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ACIT, Circle-8, Surat Versus M/s. Three Star Gems

2015 (10) TMI 1493 - ITAT AHMEDABAD

Penalty levied u/s 271(1)(c) - enhancement of net profit on account of unproved labour payment - Held that:- As the notice u/s 271(1)(c) of the Act was not served on the assessee, the assessee could not be expected to offer any plausible explanation before the Assessing Officer. When he started investigation, it was noted by him that letters u/s 133(6) of the Act could not be served on the labourers. However, no disallowance of labour expenses claimed was made by the Assessing Officer despite th .....

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thing could be certain with regard to profit which ipsofacto could not tantamount to concealment of income. The assessee cannot be said to have concealed the particulars of income merely because the books of accounts were rejected by the Assessing Officer and subsequently, the Assessing Officer and CIT(A) applied different Net Profit rate to estimate the income. In diamond job work, labourers keep on migrating one place to another and in most cases, they are not traceable as they normally do not .....

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sound basis for levying penalty u/s 271(1)(c) - Decided in favour of assessee. - ITA No. 2142/Ahd/2011 - Dated:- 30-4-2015 - Shailendra Kumar Yadav, JM And Anil Chaturvedi, AM,JJ. For the Appellant : Smt Soniakumar, Sr. DR For the Respondent : None ORDER Per Shailendra Kumar Yadav, Judicial Member This appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Surat dated 23.05.2011 for Assessment Year 2005-06, on the following grounds:- 1. On the facts .....

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notice issued prior to levy of penalty. 3. It is, therefore, prayed that the appellate order of the Ld. CIT(A) be set-aside and that of the A.O. restored back. 2. The brief facts of the case are that the assessee is a partnership firm engaged in the business of diamonds cutting and polishing on job labour basis. During the year the assessee had shown Gross Profit of 1.74% on job labour receipt of ₹ 19,45,65,313/-. The Assessing Officer issued letters u/s 133(6) of the Act on 7 persons for .....

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had rejected the books of accounts and applied the net profit rate of 5%of total labour receipts. On appeal, the CIT(A) confirmed the finding of the Assessing Officer but applied the Gross Profit rate of 2% and accordingly reduced the addition confirmed by the Assessing Officer. In Second appeal, the ITAT held that since it is a case of payment of job work, it would be proper to apply Net Profit rate as this is a case of services rendered for labour work of diamond cutting and manufacturing. Acc .....

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sessee and having considered the same, CIT(A) has granted relief to the assessee and the same has been opposed before us by the Revenue inter alia stating that the CIT(A) erred in deleting the penalty levied by the Assessing Officer u/s 271(1)(c) of ₹ 17,42,370/- in respect of enhancement of net Profit on account of unproved labour payments. The ld. Departmental Representative also submitted that on the facts and in the circumstances of the case, the CIT(A) ought to have upheld the order o .....

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. Departmental Representative and material available on record. 2.2 After going through the submissions of the ld. Departmental Representative and the material available on record, we find that as the notice u/s 271(1)(c) of the Act was not served on the assessee, the assessee could not be expected to offer any plausible explanation before the Assessing Officer. When he started investigation, it was noted by him that letters u/s 133(6) of the Act could not be served on the labourers. However, no .....

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