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TMI Blog2018 (7) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... made on estimation under the proviso of Section 145(1) of the Act by adopting the view that GP shown in the books of accounts was too low, does not automatically lead to the invocation of penalty. - Decided in favour of assessee. - ITA No. 1664/Del/2015 - - - Dated:- 29-6-2018 - Shri H. S. Sidhu, Judicial Member And Shri N. K. Billaiya, Accountant Member Assessee by : Sh. Ved Jain, Adv Revenue by : Sh. K. Tewari, Sr. DR ORDER PER H.S. SIDHU, JM The Assessee has filed this Appeal against the Order dated 03.03.2014 of the Ld. CIT(A), Karnal relating to assessment year 2007-08 on the following grounds:- 1. On the facts and circumstances of the case, the order passed by the learned CIT(A) confirming the penalty under section 271(1)(c) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the action of the AO in levying penalty amounting to ₹ 3,75,300/-. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on the facts and in law in confirming the penalty under section 271(1)(c) despite the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was as a result of application GP rate @4% by holding that the closing stock was not ascertainable as the assessee was not maintaining the stock register quality-wise and itemwise and there was no description of timber and quality of timber on the sales bills, and, therefore, it was not possible to compare the sale bills and co-relate them with the purchase bills in order to ascertain the gross profit earned and to establish the correctness of trading reserves. Against the penalty order, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 03.3.2014 has upheld the penalty made by the AO by observing that the penalty was levied on an addition made on estimated basis is a wrong contention of the assessee as the penalty was levied by the AO on the basis of the inaccurate particulars merging from the books of accounts of the assessee and also due to the failure of the assessee to provide any explanation for the inaccurate particulars pointed out by the AO. Aggrieved with the impugned order, the assessee is in appeal before the Tribunal. 3. During the hearing, Ld. Counsel of the assessee has filed a Paper Book containing pages 1-49 having the copy of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held that Penalty under section 271 (1 )(c) is a civil liability for which willful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of proceedings under section 276C. 2. R L Traders Vs ITO (2017-TIOL-2583-HCDEL- IT) where Hon'ble Delhi High Court held that citing of past instance or lack of absence of cross-examination, cannot vitiate the initiation and culmination of penalty proceedings in case of accommodation entry. 3. MAK Data P. Ltd vs. CIT [38 taxmann.com 448 (SC)/[2013] 358 ITR 593 (SC)/[2013] 263 CTR 1] Where Hon'ble Supreme Court held that Under Explanation 1 to s. 271(1)(c), voluntary disclosure of concealed income does not absolve assessee of s. 271(1)(c) penalty if the assessee fails to offer an explanation which is bona fide and proves that all the material facts have been disclosed. 9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of penalty u/s 271 (1)( c) read with Explanation 1 is justified. 8. CIT Vs Escorts Finance Ltd [183 Taxman 453 (Delhi)/[2010] 328 ITR 44 (Delhi)/[2009] 226 CTR 105] where Hon'ble Delhi High Court held that if claim made in return of income appears to be ex facie bogus, it would be treated as a case of concealment or furnishing of inaccurate particulars and penalty proceeding would be justified. 9. CIT Vs R.M.P. Plasto (P.) Ltd [184 Taxman 372 (SC)/[2009] 313 ITR 397 (SC)/[2009] 227 CTR 635] where Hon'ble Supreme Court held that Confirmed penalty upon assessee for concealment of income under section 271(1)(c) because positive income of assessee was reduced to nil after allowing set-off of carried forward losses of earlier years. 10. K.P. Madhusudhanan Vs CIT [[2001] 118 Taxman 324 (SC)/[2001] 251 ITR 99 (SC)/[2001] 169 CTR 489 (SC)] where Hon'ble Supreme Court held that where assessee was unable to furnish evidence for loans and it offered amount of transaction as additional income, Assessing Officer was justified in imposing penalty u/s271 (1 )(c) after finding the explanation to be unacceptable and applying Explanation 1 (B) of the section. 4.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact that particulars of income have not been disclosed by the assessee. However, it is a settled law that in case where the income has been estimated by applying a flat estimated rate of profit, and no other specific defects have been established which lead to concealment or furnishing of inaccurate particulars of income, no allegation could be made out against the assessee, making the conduct of assessee punishable with penalty. Our view is fortified by the decision of the Hon ble Jurisdictional High Court of Punjab and Haryana in the case of CIT vs. Metal Products of India (1984) 150 ITR 714, wherein it has been observed that the addition if made on estimation under the proviso of Section 145(1) of the Act by adopting the view that GP shown in the books of accounts was too low, does not automatically lead to the invocation of penalty. We further note that the case laws cited by the Ld. Sr. DR. are on distinguished facts. 6. In the background of the aforesaid discussions and respectfully following the precedent, as aforementioned, the penalty levied by the AO and confirmed by the Ld. CIT(A) is deleted and accordingly the grounds raised by the Assessee are allowed. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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