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TMI Blog2015 (4) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has claimed rebate under the Central Excise, therefore, the said purchases have been verified by the excise department also. There is no discrepancy either in the quantity or in the value of sales made by the assessee - Addition has been made on the ground that there is steep fall in the gross profit rate as compared to the earlier years. The assessee s case was that, same was due to decrease in sales realization due to devaluation of foreign exchange along with increased in cost of production. The assessee s explanation regarding fall in foreign exchange has been not been accepted completely on the ground that the average fall of US $ was not much. This cannot be reason for rejecting the assessee s books and estimating the gross pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been initiated on the addition made on account of gross profit. The assessee had shown sales of ₹ 31,22,46,861/- which comprised of export sales of ₹ 31.20 crores. The gross profit was shown at ₹ 36,34,969/- which was 1.17%. The Assessing Officer noted that in the earlier years the gross profit shown by the assessee were as under:- A.Y. Total sales Gross Profit Gross profit (%) 2003-04 39,02,02,282 4,67,24,149 11.97 2002-03 35,00,71,469 4,14,22,279 11.83 2001-02 43,55,29,670 5,37,52,961 12.34 3. In response to show cause notice by the AO, it was submitted by the assessee that the gross profit had declined due to continuous fall/ devaluation of US $ during the relevant year and also gave the evidence to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the assessee has claimed rebate under the Central Excise. Further the GP addition has been reduced by the Ld. CIT(A) which shows that there is difference of opinion with regard to the quantification of addition. However, the Ld. AO levied the penalty on GP addition which was sustained at 7%. 5. The Ld. CIT(A) has deleted the penalty after observing and holding as under:- "4.2 There is no dispute that penalty is levied in respect of GP addition only which was reduced by appellate authorities substantially. The para 7 and para 9 of the penalty order are contradictory in the sense that in para 9, the AO states that "Therefore, the amount of ₹ 2505098 is treated as income in respect of which particulars have been concealed." Whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not sustainable in law, by itself will not amount to concealment. Even in the instant case, it is not a case of wrong claim but it is a case of pure estimation. No false purchase/sales/expenses etc. have been found. The Hon'ble High Court of Punjab and Haryana had in the case of Harigopal Singh V. CIT (125Taxman 242) held that provisions of section 271(1)(c) Are not attracted to cases where income is assessed on estimate basis and additions are made therein on that basis. Similarly in the case of CIT Vs. MM Rice Mills (123 Taxman 308), the Hon'ble High Court had held that mere addition made by applying proviso to section 145(1) cannot be made basis for imposition of penalty for concealment u/s 271(1)(c). The case laws referred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is steep fall in the gross profit rate as compared to the earlier years. The assessee's case was that, same was due to decrease in sales realization due to devaluation of foreign exchange along with increased in cost of production. The assessee's explanation regarding fall in foreign exchange has been not been accepted completely on the ground that the average fall of US $ was not much. This cannot be reason for rejecting the assessee's books and estimating the gross profit unless no discrepancy has been found either in the quantity in value of purchase and sales. Thus, mere estimation of gross profit at 10% which has been further reduced to 7%, cannot be the basis for levy of penalty for furnishing of inaccurate particulars. The fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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