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2013 (8) TMI 626 - AT - Income TaxPenalty u/s 271(1)(c) - CIT estimated profit rate @ 5% - Held that - Tribunal in a large number of cases of assesses, carrying liquor trade has directed estimation of profit at the rate of 5% on the sales turnover of the assessee - Following decisions of Badri Prasad Bhagavandas & Co. Vs. CIT 1994 (10) TMI 268 - MADRAS HIGH COURT - Decided against Revenue. Penalty u/s 271(1)(c) - Rejection of books of accounts - CIT deleted penalty - Held that - Merely because the profit has been estimated and certain additions are made in the assessment would not automatically lead to imposition of penalty u/s 271(1)(c) of the Act. The additions made in assessment proceedings ipso facto does not lead to a conclusion that the assessee has concealed particulars of income or furnished inaccurate particulars of income. There must be material brought on record on the basis of which a conclusion can be formed that there is a conscious attempt on the part of the assessee to conceal its income or furnish inaccurate particulars of its income. It is not disputed that the major addition in case of the assessee is on account of estimation of profit - It is well settled principles of law that when profit is estimated there cannot be any inference that the assessee has concealed the income or furnished inaccurate particulars of income so as to attract the provisions of section 271(1)(c) of the Act - Following decisions of CIT vs. Iqbal Singh & Co. 2009 (3) TMI 568 - HIGH COURT OF PUNJAB AND HARYANA and Eagle Synthetics (P) Ltd. Vs. Income-tax Officer 2010 (2) TMI 719 - ITAT, Ahmedabad - Decided against Revenue.
Issues Involved:
1. Estimation of profit from liquor business. 2. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Estimation of Profit from Liquor Business: The department contested the CIT (A)'s direction to the Assessing Officer to estimate the profit of the assessee from liquor business at 5% of the sales turnover for the assessment years 2007-08 and 2008-09. The assessee, a partnership firm engaged in retail liquor trade, filed its return of income on 31-10-2007. The assessment was reopened, and due to the non-production of books of accounts, the Assessing Officer estimated the profit based on a State Government circular, applying various rates to different liquor categories and determining the net profit at Rs.38,76,660/-. The assessee appealed to the CIT (A), who upheld the estimation but disagreed with the rate, directing an estimation at 5% of the sales turnover, citing consistent Tribunal orders and a Madhya Pradesh High Court decision in Badri Prasad Bhagavandas & Co. Vs. CIT 82 Taxman 109. The Tribunal noted that the CIT (A)'s view aligned with the Tribunal's consistent stance in similar cases and the Madhya Pradesh High Court's direction. The department failed to present any contrary decisions. Thus, the Tribunal confirmed the CIT (A)'s order, dismissing the department's appeals. 2. Deletion of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act:The department's grievance was the CIT (A)'s deletion of penalties imposed under Section 271(1)(c) for assessment years 2002-03 to 2006-07. The assessee, engaged in retail liquor trade, had its books of accounts rejected due to unverifiable vouchers and lack of proper records. The Assessing Officer estimated the profit, leading to income determination and penalty initiation under Section 271(1)(c). The assessee contended that penalties cannot be imposed solely on profit estimation without evidence of income concealment or inaccurate particulars. The CIT (A) deleted the penalties, observing no evidence of concealed income or inaccurate particulars. The Tribunal upheld this view, noting the absence of a conclusive finding by the Assessing Officer of concealed income or inaccurate particulars. The Tribunal emphasized that profit estimation alone does not justify penalty imposition under Section 271(1)(c), requiring material evidence of a conscious attempt to conceal income or furnish inaccurate particulars. The Tribunal found the department's cited decisions inapplicable, as they involved clear findings of concealment or inaccurate particulars, unlike the present case. Thus, the Tribunal confirmed the CIT (A)'s order, dismissing the department's appeals. Order pronounced in the court on 12-7-2013.
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