2017 (3) TMI 1887 - AT - Income Tax

Levying penalty u/s 271(1)(c) - assessee has concealed its income and has furnished inaccurate particulars thereof - AO estimated the profit at the flat rate of 8% and determined the assessment - HELD THAT - We find, there is no dispute on the fact that the additions made by the AO certainly involves estimations. It is a settled legal proposition in such matters the penalty u/s 271(1)(c) of the Act is not excisable in respect of the ad-hoc additions involving estimations. Accordingly, we are of the considered opinion that this is not a fit case for levy of penalty. Accordingly we order. Thus, grounds raised by the assessee are allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Act based on estimation of profits.

Analysis:
The appeal was filed against the order of the CIT (A) for the AY 2007-2008, where the Assessing Officer had levied a penalty under section 271(1)(c) of the Act on the grounds of income concealment and furnishing inaccurate particulars. The CIT (A) upheld the penalty. The only issue in this case was the levy of penalty under section 271(1)(c) of the Act. The Assessing Officer had rejected the books of account and estimated profits at a flat rate of 8%, later reduced to 3% by the CIT (A) and upheld by the ITAT. The AO then imposed the penalty under section 271(1)(c) based on these estimations. The Tribunal noted that the additions made by the AO were based on estimations, and it is a settled legal proposition that penalties under section 271(1)(c) are not applicable for ad-hoc additions involving estimations. Therefore, the Tribunal held that it was not a suitable case for the levy of penalty and allowed the appeal of the assessee.

In conclusion, the Tribunal found that the penalty under section 271(1)(c) of the Act was not applicable in this case as the additions made were based on estimations. The Tribunal allowed the appeal of the assessee, concluding that it was not a fit case for the levy of penalty.