TMI Blog2020 (1) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... fraud the authorities, the penalty cannot be levied, because the income was assessed on estimate basis. Just because Appellant s explanation was not found acceptable by the AO, it does not follow that that the Appellant was unable to substantiate his explanation by providing various evidences and judicial opinions. Explanation 1 to section 271(1)(c) of the Act does not therefore cover the case of the Assessee. Based on the above facts of the case; it can be held that the Assessee had made all the necessary disclosures on a bonafide belief, which is not agreeable to the AO, it will not automatically lead to a case for penalty under section 271(1)(c). We are therefore of the considered view that the penalty is not sustainable in law in the ratio laid down by the Hon ble Supreme Court in case of CIT v Reliance Petro-products Pvt. Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] wherein it was held that merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable by the revenue, penalty under section 271(1) (c) of the Act cannot be attracted. - Decided in favour of assessee. - I.T.A No.198/SRT/2018 (Assessment Year:2007-08) - - - Dated:- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 3,93,66,960/- on which penalty were also initiated under section 271(1)(c) for furnishing of inaccurate particulars of income and concealment of income. The assessee has filed an appeal before CIT (A) against the addition so made. However, CIT (A) has dismissed the appeal of the assessee. In view of these facts, the AO further, issued show-cause notice on 06.03.2017 for levy of penalty under section 271(1)(c) but no compliance was made hence, the AO concluded that for the reasons mentioned in the assessment order, it is a fit case for levy of penalty under section 271(1)(c) of I. T. Act for concealment of income and furnished inaccurate particulars of income. Accordingly, the AO levied minimum penalty @100 at ₹ 1,32,50,920/- being tax sought to be evaded on concealed income of ₹ 3,93,66,960/-. 4. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). Wherein it was contended that the assessee has changed his address hence, notice issued under section 271(1)(c) by the AO could not be received by him hence, no explanation was filed. The AO levied penalty merely because addition was confirmed by the CIT (A). However, the appeal is pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... `ble Supreme Court in the case of Kishanchand Chellaram v. CIT [1980] 125 ITR 713 (SC) [1980] 4 Taxman 29 (SC).The disallowance were restricted to 25% following decision in the case of Vijay Proteins 55 TTJ 76 (Ahd-Trib) and same was confirmed. However, ITAT vide its order has restricted the disallowance to 5% to cover possible fall in Gross Profit relying on the decision of Hon ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd. v. ITO [Tax Appeal No. 200 of 2003] dated 17.11.2014 [2014] 11 (TMI) 812 (Gujarat). Thus, the quantum of ₹ 3,39,66,960/- on which penalty was levied has reduced to ₹ 78,73,390/- hence, penalty if confirmed be reduced to quantum addition sustained finally, which would worked out at ₹ 23,62,017/-. The learned counsel for the assessee further submitted that penalty were initiated for furnishing of inaccurate particulars of income and concealment of income and finally levied for both defaults. Therefore, initiation of penalty proceedings is bad-in-law as the AO was not certain whether it was for concealment of income or furnishing inaccurate particulars of income. In support of his contention on this issue, the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed copy of confirmation from them, copy of bank statement showing payments received by account payee cheques and there was no immediate cash withdrawal. The AO has estimated profit of such bogus purchases @ 25 % by applying the ratio laid down in the case of Vijay Proteins 55 TTJ 76 (Ahd-Trib.) whereas the Tribunal in the case of the assessee has reduced the same to 5% of unverifiable purchases by relying on the decision of Hon ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd. v. ITO [Tax Appeal No. 200 of 2003] dated 17.11.2014 [2014] 11 (TMI) 812 (Gujarat). Thus, the addition was sustained on estimate basis only. The assessee has purchased the goods, which is undisputed fact. The Bhanwarlal Jain Group might have arranged the bills but purchase cannot be treated as non-genuine, since the same quantity of goods has been sold by the assessee. We find that in the assessment order, the AO has estimated the profit of the assessee on the balance sheet of Vijay Proteins 55 TTJ 76 (Ahd-Trib.). However, the assessee has produced the quantitative tally, which shows that the assessee has sold the goods to other parties and issued the bills and amounts received from them through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases. Therefore, the addition was made and income was estimated which amounts to only estimation of income. Therefore, we are of the view that the penalty cannot be levied. We further note that the addition is reduced to ₹ 78,73,393/- hence, minimum penalty leviable comes to ₹ 23,62,017/-. Even if the penalty is confirmed the same is required to be reduced to ₹ 23,62,017/-. Hence, same is reduced to that extent. Similarly, the Hon ble Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 131 CTR 121 (Guj) held that where penalty under section 271(1)(c) , Explanation is sought to be imposed on the basis of estimated income after rejecting book results, the preponderance of probability is that failure to return the assessed income was not on account of any fraud or gross or willful neglect on the part of the assessee. It has been held that onus on assessee the assessee stands discharged and the presumption under Explanation to section 271(1)(c) stands rebutted. Hence, penalty under section 271(1)(c) cannot be imposed in such a case. In the case of Dilip N. Shroff v. JCIT [2007] 291 TTR 519 (SC)The Hon`ble Supreme Court held that finding in assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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