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TMI Blog2014 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... posed by the Assessing Officer on the amount of Rs. 1,00,000, which was sustained as addition, which was confirmed by the Commissioner of Income-tax (Appeals) (for short "the CIT(A)") under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act of 1961"), for the assessment year 1996-97. The said penalty was, however, deleted by the Income-tax Appellate Tribunal (for short "the ITAT") Brief facts may be observed that the respondent is a registered firm and is engaged in retreading of old (worn out) tyres of all vehicles. Besides the job work, the respondent-assessee was also selling such raw material to local parties. A survey operation came to be carried out at the business premises of the respondent on November 16, 1995, where some documents were found, which, according to the Assessing Officer, was not satisfactorily explained and, accordingly, on account of the said discrepancies, an estimated addition was made of Rs. 1,44,000. The respondent preferred an appeal against the said addition of Rs. 1,44,000, which came to be sustained by the Commissioner of Income-tax (Appeals) and on further challenge before the Income-tax Appellate Tribunal, the Tribunal modifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation was not offered, it does not make out that the assessee became liable for imposition of penalty. He also submitted that it is basically a finding of fact and no question of law arises for consideration. We have considered the arguments advanced by the learned counsel for the parties and have also perused the impugned order. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) only. Thus, the assessee will get the relief of Rs.44,000 (Rs. forty four thousand) from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 271(1)(c) of the Income-tax Act. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714 (P&H), has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income. The Gujarat High Court in the case of CIT v. Whitelene Chemicals (Tax Appeal No. 496 of 2012), vide order dated January 15, 2013, since reported in [2014] 360 ITR 385 (Guj) has observed that no penalty can be imposed merely because account books of the assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. The assessee filed its explanation which could not be termed as not bona fide and, accordingly, the Gujarat High Court came to a conclusion that mere rejection of books of account and estimation of profit cannot be a ground for imposition of penalty. The Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 221 ITR 110 (Guj), has held as under (headnote) : "Held, that a best judgment assessment had been made. While the assessee in its books of account disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (c) of section 271(1) of the Act. There is not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department. We are also of the considered view that the Tribunal grossly erred in law in relying on Explanation 1(B) to section 271(1)(c) of the Act to raise a presumption against the assessee. The assessee had justified his estimate of income on the basis of household expenditure and other investments made during the relevant period. It is not the case of the Revenue that he had, in fact, incurred expenditure in excess of what he had stated. In this view of the matter, it cannot be said that the explanation furnished by the assessee had not been substantiated or that he had failed to prove that such explanation was not bona fide." The Madhya Pradesh High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n considered by the authorities below, but failure to do so by the Tribunal would not in any way affect the jurisdiction of the Tribunal to proceed to decide the appeal on the basis of the material on record. The finding of the Tribunal, therefore, cannot be said to be based on no evidence and the finding that there has been no concealment of income is a finding of fact and it does not raise any question of law and the Tribunal was right in cancelling the penalty imposed on the assessee." The Delhi High Court in the case of CIT v. Aero Traders P. Ltd. [2010] 322 ITR 316 (Delhi) ; [2010] 231 CTR 524 has held that penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal. The Punjab and Haryana High Court in the case of CIT v. Modi Industrial Corporation [2010] 195 Taxman 68 (P & H) has held that where the assessment of the assessee was completed on estimated basis penalty under section 271(1)(c) of the Act was not imposable with respect to the additions made on such estimate by the Assessing Officer. The Chhattisgarh High Court in the case of CIT v. Vijay Kumar Jain [2010] 325 ITR 378 (Chhattisgarh) has held that the assessee decl ..... 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