2012 (3) TMI 121 - AT - Income Tax

Estimation of profit - net profit at 2% - Held That - Assessing officer has to give one more opportunity to the assessee before framing the assessment. No audit under 44AB - Penalty under 271B - Held That - whether there was delay in getting the audit report or whether the assessee could not get the audit report at all. If the assessee could not get the audit report in time, then it is for the assessee to explain the reasonable cause for the delay in not getting the audit report. Therefore, in our opinion, the matter needs to be factually verified by the assessing officer. Case remanded back.

Summary

Issues:
Estimation of profit for multiple assessment years, levy of penalty under section 271(1)(c) of the Income-tax Act, non-compliance with audit report requirements under section 44AB of the Act.

Estimation of Profit:
The appeals involved two independent assesses challenging the estimation of profit by the assessing officer at 2% of total turnover without providing the assessee with an opportunity to explain. The Tribunal noted that the assessment was framed under section 144 of the Income-tax Act and observed that the assessing officer had not considered comparable cases or profit ratios of similar traders in the area. As the assessing officer did not have a basis for the profit estimation and the assessee was not given a chance to present their case, the Tribunal ruled in favor of granting the assessee another opportunity to explain before the assessment is finalized. The Tribunal emphasized that providing this opportunity would serve the cause of justice and ordered the issue to be remitted back to the assessing officer for reconsideration.

Levy of Penalty under Section 271(1)(c):
For cases where penalty under section 271(1)(c) was imposed, the Tribunal decided to set aside the orders of the lower authorities and remand the issue back to the assessing officer for reevaluation after completion of assessments. The assessing officer was directed to reconsider the levy of penalty in accordance with the law and provide a reasonable opportunity for the assessee to be heard before making a decision on the penalty.

Non-compliance with Audit Report Requirements:
In cases where the assessee failed to get the accounts audited as required under section 44AB of the Act, the Tribunal found discrepancies in the explanations provided by the assessee and the Commissioner of Income-tax(A). The matter was deemed in need of factual verification by the assessing officer to determine if there was a delay in obtaining the audit report or if the report was not obtained at all. The Tribunal directed the assessing officer to re-examine the quantum addition, penalty levy, and the audit report issue, ensuring a fair opportunity for the assessee to present their case. The orders of the lower authorities were set aside for consistency, and the issue of penalty under section 271B was also remitted back to the assessing officer for reconsideration.

In conclusion, the Tribunal allowed the appeals filed by the assessee, emphasizing the importance of providing reasonable opportunities for the assessee to present their case and ensuring assessments are made in accordance with the law and without prejudice.