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2021 (4) TMI 860 - AT - Income TaxPenalty levied u/s 271(1)(c) - addition @ 5% of Gross Profit - HELD THAT - Considering the fact that addition in the assessment order, on the basis of which the penalty was levied, is purely an estimated addition. It is settled position in law that no penalty under section 271(1)(c) can be levied on additions made on estimation. The similar view was taken by the Hon'ble Jurisdictional High Court in Manish Dhirajlal Mehta Vs. ACIT 2014 (11) TMI 939 - GUJARAT HIGH COURT , Vijay Proteins Ltd., Vs. CIT 2015 (1) TMI 828 - GUJARAT HIGH COURT , in Vijay Proteins Vs CIT 2015 (1) TMI 828 - GUJARAT HIGH COURT and other case laws relied by ld. AR for the assessee. No contrary facts or law is brought to our notice. In the result, Ground No.1 of appeal is allowed.
Issues:
1. Appeal against penalty levied under section 271(1)(c) for A.Y. 1988-89 and 1989-90. 2. Challenge of penalty orders by the assessee. 3. Reconstitution of files for hearing afresh. 4. Assessment of income and estimation of Gross Profit. 5. Applicability of penalty under section 271(1)(c) on estimated additions. Detailed Analysis: Issue 1: Appeal against Penalty The appeals by the assessee were directed against the penalty levied under section 271(1)(c) for A.Y. 1988-89 and 1989-90. The initial challenge was based on the grounds of no concealment of income and reliance on a Special Bench decision. The Tribunal allowed the appeals of the assessee based on the Special Bench decision, leading to deletion of the penalty. However, the order was challenged by the revenue in the Gujarat High Court and later in the Supreme Court, resulting in the revival of the penalty orders. Issue 2: Challenge of Penalty Orders The assessing officer, following the Supreme Court's order, restored the penalty orders dated 21.09.2004. The assessee challenged these orders before the ld. CIT(A), which were dismissed. Subsequent appeals for AY 1989-90 were also dismissed. Miscellaneous Applications were filed for fixing the appeals for adjudication, leading to the reconstitution of files for fresh hearings on ground No.1 for both assessment years. Issue 3: Reconstitution of Files Upon the reconstitution of files and submission of necessary documents by both parties, the cases were fixed for fresh hearings. The facts leading to the penalty for both years were found to be identical, and the appeal for A.Y. 1988-89 was treated as the lead case for adjudication. Issue 4: Assessment of Income and Gross Profit The assessing officer had rejected the books of accounts of the assessee and estimated the Gross Profit at 10% of turnover, leading to additions in the assessment. However, the Tribunal later restricted the addition to 5% of Gross Profit for both years. The legality of levying penalties on estimated additions was a key point of contention, with the assessee citing various case laws to support their argument. Issue 5: Applicability of Penalty on Estimated Additions The Tribunal considered the arguments of both parties, reviewed the orders of Lower Authorities, and examined relevant case laws. It was noted that penalties under section 271(1)(c) cannot be levied on additions made on estimation basis. The Tribunal allowed the appeal of the assessee on ground No.1 for A.Y. 1988-89 and extended the same decision for A.Y. 1989-90 based on the principle of consistency. In conclusion, the Tribunal allowed the appeals for A.Y. 1988-89 and 1989-90 while dismissing the appeals for the same years based on the deletion of penalties. The order was pronounced on 13th April 2021 during the hearing of the appeal.
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