TMI Blog2016 (3) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is confirmed. - Decided against revenue. - ITA No.293(Asr)/2013 - - - Dated:- 4-3-2016 - SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Sh. R.K.Sharda, DR For the Respondent : Sh. Padam Bahl, CA ORDER PER A.D. JAIN, JM: This is the Department s appeal for the assessment year 2005-06 against the order, dated 06.02.2013, passed by the ld. CIT(A), Jammu. The Department has raised the following grounds of appeal: 1. On the facts and circumstances whether ld. CIT(A) was right in deleting the penalty imposed u/s 271(1)(c) of ₹ 13,88,830/- when the assessee had failed to produce books of account during assessment proceedings in confirmation of the income declared by the assessee. Under these circumstances, the income assessed over and above the income returned by the assessee represents its concealed income. 2. On the facts and circumstances whether ld. CIT(A) was right in deleting imposed u/s 271(1)(c) ₹ 13,88,830/- when penalty u/s 271(1)(c) has been upheld in the following case laws despite the fact that the addition made was based on estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have gone through the reply filed by the assessee ad the case laws referred by it in its reply. The main contention of the assessee is that the addition of ₹ 39,22,515/- has been made on account of estimation by applying rate of 10% of the turnover. Here, it is pertinent to mention that assessment by estimation is one of the known methods of assessment in the taxation^ world where the assessee conceals relevant material evidence. The revenue has no option but to make a best judgment by estimate. An assessment by estimation is as much legal as any other assessment. Once an assessment has been done, whether it is best assessment or otherwise, the figure assessed must be held to be the income of the assessee. This view has been held by Hon'ble Punjab Haryana High Court in the case of CIT vs. Warsat Hussain, (1988)171 ITR 405, 412 (PUNJ). Further, if the difference between income assessed and the income returned is due to fraud or gross or willful neglect on the part of the assessee then it cannot be said that income returned was the result of the honest belief of the assessee regarding his exact income (Hari Lai Kunj Behari Lai (1977) 166 ITR 720 (ALL). In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult in attracting the penalty provision u/s 271 (1) (C).In CIT vs K.R. Chinni Krishna Chetty (2000) 246 ITR/f^/lad), an estimated addition made in respect of cost of construction based upon the valuation made by a valuer, it was held, does not justify penalty. The penalty is not automatic on addition being confirmed. The law that assessment and penalty proceedings are different and that penalty does not exigible, merely because the addition has become final. It was in this context, the High Court in CIT vs Mata Prasad [2005] 278 ITR 354 (All) found no merit in departmental appeal questioning the deletion of penalty on the ground that the Tribunal itself having upheld the addition, could not have deleted the penalty. According to the question raised, this amounted to a volt face on the part of the Tribunal amounting to a review of its own finding in quantum appeal. - The High Court found that decision rendered on evidence on material by the Tribunal did not suffer from any legal infirmity and that tribunal was well within its jurisdiction in coming to the conclusion, that penalty was not leviable, though addition was justified. The penalty is also not leviable for artificial disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sahib v. CIT [1977] 108 ITR 736 (Mad). The assessee who is a manufacturer of salt claimed loss due to cyclone and rain, but such loss was not fully accepted, because of estimates involved. There is no room for penalty for such estimated addition was held in CIT v. Valimkbhai H. Patel [2006] 280 ITR 487(Guj). The High Court also pointed out there is not legal issue involved in view of concurrent finding by the Commissioner (Appeals) and Appellate Tribunal. Where an estimate of income was made for lack of vouchers, penalty does not automatically follow. Where addition is made solely on the basis of estimate without any proof of concealment, by way of best-judgment assessment, there could hardly be any case of penalty. It was this law, which was adopted to delete a penalty of ₹ 29,87,077/- sustained by the commissioned Appeals) in Dr. Hakeem S.A. Syed Sathar v. Asst. CIT [2009] 314 ITR (AT) 290 (Chennai). Where income is merely estimated, but there is no conclusive proof available as is evident from the fact that the estimated addition was reduced in first appeal, there is no scope for levy of penalty as was pointed out by the High Court in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- to show income of ₹ 7,500/-. Hence, not a case of estimation of income. 9.2. Addl. CIT vs. Lakshmi Industries and Cold Storage Co. Ltd. 146 ITR 492 (All.), was a case where penalty had been levied on account of unexplained cash credits and not on account of estimated additions. 9.3 Sushil Kumar Sharad Kumar vs. CIT , 232 ITR 588 (All) is a case where addition was made for low domestic personal expenses and not on account of estimation of income. 9.4. A.M. Shah Co. vs. CIT , 238 ITR 415 (Guj.) was a case where discrepancies in the books of account were found and there was alleged suppression of closing stock, not a case of estimation of income. 9.5 CIT vs. Swarup Cold Storage General Mills , 136 ITR 435 All.) was a case where it was held that their was gross or willful neglect on the part of the assessee and penalty was levied and not a case of estimation of income. 9.6. The Department has also sought to rely on CIT vs. Chandra Vilas Hotel , 292 ITR 202 (Guj). However, there is no such reported decision. 10. Thus, evidently, in none of the above cases, the income was assessed by way of estimate. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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