2018 (4) TMI 1997 - AT - Income Tax

Addition u/s.68 - Estimation of net profit @ 10% of turnover by CIT(A) - HELD THAT - We are unable to see any ambiguity, perversity or any other valid reason to interfere with the same as the ld. CIT(A) has not only taken on account GP and NP rate of assessee during immediately previous years, but also considered the percentage of GP and NP after making additions/disallowance made by the A.O. In this situation, we decline to accept allegation of the A.O that the ld. CIT(A) has erred in granting relief to the assessee and thus, we uphold the first appellate order. Accordingly, Ground No.1 2 of Revenue are dismissed. Penalty u/s 271(1)(c) - AO made additions by disallowing various expenses and the ld. CIT(A) after considering entire facts and circumstances restricted the addition to 10% of turnover and it was done by estimation of income by following basis of preceding year profit percentage. In this situation, we have no hesitation to hold that addition has been made on estimation basis. In the case of Reliance Petro 2010 (3) TMI 80 - SUPREME COURT held that merely because claim of assessee was not accepted or was not found to be acceptable by the Revenue authorities, does not automatically allow to impose penalty u/s. 271(1)(c) of the Act. In the present case, it is not an allegation of A.O that the assessee made a bogus or malafide claim. However, in absence of verification the authorities below raised a doubt regarding claim of assessee on certain expenses and finally the ld. CIT(A) restricted the addition by estimating the profit @ 10% of turnover which is on the estimation basis. In this situation, allegation of either concealment of particulars of income or allegations of furnishing of inaccurate particulars of income cannot be made against the assessee for imposing penalty u/s. 271(1)(c) We reach of a logical conclusion that the A.O imposed penalty without any valid reason on the basis of addition based on estimation basis and the same was upheld by the ld. CIT(A) without any reasonable and acceptable cause. Hence, penalty order as well as first appellate order is not sustainable and we direct the AO to delete the penalty. Decided in favour of assessee.

Summary

Issues:
Cross appeals by the Revenue and the Assessee regarding additions and penalties for Assessment Year 2007-08.

Analysis:
1. The Revenue appealed against the CIT(A)'s decision to restrict additions made by the AO, arguing that the CIT(A) disregarded the AO's findings and provisions of the Income Tax Act. The Tribunal found that the CIT(A) properly considered the facts and circumstances, estimating the net profit at 10% of turnover after verifying various expenses. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

2. The Assessee challenged the penalty imposed under section 271(1)(c) for alleged inaccurate particulars of income. The Assessee contended that the lower authorities overlooked detailed submissions and imposed penalties based on estimations. The Tribunal noted that the additions were made on estimation basis and not due to concealment or furnishing inaccurate particulars of income. Citing relevant case laws, the Tribunal concluded that the penalty was unjustified and directed the AO to delete the penalty. The Assessee's appeal was allowed, and the Revenue's appeal was dismissed.

This judgment highlights the importance of considering all relevant facts and circumstances before making additions or imposing penalties, emphasizing the need for clear findings to support penalties under section 271(1)(c) of the Income Tax Act.