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TMI Blog2010 (6) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 (hereinafter referred to as the Act ) vide his order dated 12-12-2006 for the Assessment Year 2004-05. The penalty under dispute was levied by the Income Tax Officer, ward 2(2), Bhavnagar under Section 271(1)(c) of the Act vide order dated 24-03-2009. First we will deal with assessee s appeal ITA No.1458/Ahd/2008. 2. The only issue in this appeal of the assessee is against the order of CIT(A) confirming the estimate made by Assessing Officer by applying net profit at 1% and consequently not allowing remuneration and interest to partner u/s.40b of the Act. For this, assessee has raised the following two grounds:- 1. The honorable Commissioner of I. Tax (appeals) was not justified in confirming the income estimated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus entry reflecting the bogus state of affairs of the business. The books of account maintained only to bluff the different Government Departments. Due to these reasons the S.T. Department has cancelled the registration of the above three parties, the copies of the letter dated 16-11- 2006 received from the S.T. Department are the form of part of assessment order. Hence, the books of accounts maintained by the assessee and which were produced and presented for verification are rejected accordingly. Aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the Assessing Officer by giving following findings in para-6 of his appellate order:- I have considered the facts of the case, results of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. Even it is not the case of the Revenue that the assessee has not made sales even though the purchases made are bogus and that also from the bogus firms. It is not the case that the material has not come to the assessee for making sales. But before us, the assessee is unable to establish the purchases and the Ld. counsel fairly stated that the assessee s gross profit was at 0.87% and in the immediate preceding year the GP was at 1.02% on the total sales of ₹ 9,40,32,189/-. The net profit in the present year is at 0.15%. He stated that the Assessing Officer has applied net profit at 1%, which is higher. The Ld. counsel for the assessee stated that the net profit can be applied at 0.87% but consequential salary and interest to the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition is confirmed partly on the basis of estimates and not on any defects. It is a factual question, whether the assessee has made purchases from the bogus entity or not but it is not in dispute neither by the Assessing Officer nor by the CIT(A) that the sales effected by the assessee are bogus. In that eventuality, the penalty levied by the Assessing Officer and confirmed by CIT(A) u/s.271(1)(c) of the Act is just on the basis of conjecture and surmises. We further find that just on the basis of estimate the penalty cannot be confirmed. We further gone into the penalty order and finding that there is no finding of facts as to how the assessee has furnished inaccurate particulars of income thereby concealing the income. Accordingly, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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