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TMI Blog2017 (11) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... for assessment year 2009 -10. 2. The facts of the case are that the return of income was filed declaring income at Rs. 33,08,421/- and subsequently the assessment under section 143 (3) read with section 144 of the Income Tax Act, 1961 was completed after making an addition of Rs. 12,38,711/- after invoking provisions of section 145 (3) of the Income Tax Act, 1961 and applying a net profit rate of 5% on the gross turnover. The AO also made a disallowance of Rs. 41,000/- out of donations which were claimed as expenses. Subsequently, penalty proceedings were initiated under section 271 (1) (c) of the Income Tax Act, 1961 on the addition made on account of net profit rate and a penalty of Rs. 4,21,040/- was imposed, which, on appeal, was confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of low net profit (5% instead of 3.65% declared by assessee) and that too, after rejecting the books of accounts, which addition was merely a deemed addition and as such, the penalty so sustained is highly unjust, as no penalty should be levied on the basis of deemed addition. 3.1 That the learned CIT(A) has also erred in proceeding to uphold the levy of penalty on wholly irrelevant, extraneous and immaterial considerations and as such, penalty sustained is not in accordance with law." 3. The Ld. Authorised Representative submitted that the addition on which the penalty was imposed was estimated after applying the net profit rate and that it was a settled law that penalty on ad hoc disallowance or addition made on estimate basis was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n penalty proceedings and the authorities have to consider the matter afresh from different angle. 5.1 The statute requires a satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department. While considering whether the assessee has been able to discharge his burden the Assessing Officer should not begin with the presumption that he is guilty. Since the burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in the assessment proceedings that a particular receipt is income cannot auto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures were made and that on the basis of material disclosed there cannot be a case of concealment of income or furnishing inaccurate particulars of income. Further, if there is any material or additional evidence which was not produced during assessment proceedings, the same can be produced in penalty proceedings as both assessment and penalty proceedings are distinct and separate. 5.2 In CIT vs. M/s Sidhartha Enterprises reported in 184 Taxman 460 (P & H), the Hon'ble Punjab & Haryana High Court held that the judgment in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. Even so, the concept of penalty has not undergone change by virtue of the said judgment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been defined as: "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." The Hon'ble Supreme Court observed that by reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. The Hon'ble Supreme Court further noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and, accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee would have earned. Therefore, the quantification of the alleged concealment/inaccurate particulars is only an estimate and it is settled law that penalty is not attracted on estimated additions. 5.5 The Hon'ble Delhi High Court in CIT vs. Aero Traders Pvt. Ltd., reported in 322 ITR 316 (Del), has held that no penalty u/s 271(1)(c) can be imposed when income is determined on estimate basis. Similar view has been taken by the Hon'ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT reported in 258 ITR 85 (P&H) and the Hon'ble Gujarat High Court in the case of CIT vs. Subhash Trading Company reported in 221 ITR 110 (Guj). In view of the foregoing precedents including the one from the Hon'ble Jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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