TMI Blog2019 (10) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is deleted. Addition it is pertinent to note that the AO has rejected the books of account by invoking the provisions of section 145(3) and thereafter estimated the income of the assessee by applying GP rate at 2% as against 1.92%. Thus to the extent of sales declared by the assessee in the books of account and in the return of income filed under section 139(1), any trading addition made after rejection of books of account by estimating the income would not attract the penalty under section 271(1)(c) and particularly in the case of the assessee when the income declared by the assessee represents GP rate at 1.92% and the AO has estimated the income by applying GP at 2%. Extent of the addition by applying GP at 2% on the declared sales, same will not be regarded as furnishing inaccurate particulars of income or concealment of particulars of income to attract the penal provision under section 271(1)(c). Accordingly, the penalty to the extent of the trading addition made in respect of the declared sales is deleted. Addition made by the AO in respect of unaccounted sales by applying GP at 2%, since it is the case of undisclosed sales by the assessee and, therefore, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2011-12. The assessee has raised the following grounds of appeal :- 1. Under the facts and circumstances of the case and in law, the order dated 19.08.2016 passed by the learned Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 on the basis of notice issued on 07.02.2014 without striking off the irrelevant portion of the printed show cause notice viz., furnished inaccurate particulars of income or concealed particulars of such income is bad in law. 2. That the order passed by the learned CIT (A) u/s 271(1)(c) of the Income Tax Act, 1961 is void ab-initio deserves to be quashed. 3. In the facts and circumstances of the case the learned CIT (A) has erred in confirming the penalty of ₹ 1,73,443/- u/s 271(1)(c) of the Income Tax Act, 1961. 4. That the order passed by the learned Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 is void ab-initio deserves to be quashed as no satisfaction was recorded with reference to concealment of income or furnishing inaccurate particulars of income. 5. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing. 2. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and applying the GP rate at 2% as against the GP rate declared by the assessee at 1.92%. Therefore, the addition based on the estimation of income is not sustainable in law as it is not falling in the category of furnishing of inaccurate particulars of income or concealment of particulars of income. The ld. A/R has then contended that the expenditure on account of salary as well as miscellaneous expenditure was also on adhoc basis as initially the AO made a disallowance of ₹ 24,000/- which was restricted by the ld. CIT (Appeals) to ₹ 4,000/- and similarly the various expenditures which were disallowed by the AO to the tune of ₹ 33,847/- was restricted by the ld. CIT (Appeals) to ₹ 6,400/-. Therefore, such disallowance on adhoc basis would not attract the penalty provision of section 271(1)(c). Thus the ld. A/R has pleaded that the penalty levied by the AO and sustained by the ld. CIT (A) may be deleted. 4. On the other hand, the ld. D/R has submitted that but for the survey conducted by the department, the assessee would not have disclosed the undisclosed income of ₹ 5,59,827/-. Therefore, the income disclosed by the assessee and offered to tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 7,14,863/-. It is undisputed fact that the assessee filed his return of income under section 139(1) of the IT Act and declared total income at ₹ 9,53,880/- which includes an income of ₹ 5,59,827/- which was surrendered during the course of survey proceedings conducted on 28.01.2011. Even if the assessee has surrendered the said income of ₹ 5,59,827/- in the course of survey proceedings, however, once the said income was declared in the return of income under section 139(1), then the same cannot be deemed as furnishing of inaccurate particulars of income or concealment of particulars of income as per the provisions of section 271(1)(c) of the IT Act. It is not a case of search carried out under section 132 of the IT Act and thereby the Explanations 5 or 5A of section 271(1)(c) would be applicable to deem such income declared in the return of income filed after search will fall in the category of concealment of particulars of income or furnishing inaccurate particulars of income on the part of the assessee. Therefore, in the absence of any such deeming provision under section 271(1)(c), once the assessee has declared the income in the return of income file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of unaccounted sales by applying GP at 2%, since it is the case of undisclosed sales by the assessee and, therefore, the addition on the said amount will fall in the category of concealment of particulars of income and consequently the penalty levied under section 271(1)(c) in respect of the addition is sustained. The AO is directed to re-compute the penalty in respect of the addition on account of unaccounted sales. 8. As regards the salary expenditure which was originally disallowed by the AO of ₹ 24,000/- but the ld. CIT (A) has restricted the same to ₹ 4,000/-, this is only a case of non-acceptance of the claim of the assessee whereas it is not a bogus claim of salary expenditure. The assessee has claimed the salary @ ₹ 12,000/- per month whereas the ld. CIT (A) in quantum appeal has allowed the salary @ ₹ 10,000/- per month. Therefore, in such a situation when the claim and particulars were already declared by the assessee in the return of income, then disallowance of part of the claim would not attract the penalty provision under section 271(1)(c). Similarly, the miscellaneous expenditures were disallowed on estimated basis of ₹ 6,400/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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