs under s. 271(1)(c) of the IT Act, 1961. 4. On appeal, the learned CIT(A) confirmed penalty levied by the AO stating that assessee had willfully and deliberately not produced books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mansukh Dass Soni vs. Asstt. CIT (2006) 10 SOT 51 (Jd). 6. In view of the above, the learned Authorized Representative of the assessee submitted that impugned penalty may be cancelled. 7. On the other hand, the learned Departmental Representative strongly supported the orders of the authorities below. He further submitted that in the instant case, the AO rejected books of account and also recorded specific finding and invoked provisions of s. 145 of the IT Act, 1961 while framing assessment. The AO worked out assessee's income by applying a net profit rate of 7 per cent to the total receipts which was reduced by the learned CIT(A) to 6 per cent. According to the learned Departmental Representative, assessee's assessed total income, after giving effect to the order of the learned CIT(A), exceeded the income disclosed by the assessee. According to the learned Departmental Representative, assessee grossly understated its income and has failed to make full and true disclosure of its income in the return of income filed by it. He, therefore, submitted that assessee has consciously made concealment or furnished inaccurate particulars of its income. It was also submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, the learned CIT(A) reduced net profit rate applied by the AO to 4 per cent. In second appeal, the Tribunal confirmed the order of the learned CIT(A), hence rate of 4 per cent became final. The final assessed income worked out by the AO was Rs. 13,93,353 as against Rs. 12.50 lakhs declared by the assessee. Thus, addition came to Rs. 1,43,353. The AO levied penalty on the difference between income returned and income assessed. The order of the AO was confirmed by the learned CIT(A). In second appeal, this Bench of the Tribunal cancelled penalty vide order dt. 27th April, 2004, observing as under: 8. We have carefully considered the rival submissions and have also perused the orders of the authorities below. The decisions relied upon by both the parties were also considered. In the instant case, the assessee had submitted block return showing an income of Rs. 12,50,000 which covered all the aspects of the search. The profit on sales was estimated by applying a net profit rate of 3.3 per cent approximately. However, the AO applied the net profit rate of 4.5 per cent. He has not disputed the total figures of sales as found undisclosed. At the same time, the AO has not brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is own trucks on estimate basis and had shown income from commission at 7 per cent of the gross receipts in respect of the trucks owned by others. The AO had allowed expenditure at 80 per cent. The CIT(A) allowed expenditure at 84 per cent. Similarly, whereas the AO had estimated income from commission at 10 per cent, the CIT(A) allowed it at 8 per cent. The Tribunal found that the difference between the returned and the assessed income was due to the difference of opinion about the estimated rates of income and expenditure. Income had been enhanced by the AO by adopting a lower estimate in respect of the expenditure and higher estimate with regard to the income from commission. The AO determined the income of the assessee on estimate basis. The Tribunal noticed that since the difference in estimates was based on a difference of opinion, there was no positive proof regarding concealment of income by the assessee. The assessee had shown expenditure as also the income from commission on estimate basis. The rates of estimate were varied by the AO. These were further varied by the CIT(A). The Tribunal, therefore, cancelled the penalty on the ground that there was no positive evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BFA(2) of the IT Act, 1961 can be levied in this case. Accordingly, we cancel the penalty levied by the AO and confirmed by CIT(A). 9. In the above order, the Tribunal has clearly held that no penalty is leviable on the addition made on estimate basis. In our view, the above decision is squarely applicable to the facts of the present case and therefore we are of the view that no penalty can be levied in this case. 10. In the case of CIT vs. K.L. Mangal Sain, the Hon'ble Allahabad High Court held as under: Held, that the Tribunal had proceeded upon the basis that the burden lay on the assessee, that the only fact proved was that the assessee had not maintained the accounts regularly, for which reason they were rejected and the correct income was estimated by applying a flat rate, and that merely because books were rejected it could not be held that the assessee was guilty of fraud or gross or willful neglect. The Tribunal rightly quashed the penalty order imposed by the IAC. 11. In the above case, the Hon'ble Allahabad High Court has also held that merely because books were rejected, it could not be held that assessee was guilty of fraud or gross or willful ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 can be validly levied in this case. Reliance placed by the Revenue on the decision of the Hon'ble Supreme Court of India in the case of K.C. Builders vs. Asstt. CIT is of no help to the case of Revenue. In fact, there is no material on record to show that assessee has consciously made concealment or furnished inaccurate particulars of its income. There is no dispute that gross receipt of Rs. 1,63,53,985 shown by the assessee has been accepted by the Department. In our view, merely (because) books of account of the assessee were rejected, it could not be held that assessee was guilty of fraud or gross or willful neglect. Therefore, the decision of Hon'ble Supreme Court of India in the case of K.C. Builders vs. Asstt. CIT is not applicable to the facts of the present case. 16. Recently, the Hon'ble Allahabad High Court in the case of CIT vs. Raj Bans Singh (2005) 276 ITR 351 (All) upheld the findings of the Tribunal in holding that assessee had not deliberately concealed income. In the said case, the Tribunal held that it was a case of estimate against an estimate and there was no concealment. Accordingly, the Tribunal concluded that no penalty under s. 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
