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2015 (1) TMI 1317 - AT - Income TaxPenalty u/s 271(1)(c) - assessee could not furnish some of the vouchers and WIP stock details as finely required by him - Held that - It has not been disputed that the books of account are audited and the expenses are incurred at various sites. The additions are as a result of estimation based on assessee s efforts to get the proceedings settled with a pertinent request to make reasonable addition. The assessee no where agreed for rejection of books and same does not amount to un-quantified surrender in terms of facts of Mak Data (P) Ltd. vs. CIT (2013 (11) TMI 14 - SUPREME COURT). Besides WIP stock addition leads to increase in the opening stock of next year. We are of the view that decisions of Hon ble Supreme Court in the cases of CIT vs. Reliance Petro Products (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT) and Hindustan Steel Ltd. vs. State of Orrisa (supra) are squarely applicable to the assessee case Therefore in the facts and circumstances of the case we are inclined to delete the penalty imposed u/s 271(1)(C) by the lower authorities. - Decided in favour of assessee.
Issues involved:
Imposition of penalty under section 271(1)(c) of the Income Tax Act based on estimation and rejection of books of account. Detailed Analysis: Issue 1: Imposition of Penalty under section 271(1)(c) The appellant, engaged in real estate business, contested the penalty imposed under section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) rejected the books of account under section 145(3) and made additions based on estimation. The appellant argued that despite maintaining proper books of account, the rejection and estimation were arbitrary. The appellant cited various case laws to support their defense, emphasizing that penalty cannot be imposed for technical breaches. The first appeal upheld the penalty, leading to the appeal before the ITAT Jaipur. Issue 2: Defense and Arguments The appellant's counsel reiterated that the rejection of books and ad hoc additions were unwarranted. They highlighted the distinction between quantum and penalty proceedings, asserting that ad hoc estimates do not automatically warrant a penalty. Citing a Rajasthan High Court case, the appellant argued for the deletion of the penalty, similar to a previous decision by the ITAT Jaipur Bench. The appellant also relied on the Hindustan Steel Ltd. case to support their position that penalties should not be imposed for minor breaches. Issue 3: Judicial Precedents and Legal Arguments The appellant's counsel further emphasized that the books of account were audited, and the lack of detailed information in certain cases did not amount to furnishing inaccurate particulars of income. They referenced the CIT vs. Reliance Petro Products case to argue that additions based on return information do not justify penalties. The appellant differentiated their case from the Mak Data case, asserting that their actions did not constitute unquantified surrender. Issue 4: ITAT Decision and Rationale After considering the contentions and evidence, the ITAT concluded that the rejection of books and ad hoc additions did not amount to unquantified surrender. Referring to relevant Supreme Court decisions, the ITAT found that the penalty imposed was not justified in the circumstances. Consequently, the ITAT allowed the appeal, deleting the penalty under section 271(1)(c) for the appellant. In conclusion, the ITAT's judgment in this case focused on the rejection of books of account, ad hoc additions, and the applicability of penalties under section 271(1)(c) of the Income Tax Act. The decision highlighted the importance of distinguishing between estimation-based additions and deliberate inaccuracies in income reporting, ultimately leading to the deletion of the penalty imposed on the appellant.
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