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Motta Construction Pvt. Ltd. Versus ACIT, Central Circle-15 and 16, Mumbai

Penalty 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 .....

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epartment 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-satisfa .....

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r The Respondent : Shri Vinita Menon ORDER Per Mahavir Singh, JM: These Appeals by the Assessee are arising out of the orders of Commissioner of Income Tax (Appeals)-39, Mumbai ( CIT(A) for short) in Appeal Nos. CIT(A)- 39/AC.CC.15&16/IT-34 & 33/2011-12 vide order of common date 07.01.2013. The assessment were framed by ACIT-Central Circle-15 & 16, Mumbai u/s. 143(3) r/w s. 153C of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2005-06 and 2006-07 vide .....

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will decide both the appeals. Grounds raised in ITA No. 2857/Mum/2013 for A.Y. 2006-07, reads as under: 1. The Learned CIT(A) erred in confirming the penalty levied u/s. 271(1)(c) being 100% of the tax sought to be evaded on the undisclosed income being difference between assessed income and returned income. 2. The Learned CIT(A)failed to appreciate the fact that the penalty proceedings were initiated only on account of additions made on estimation basis. 3. The penalty u/s. 271(1)(c) being 100% .....

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nditure claim the return year-wise reads as under: Asstt. Year Total Expenses (Unaccounted) Expenses claimed as allowable in the P & L A/c filed with the Return u/s. 153C 2000-01 49,02,781 38,97,825 2001-02 23,75,693 7,74,874 2002-03 23,47,337 12,00,430 2003-04 89,62,914 34,55,356 2004-05 70,85,795 27,41,482 2005-06 7,50,000 6,00,000 2006-07 50,000 50,000 4. In both the assessment years, the Assessing Officer (A.O.), instead of disallowing these unaccounted expenses, representing cash expend .....

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fore us, Authorised Representative (AR) submitted that estimate made by the CIT(A) was on higher side, that no seizure was made from the assessee s premises, that during 153C proceedings, assessee had filed full details of his income. Departmental Representative (DR) supported the orders of the FAA. After hearing the rival submission and perusing the material available on record, we find that assessee had shown 19.27% Gross Profit (GP). AO fixed the GP at 26.52%. FAA reduced it to 25%. 4.1 Thus, .....

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ome of the assessee @ 23% of the cost of the sales (sales minus profit). AO is directed not to consider 40 A(3) disallowances. Accordingly, the A.O. started penalty proceedings u/s. 271(1)(c) of the Act and levied the penalty for furnishing of inaccurate particulars of such income at ₹ 9,12,679/- in A.Y. 2006-07. Similar penalty was levied in A.Y. 2005-06 at ₹ 36,40,057/-. 5. Aggrieved, the assessee preferred an appeal before the CIT(A) who also confirmed the action of the A.O., on t .....

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profit and loss account accompanying the regular return, the said expenditure was not reflected, in t furnished. I am in agreement with the observation of the Assessing Officer that a search and seizure action, leading to issue of notice under s. 158BC, cannot be made use of by the assessee to his benefit to reduce his income for the impugned year. The said provision is to help the Revenue to collect tax due from undisclosed income and not for the benefit of the assessee. Further, the position t .....

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nsate for loss of revenue. Mens Rea or deliberate intention to conceal need not be proved. Both the CIT(A) and the ITAT have come to a finding that the books as maintained are not reliable, hence the appellant is to be visited with penalty in respect of such income in respect of which particulars have been concealed. Hence I am of the firm view that this is a fit case for imposition of penalty under s. 271(1)(c). However, the Assessing Officer will compute the penalty on the undisclosed income d .....

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ofit and formula adopted by lower authorities directing to reduce the profit rate at 23% of the cost of sales. The ld. Counsel for the assessee argued that once the estimation is made, there is no finding by the lower authorities that there is concealment of income or the assessee has furnished inaccurate particulars of income. According to the ld. Counsel once the estimation is made, the penalty u/s. 271(1)(c) of the Act cannot be levied. Hence, he requested for deletion of the same. On the oth .....

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