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2016 (11) TMI 884 - ITAT MUMBAI

2016 (11) TMI 884 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - g.p. estimation - Held that:- There is no concrete evidence of concealment of income or furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act and the addition was made based on estimating Gross Profit by rejecting books of accounts hence no penalty is attracted. Thus we reverse the orders of the authorities below and delete the penalty levied under section 271(1)(c) of the Act on estimated .....

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ng the penalty levied under section 271(1)(c) of the Act on the addition made estimating the gross profit in respect 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 o .....

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ns 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. The assessee preferred appeal before the Ld. CIT(A) and the Ld. CIT(A) sustained the addition. Subsequently, the matter was carried to the Tribunal by the assessee and the co-ordinate bench .....

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lars. It was further contended that as far as iron and steel business are concerned all the confirmations were submitted and none of the notices issued under section 133(6) sent to the parties in respect of iron and steel were not returned and all the parties responded to the notices. The notices returned pertained only for textile business and the assessee has produced the confirmations, sale bills and purchase bills. Therefore, it was contended that rejection of books is not justified merely b .....

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sing Officer passed penalty order on 30.03.12 holding that a survey action under section 133A was conducted at the premises of the assessee and a lot of incriminating evidences were found and they were thoroughly analysed by the Assessing Officer and arrived at a conclusion that the assessee has concealed/did not produce/fabricated wrong evidences and discussed in detail in the assessment order. The Assessing Officer concluded that such action of the Assessing Officer is confirmed by the Ld. CIT .....

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ted 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 .....

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ncealment of income. The Ld. Counsel further submits that there is no real concrete evidence to prove that these transactions of purchases are sham. It is submitted that no discrepancies were found about stocks. The Ld. Counsel for the assessee submits that the Assessing Officer has simply relied on the findings in the assessment order for imposition of penalty. He submits that the penalty proceedings are independent and the assessment proceedings are independent. He cannot blindly rely on asses .....

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ision of the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Ltd. (322 ITR 158) and submits that making incorrect claim does not amount to concealment of particulars, therefore no penalty is attracted. The Ld. Counsel further referring to para 7 to 10 of the co-ordinate bench in the case of Shri Narayansingh J. Deora vs. ACIT (supra) submits that on similar circumstances where the books of accounts were rejected and income was estimated on the contract receipts, the co-ordina .....

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well as iron and steel business on the turnover of about ₹ 15 crores for the assessment year 2006-07. During the course of survey, assessee in spite of repeated directions to furnish godowns and warehouse addresses no details were furnished by the assessee. The office premises 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 l .....

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ls 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 where the assessee h .....

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seal, name and designation of the authority who has signed the confirmations and therefore they are dubious and not genuine. He further submits that the Assessing Officer has found that there was no complete address i.e. plot number, room number, floor number, road name, pin code etc. on the confirmations. The Assessing Officer further noticed that the pen and ink used for signatures by the signatories is almost the same. Therefore, by virtue of all these defects the books were rejected by the A .....

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is into the business of textiles, iron and steel. There was a survey in the premises of the assessee and in the course of survey it was noticed that the assessee was showing very low gross profit on the turnover from the business of textiles as well as iron and steel. The Assessing Officer when requested for furnishing the details of godowns and warehouses addresses the assessee seems to have given evasive replies. The survey party has also found that the assessee is operating her business in a .....

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eedings, 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 accou .....

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xtile business is on higher side. The Tribunal reduced the gross profit rate by 5% in both the businesses of the assessee. 8. The Assessing Officer levied penalty holding that there is concealment of income or furnishing of inaccurate particulars which the Ld. CIT(A) sustained. On a reading of the orders of the lower authorities i.e. the assessment order and the Ld. CIT(A) s order, we find that the books of accounts were rejected on noticing various discrepancies such as no proper confirmations .....

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the assessee raising invoices on the clients and the dealers on the assessee is also not in dispute. In fact it is the finding in the survey report that assessee is keeping some margin from such sales. Therefore the lower authorities could not concretely prove that there is furnishing of inaccurate particulars or concealment of income in showing less GP in the businesses. Mere estimation of gross profit will not lead to furnishing of inaccurate particulars or concealment of income. 9. In the cas .....

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failure to return the correct income by means of fraud or gross or willful neglect . 10. In the case of Harigopal Singh vs. CIT (258 ITR 85) the Hon ble Punjab & Haryana High Court held that where the assessment is made on estimate basis, no penalty under s. 271(1)(c) can be imposed. The Hon ble High Court observed that there was a difference of opinion as regards the estimate of income of the assessee. Since the Assessing Officer and the Tribunal adopted different estimates in assessing the .....

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urnover. 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 no .....

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d to any finding to the effect that there was any fraud or gross or willful neglect on the part of the assessee. On this view the penalty order was cancelled. The only fact proved was that the assessee had not maintained the accounts regularly, for which reason they were rejected. The correct income was estimated by applying a flat rate. On these facts the Tribunal held that it could not be said that the assessee was guilty of fraud or gross or willful neglect. 13. In the case of CIT vs. Sangrur .....

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ies were available. By taking into consideration the said material and the statement of the Director of the Company, the Assessing Officer arrived at a conclusion that the books of account of the assessee were not reliable and did not reflect its true income. Accordingly, the Assessing Officer rejected the accounts of the assessee and concluded that the assessee had made unaccounted sales. While completing the assessment, the Assessing Officer, in order to arrive at the quantum of such unaccount .....

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the impugned order. 7. The order passed by the ITAT 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 t .....

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