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2013 (6) TMI 68 - HC - Income TaxPenalty u/s 271(1)(c) - whether penalty order had been passed within the limitation period? - interest on the FDR calculated for a separate source of income and addition also made by computing the net profit rate @ 8% u/s 44 AD - Held that - As nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed u/s 44 AD. As the turnover is more than 40 lacs, so Section 44 AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) can be imposed as per the ratio laid down in C.I.T. vs. Arjun Prasad Ajit Kumar, (2008 (1) TMI 821 - ALLAHABAD HIGH COURT) As no finding of deliberate concealment of income was brought in the instant case as the assessee has never suppressed the interest income from FDRs. Interest income from FDR was duly shown. It was for the A.O. to treat this income as business income or income from other sources. But the fact remains that there is no concealment on the part of assessee. So, no penalty leviable - in favour of the assessee.
Issues:
1. Interpretation of section 275 of the Income Tax Act regarding the limitation period for passing penalty orders. 2. Interpretation of section 271(1)(c) of the Income Tax Act for the imposition of penalty on the assessee. Analysis: Issue 1: Interpretation of section 275 of the Income Tax Act The appeal was filed by the assessee-appellant under Section 260-A of the Income Tax Act against the judgment and order passed by the Income Tax Appellate Tribunal. The substantial questions of law raised in the appeal pertained to the legality of the penalty order dated 28.09.2006 and whether it was passed within the limitation period as prescribed under section 275 of the Act. The court examined the facts of the case, including the rejection of books of account and the additions made by the Assessing Officer. The court referred to relevant legal precedents, such as the case of T. Ashok Pai vs. Commissioner of Income Tax, to determine the bona fide nature of the assessee's explanation and the requirement of deliberate concealment for levying penalties under section 271(1)(c). Issue 2: Interpretation of section 271(1)(c) of the Income Tax Act The main contention revolved around the imposition of a penalty under section 271(1)(c) on the assessee by the Assessing Officer. The appellant argued that no penalty for concealment could be imposed as there was no deliberate concealment of income or furnishing of inaccurate particulars. The court analyzed the facts presented by both parties, emphasizing that the burden of proof lies on the Department to establish concealment of income by the assessee. The court cited the case of C.I.T. vs. Reliance Petro Products Pvt. Ltd. to highlight the requirement of inaccurate particulars for invoking penalty under section 271(1)(c). It was observed that in the absence of deliberate concealment or furnishing of inaccurate particulars, the penalty provision cannot be invoked. In conclusion, the court set aside the impugned orders and canceled the levy of the penalty imposed on the assessee. The court ruled in favor of the assessee, stating that no penalty for concealment was leviable based on the circumstances and totality of the case. The appellant was granted relief, and the appeal was allowed without any costs.
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