TMI Blog2016 (11) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... t of textile business and iron and steel business of the assessee. 2. Briefly stated the facts are that the assessee, engaged in the business of dealers in fabrics, cloths, iron and steel products, filed her return of income on 12.10.07 declaring the income at ₹ 1,91,917/-. The assessment was completed under section 144 read with section 145 of the act determining the income of the assessee at ₹ 2,87,58,580/-. The Assessing Officer while completing the assessment made addition of ₹ 3,01,83,302/- estimating the gross profit on sales of iron and steel business at 10% and on the sales of textiles at 20%. The Assessing Officer rejected the books of accounts of the assessee observing that gross profit is very low, the sales and purchase made by the assessee are not genuine, assessee has not maintained proper stock records, assessee has not produced confirmations from the purchasers, the notices issued to the purchasers were returned unserved, the assessee could not produce the purchasers. Therefore, the Assessing Officer because of all these discrepancies rejected the books of account of the assessee and estimated the gross profit and made addition accordingly. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness and iron and steel business of the assessee. While sustaining the penalty the Ld. CIT(A) was of the view that assessee has been resorting to unfair means and submitting inaccurate particulars of income whereby concealing the income, therefore there is no scope for any relief to be granted to the assessee. Ld. CIT(A) placed reliance on the decision of Hon ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors (306 ITR 277). 5. The Ld. Counsel for the assessee submits that the assessee is into trading of iron and steel and fabrics on a wholesale basis. The addition was made in the assessment order by estimating the gross profit at 20% from these two businesses i.e. textile and iron and steel by rejecting the books of accounts. The addition was made on estimate basis without any cogent materials. The Ld. Counsel for the assessee inviting our attention to para 6.1 of the Ld. CIT(A) s order submits that a remand was called for by the Ld. CIT(A) and in response to the remand report assessee also filed reply which is at para 6.2. The Ld. Counsel further invited our attention to page 9 of the Ld. CIT(A) s order and the observations which were recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of the assessee was a sharing accommodation where the assessee was paying a meager rent of ₹ 1000/- per month and there was no furniture of the assessee to conduct the business properly and further it came to light that assessee is not maintaining any opening or closing stock of both the businesses since as and when the orders received from the parties either through brokers directly assessee places these orders with their members who supplied and delivered the materials directly to the assessee s client. Thereafter assessee has raised sale bills on her client and in the similar manner her suppliers also raised the bills on the assessee. It was also stated in the report that while raising the sale bills on clients assessee used to keep her margin. The Ld. D.R. further referring to page 3 of the assessment order submits that the assessee has shown very low GP and is maintaining GP at 1% to 1.5 % on the margin of sales and this is very low margin in textile and iron and steel businesses. The Ld. D.R. further submits that in order to verify the genuineness of sales and purchase transactions as the assessee was showing very low GP, notices were issued to various parties from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see raises bills on her client and in turn her suppliers also raise bills on the assessee. In the course of assessment proceedings, the Assessing Officer issued notices to various parties who have sold materials to the assessee. Many of the notices were returned unserved. However, assessee seems to have produced the confirmations before the Assessing Officer whereas notices were returned unserved. The Assessing Officer after noticing various discrepancies in the confirmations he treated such confirmations as dubious and non genuine. In view of all these discrepancies the Assessing Officer rejected the books of accounts of the assessee and estimated the gross profit at 20% in respect of sales made in the textile business and 10% in sales made in iron and steel business. The Ld. CIT(A) sustained the action of the Assessing Officer in rejecting books of accounts and estimating of gross profit. However, the Tribunal while sustaining the rejection of books of accounts by the lower authorities as they are not reliable and at the same time held that the gross profit estimated in the iron and steel business and textile business is on higher side. The Tribunal reduced the gross profit rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent estimates in assessing the income of the assessee, it could not be said that the assessee had concealed the particulars of his income so as to attract cl. (c) of s. 271(1)(c) of the IT Act, 1961. 11. In the case of CIT vs. Nawab and Bros. (1977) 107 ITR. 681 (All), the Hon'ble Allahabad High Court held as under: that the only reason why his books were rejected was that the assessee was not maintaining a day-to-day stock register. The correct income was determined by merely applying a flat rate on the returned turnover. In view of these facts, it could not be said that the assessee was guilty of either fraud or willful neglect in the matter and the assessee had discharged the burden that lay on him. The Tribunal was justified in law in cancelling the penalty. 12. In the case of Commissioner of Income Tax vs. K.L. Mangal Sain (107 ITR 598) the Hon ble Allahabad High Court held as under: on appeal before the Tribunal it was urged on behalf of the assessee that it has been established that it was not guilty of fraud or gross or willful neglect. It was submitted on behalf of the assessee that the book version was rejected and profit was determined by applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT is based upon two decisions of this Court in CIT v. Ravail Singh Co. [2002] 254 ITR 191 1 and Hari Gopal Singh v. CIT [2002] 258 ITR 85 2. In both these decisions, this Court has held that in order to attract clause (c) of section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of section 271(1)(c) of the Act are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. It was held that when the addition had been made on the basis of estimate and not on account of any concrete evidence of concealment, then the penalty was not leviable. The similar view was also taken by this Court in CIT v. Dhillon Rice Mills [2002] 256 ITR 447 3, where the addition was made by the Assessing Officer by estimating the yield of super phak as well as of chhilka and also the price of chhilka, that addition was reduced by the CIT(A). However, the penalty levied by the Assessing Officer was deleted by the CIT(A). The order of CIT(A) was confirmed by the ITAT and the appeal filed by the revenue against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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