TMI Blog2017 (2) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... 42.36% which has been finally brought down to 40.40%. The additions have thus been confirmed on a pure estimation basis taken into consideration the prevalent business environment and the past history of the assessee and the same cannot be basis for levy of penalty. - Decided in favour of assessee - ITA No. 143/JP/2016 - - - Dated:- 16-1-2017 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri Rajeev Sogani (CA) Revenue by : Shri Rajendra Jha (Addl. CIT) ORDER Per Vikram Singh Yadav, A.M. This is an appeal filed by the assessee against the order of Ld. CIT(A) dated 17.12.2015 for A.Y. 2007-08. The sole ground of appeal taken by the assessee is as under:- 1. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the penalty amounting to ₹ 2,00,043/- u/s 271(1)(c) of the Income Tax Act, 1961 on estimated trading additions. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said additions of ₹ 2,00,043/- 2. Brief facts of the case are that the assessee is engaged in the business of manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the limited issue for consideration is what should the reasonable basis for estimation of G.P. rate and whether estimation done by the lower authorities call for any interference. The A.O. has applied average G.P. rate of last two years @ 42.36%. The ld. CIT(A) by following the G.P. rate of last year has brought the same down and applied G.P. rate of 40.40%. Apparently, both the AO as well as ld. CIT(A) are guided by assessee s past history. At the same time, it is observed from the order of the ld. CIT(A) that he has considered the unusual business conditions prevalent during the subject matter in terms of profit margins getting effected by increase in cost of raw material, introduction of new products in the market and fact that some of the assessee s customers did not place orders during the year resulting in fall in turnover from ₹ 375.70 lacs to ₹ 302 lacs during the year. In our view, the view of the ld. CIT(A) is fair and reasonable which has factored in the business environment prevalent during the year and at the same guided by assessee s past history, applied gross profit rate of 40.40% as against 42.36% applied by the AO. In light of above, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead to the reasonable and positive inference that the assessee s case is false, then no penalty can be imposed in such case. Same ratio was laid down by the Hon ble Gujarat High Court in the case of National Textiles (2001) 249 ITR 0125 (Guj- HC) 9. Further reliance is placed on the judgment of the Hon ble Delhi High Court in the case of Vatika Construction (P.) Ltd. [2014] 45 taxman.com 471 (Delhi) (Case Law Page 21), in which it has been held that Head Notes Section 271(1)(c), read with sections 40A(3) and 44AD of the Income-tax Act, 1961 Penalty For concealment of income (Agreed additions) Assessment year 2004-05 Assessee carried on construction business It had issued large number of bearer cheques to small suppliers of building material In response to notice issued by Assessing Officer seeking to disallow said payments under section 40A(3), assessee offered that its income might be computed by applying net profit rate of 8 per cent of gross receipts Assessing Officer having accepted assessee s offer, made addition in terms of section 44AD He also passed a penalty order under section 271(1)(c) Tribunal, however, set aside said penalty order Whether sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under section 148. During the course of assessment proceedings, it was noted by the AO that the assessee had made certain unexplained investments over the construction of the house. When the assessee was confronted with this aspect, she did not deny that the house was constructed by her in the name of her minor son. She even explained the investments. AO then estimated the amount of expenditure for the construction of such house. The judicial authorities even questioned the mental attitude of the assessee in not filing the return u/s 139(1). The facts in the present case are totally different as this is not a case where the assessee tried, even minutely, to conceal the particulars of his income. It is a case where the ld. AO not being satisfied by the percentage of Gross Profit declared by the assessee as compared to the past years estimated a GP rate. 10.iv In the case of MD. WARASAT HUSSAIN (Supra) there was a clear finding by the AO that the assessee had concealed his capital gains on sale of land. The assessee calculated Capital Gains, but, however failed to provide the documents for such sale before the AO and even asked the revenue authorities to determine the Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in paragraph 2 of the decision .. ..we fail to see how the decision in Dharamendra Textile Processors case (supra) can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile Processors case (supra) could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. 12.ii CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) ..We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the asseessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly of Explanation 1, as it exists now, to section 271(1)(c). Their Lordships have indeed held that a penalty under section 271(1)(c) is a civil liability but that expression is used in contradistinction with criminal liability and, as held by the Hon ble Supreme Court itself in the case of Om Prakash Shiv Prakash (supra), there is no conflict in a liability being a civil liability and at the same time being penal in character. In effect, therefore, liability under section 271(1)(c) continues to have its basic penal character even as it is held to be a civil liability 14. Ld. CIT(A) has not distinguished the jurisdictional High Court decisions. Therefore, ld. ICT(A) has erred in not following the same. 15. It is not the finding of the ld. AO or ld. CIT(A), in the quantum proceedings, that the assessee was indulged in bogus purchases. 16. Hon ble ITAT Japur Bench has consistently taken a view that no penalty should be levied on estimated additions. Below mentioned are some of the cases in which such view has been followed by the Hon ble Jaipur Bench. 16.i Indus Jewellery Private Limited, ITA. No.933/JP/13 (Cse Law Page 30) 16.ii Vijay Solvex Ltd., ITA No.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense, can neither be said to be addition of any amount in the returned income nor disallowance of any amount as deductions claimed. The word amount of which additions made or deductions disallowed also denotes reference to specific item of amount added or disallowed as deduction in contrast to substitution of altogether a new estimated sum in place of theincome returned. It is a case neither of addition or disallowance but a case of substitution. 18. Further, the assessee has relied on decision of Hon ble Rajasthan High Court in case of Mahendra Singh Khedla wherein the High Court has confirmed the findings of the Tribunal at Para-8 which are as under:- Under these circumstances when in the present case there was no positive evidence beyond doubt regarding estimated trading addition that the amount in difference between the result shown by the assessee and that estimated by the AO was resultant of concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee, penalty under section 271(1)(c) of the Act cannot be levied. The AO had rejected the books of account and estimated the trading addition on the basis that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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