Appeal allowed on penalty imposition, quantum additions dismissed. Failure to seek rectification led to appeal dismissal.

The appeal against the penalty imposition under section 271(1)(c) of the Act was allowed as the rejection of audited statements and estimation of income using the net profit rate rendered the penalty inappropriate. The appeal against quantum additions was dismissed, upholding the findings of the ld. CIT(A) regarding the computation of net profit and disallowance of certain deductions. The appellant's failure to seek rectification led to the dismissal of the appeal. The decisions were pronounced on 22/09/2021.

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Issues:
1. Imposition of penalty u/s. 271(1)(c) of the Act
2. Quantum additions

Analysis:

Issue 1: Imposition of penalty u/s. 271(1)(c) of the Act
The appellant filed an appeal against the imposition of penalty u/s. 271(1)(c) of the Act. The Assessing Officer had estimated the income of the assessee by applying the net profit ratio and rejected the books of accounts. The appellant argued that it had fulfilled its obligation by getting the accounts audited, and the rejection of the audited statements was unjust. It was noted that penalty u/s. 271(1)(c) is applicable if the assessee conceals income or provides incorrect particulars. However, when books of account are rejected and income is estimated using the N.P. rate, the imposition of penalty u/s. 271(1)(c) is deemed inappropriate, as per various Tribunal and court judgments. The Hon'ble Allahabad High Court also held that if income is estimated on a basis of estimation, penalty u/s. 271(1)(c) cannot be imposed. Therefore, the penalty imposed by the Assessing Officer was deemed not leviable, and the appeal against the penalty imposition was allowed.

Issue 2: Quantum Additions
The appeal in ITA No. 549/Lkw/2018 was against the quantum additions where the assessee contested the additions sustained by the ld. CIT(A). The assessment order was passed based on the ITAT order, which had set aside the matter on two issues back to the Assessing Officer. The Assessing Officer computed the net profit of the assessee at 7% and added the profit on the sale of fixed assets. The appellant argued that salary and interest to partners were not allowed by the Assessing Officer. However, the Tribunal upheld the findings of the ld. CIT(A) based on the provisions of Section 184(5) and 185 of the Act. The Tribunal rejected the contentions of the assessee regarding the allowability of deductions for interest and salary paid to partners. The Tribunal concluded that the appellant should have approached the High Court or filed a miscellaneous application for rectification, which was not done. As a result, the appeal in ITA No. 549/Lkw/2018 was dismissed.

In conclusion, the appeal in ITA No. 548/Lkw/2018 against the penalty imposition was allowed, while the appeal in ITA No. 549/Lkw/2018 against quantum additions was dismissed. The orders were pronounced on 22/09/2021.

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