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2022 (11) TMI 378 - AT - Income TaxNet profit estimation - assessee is engaged in the business of iron ore - HELD THAT - As profit percentage is varied in between 5.8% to 7.26% for the assessment years 2004-05 to 2008-09. This being so, we are of the view that respectfully following the decision of the Co-ordinate Bench, on identical facts in the case of Dillip Kumar Naik 2022 (11) TMI 215 - ITAT CUTTACK the estimation of 10% as done by the ld CIT(A) stands reduced to 8%. Levy of penalty u/s.271F - HELD THAT - As the facts of the present case are identical to the facts of the case of S.M.Enterprises 2022 (11) TMI 274 - ITAT CUTTACK and also in the case of Gobardhan Matia 2022 (11) TMI 214 - ITAT CUTTACK respectfully following the decision of the Co-ordinate Bench, in the above two cases, the penalty as levied u/s.271F of the Act by the AO and confirmed by the ld CIT(A) stands deleted. Penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT - AO has not struck out inappropriate words in the paragraphs of notice issued u/s.274/271(1)(c) of the Act and on account of the fact that income of the assessee has been assessed only on estimation basis and no evidence of concealment of income has been found in the case of the assessee - Thus as relying on decision of the Co-ordinate Bench of this Tribunal in a group concern M/s. S.M.Enterprises . 2022 (11) TMI 275 - ITAT CUTTACK the penalty levied u/s.271(1)(c) by the AO and confirmed by the ld CIT(A) stands deleted. All the appeals of the assessee stand allowed.
Issues Involved:
1. Non-compliance with notices and completion of assessment ex-parte. 2. Inflation of expenses and discrepancies in financial records. 3. Estimation of net profit percentage. 4. Levy of penalty under section 271F of the Income Tax Act. 5. Levy of penalty under section 271(1)(c) of the Income Tax Act. Detailed Analysis: 1. Non-compliance with Notices and Completion of Assessment Ex-parte: The assessee did not file any return of income in response to the notice under section 153A dated 11.03.2010. Despite subsequent reminders and a final show-cause notice, there was no compliance from the assessee. Consequently, the assessment was completed ex-parte under section 144 of the Income Tax Act. 2. Inflation of Expenses and Discrepancies in Financial Records: The search operations revealed significant inflation of labour expenses, power and fuel charges, and other expenses. The Assessing Officer (A.O.) found discrepancies in the number of labourers and the actual payments made, indicating that the claimed expenses were highly inflated. Similarly, the power and fuel expenses claimed were found to be excessively high compared to the actual usage. The A.O. also discovered that cash withdrawals from the bank were not used for meeting expenses but for adjustments, further supporting the inflation of expenses. 3. Estimation of Net Profit Percentage: Both parties agreed that the issues were covered by a previous decision of the Tribunal in the case of Dillip Kumar Naik. The Tribunal had determined that the net profit percentage should be estimated at 8% instead of 10%. The assessee provided a chart showing profit percentages varying between 5.8% to 7.26% for the relevant assessment years. Respectfully following the previous decision, the Tribunal reduced the estimation of net profit from 10% to 8%. 4. Levy of Penalty Under Section 271F of the Income Tax Act: The issue of penalty under section 271F was also covered by a previous decision of the Tribunal in the case of S.M. Enterprises. The Tribunal had held that the delay in filing the return was justified due to the time taken to obtain and reconcile the seized documents. Following this precedent, the penalty levied under section 271F was deleted. 5. Levy of Penalty Under Section 271(1)(c) of the Income Tax Act: The penalty under section 271(1)(c) was contested on the grounds that the notice did not specify whether the penalty was for furnishing inaccurate particulars of income or for concealment of income. The Tribunal referred to various judicial precedents, including the decision in the case of S.M. Enterprises, which held that non-striking off the inappropriate words in the penalty notice violated the principles of natural justice. Additionally, the Tribunal noted that the income was assessed on an estimation basis, and no evidence of concealment was found. Consequently, the penalty under section 271(1)(c) was deleted. Conclusion: - Appeals of the assessee were partly allowed with the net profit percentage estimation reduced to 8%. - Appeals of the revenue were dismissed. - Penalties levied under sections 271F and 271(1)(c) were deleted, following the precedents set by previous Tribunal decisions.
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