TMI Blog2014 (8) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... I 68 - ALLAHABAD HIGH COURT] - in a case of estimation of income after rejection of books, no penalty could be imposed under section 271(1)(c) of the Act – thus, once the books of account are rejected and net profit is estimated by the AO, penalty u/s 271(1)(c) of the Act cannot be imposed – Decided in favour of Assessee. - ITA Nos.76, 77 & 79/LKW/2014 - - - Dated:- 28-7-2014 - Shri Sunil Kumar Yadav And Shri. A. K. Garodia,JJ. For the Appellant : Shri. B. P. Yadav, Advocate For the Respondent : Shri. Alok Mitra, D.R. ORDER Per Sunil Kumar Yadav: These appeals are preferred by the assessee against the respective order of the ld. CIT(A) confirming the penalty levied under section 271(1)(c) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty proceedings under section 271(1)(c) of the Act would be initiated, but the Assessing Officer has invited penalty proceedings and levied penalty in all the three assessment years, against which appeals were filed before the ld. CIT(A), but the assessee could not find favour with him. 3. Now the assessee is before us. The ld. counsel for the assessee has contended that once the books of account are rejected and net profit rate is estimated, penalty proceedings under section 271(1)(c) of the Act cannot be initiated, as there is no material on record in order to establish that the assessee has either concealed the income chargeable to tax or has furnished inaccurate particulars of income. In support of is contention, the ld. counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in the case of Naresh Chand Agarwal vs. CIT (supra) that in a case of estimation of income after rejection of books, no penalty could be imposed under section 271(1)(c) of the Act. The relevant observation of the Hon'ble High Court is extracted hereunder:- 11. In the instant case, nothing was concealed by the assessee. It was the AO who has rejected the books of account in the second round and applied the 8 per cent net profit rate prescribed under s. 44AD. In the instant case, the turnover is more than 40 lacs, so s. 44AD is not applicable, nonetheless the AO inspired with the provision of s. 44AD and made the addition by estimating the net profit rate @ 8 per cent. Rejection of the books of account allowed the AO to make the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estions of law is in favour of the assessee and against the Revenue. 7. Relying upon the aforesaid judgment of the Hon'ble jurisdictional High court, the Tribunal of this Bench has also taken a view that where the books of account are rejected by the Assessing Officer having invoked the provisions of section 145(3) of the Act, penalty under section 271(1)(c) of the Act cannot be imposed. The relevant observation of the Tribunal is also extracted hereunder:- 4.1 From the above paras of the order of learned CIT(A), we find that a clear finding is given by CIT(A) that no positive material is brought by the Assessing Officer on record to indicate that the said expenditure claimed by the assessee was bogus and/or the assessee had con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 145(3) of the Act and thereafter estimated the profit by applying the net profit rate of the gross receipts. Therefore, following the aforesaid judgment on the Hon'ble jurisdictional High Court and the order of the Tribunal, we are of the considered view that once the books of account are rejected and net profit is estimated by the Assessing Officer, penalty under section 271(1)(c) of the Act cannot be imposed. Accordingly we do not find any merit in the penalty levied in the instant appeals. We, therefore, set aside the orders of the ld. CIT(A) and delete the penalty in all these three cases. 9. In the result, appeals of the assessee are allowed. Order pronounced in the open court on 28.7.2014. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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