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2016 (12) TMI 1146 - AT - Income TaxLevy of penalty u/s 271(1)(c) - addition on account of income estimated @ 10% of turnover - Held that - We find that the assessee in the course of statement recorded u/s 132(4) of the Act on 25/01/2006 had stated that his income from business of construction of godowns was around 10%. This statement of the assessee was a general one indicating the approximate rate of net profit which would be earned by the assessee from the said business. The net profit finally declared by the assessee vide his return of income from the said business was 9.53% i.e. 10% figure stated by the assessee in the 132(4) statement. The addition made by the AO is solely based on the statement of the assessee recorded u/s 132(4) of the Act and no defect or deficiency has been pointed out by him in support of the addition. Therefore, the penalty u/s 271(1)(c) would not be attracted on the addition of ₹ 5,58,372/-. The order of the ld. CIT(A) on the penalty in respect of ₹ 5,58,372/- is set aside and the AO is directed to delete the same. - Decided in favour of assessee. Addition made u/s 68 as unexplained cash credit on account of consideration received on sale of equity shares - Held that - Penalty u/s 271(1)(c) is a civil liability and the wilful concealment is not an essential ingredient for attracting civil 16 liability unlike the matter of prosecution u/s 276C. While considering an appeal against an order made u/s 271(1)(c), what is required to be examined is the record which the officer imposing penalty had before him and if that record can sustain the finding that there has been concealment, that would be sufficient to sustain penalty. See UoI vs. Dharmendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT ) The order of the ld. CIT(A) directing the AO to impose penalty u/s 271(1)(c) @ 100% on addition made u/s 68 is confirmed.- Decided in favour of revenue.
Issues Involved:
1. Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for addition of ?5,58,372/- on account of income estimated at 10% of turnover. 2. Penalty under Section 271(1)(c) of the Income Tax Act, 1961 for addition of ?53,86,564/- as unexplained cash credit under Section 68 on account of consideration received on the sale of equity shares. Analysis of Judgment: 1. Penalty on Addition of ?5,58,372/-: The assessee argued that the addition of ?5,58,372/- was based on an estimated net profit of 10% of turnover, derived from a general statement made during a search. The actual net profit declared was 9.53%, close to the 10% mentioned. The Assessing Officer (AO) made the addition solely based on this statement without identifying any specific defects or deficiencies. The Tribunal found that since the addition was based on an estimated figure from the assessee's statement and not on concrete evidence, the penalty under Section 271(1)(c) was not justified. Consequently, the Tribunal set aside the penalty related to the addition of ?5,58,372/- and directed the AO to delete it. 2. Penalty on Addition of ?53,86,564/-: The assessee had disclosed Long Term Capital Gains (LTCG) of ?52,92,328/- from the sale of shares. During the assessment, the AO found discrepancies as the assessee could not produce share certificates, STT challans, or a demat account. The AO recorded a statement from the broker, who admitted that the transactions were merely accommodation bills. Confronted with this, the assessee filed a revised return, increasing business income and reducing cash-in-hand. The AO treated the sale proceeds as unexplained cash credit under Section 68 and imposed a penalty. The assessee's counsel argued that the transactions were genuine and that penalties should not be imposed based on estimated or unsubstantiated additions. They cited several case laws to support their argument, emphasizing the need for cross-examination and the principle of natural justice. However, the Tribunal noted that the assessee did not request a cross-examination during the assessment and did not appeal against the initial order, which had attained finality. The Tribunal upheld the penalty, noting that the assessee failed to prove the source of the money as required by law and that the revised return was filed only after the AO's query, which does not absolve the assessee from penalty. Case Laws and Precedents: The Tribunal distinguished the present case from several precedents cited by the assessee, such as Andaman Timber Industries, R.W. Promotions (P) Ltd., and CIT vs. Gem Granites, noting differences in factual situations and the assessee's failure to demand cross-examination or appeal earlier orders. Conclusion: The Tribunal partly allowed the appeal: - Penalty related to the addition of ?5,58,372/- was deleted. - Penalty related to the addition of ?53,86,564/- under Section 68 was upheld. Order Pronouncement: The order was pronounced in the open court on 26/10/2016.
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