TaxTMI 
TaxTMI 
2012 (5) TMI 74
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....(A) granted the relief by holding as under :- "The contention of the A/R is considered. The Hon'ble ITAT's order (DB) was gone through. While fixing profit rate at 8% and subject to allowance of depreciation and interest there on the Hon'ble ITAT has found profit rate of 8% as "quite reasonable". The Hon'ble ITAT also observed that the proposal of the assessee for fixing net profit rate of 11 % was a conditional proposal and was a counter offer to the proposal made by the AO which came to be made as appellant at the relevant time was not able to collect information about such contracts or produce those personnel. It was merely to purchase peace and avoid any dispute with the department. From the record it appears that the AO though made various queries but has not stated basis of its estimation nor gave chance to the appellant to rebut basis of arriving at the application of the presion rate of 11 %. The counter proposal of the assessee was conditional offer as to the allowability fastened with the conduct of the activity. But the assessing officer neither informed the appellant with the proposal so made is acceptable nor he did act in accordance with the offer so made by the app....
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.... the facts and in the circumstances of the case, the learned CIT (Appeals) was justified in canceling the penalty under section 271(1)(c) imposed at Rs.24,00,977/- whereas the assessed income worked out at Rs.1,38,79,261/- as against declared income of Rs.88,91,700/- resulting in the concealed income of Rs.49,87,561/-which has been accepted by the assessee & for which no further appeal has been filed. 5. Whether, on the facts and the circumstances of the case, the learned CIT(Appeals) was justified in canceling the penalty under section 271(1)(c) relying on decisions as reported on 1105 ITR 602, 125 ITR 700, 131 ITR 619 & 83 ITR 26. These case laws relate to earlier years i.e. before the insertion of explanation under section 211(1)(c) when the onus was on the Department to prove that assessee has deliberately filed inaccurate particulars. 6. The. appellant craves leave to add, to alter, or amend any grounds or the appeal raised above at the time of hearing." 4. These grounds raised by the revenue are basically based on three reasons, viz., firstly, placing reliance on the statement of Shri A.K. Solanki in which it was alleged that net profit ratio was i....
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....that nowhere in the assessment order the Assessing Officer made it clear as to how he has arrived at the surgical precision rate of 11 %. Even if in the absence of any supporting vouchers the Assessing Officer was justified in invoking provisions of sec. 145 of the Act, though not challenged by the appellant before us, it did not mean that he had got abundant power to make the additions or estimation at his sweet will. It is settled proposition of law that assessment is a quasi judicial proceeding in which the personal will or rough estimation did not have any place. The Assessing Officer is bound to disclose the mental process through which he arrived at a particular figure of income as his orders are being subjected to appeal and, therefore, should have been speaking One. It is evidenced from the past history of the appellant that never a profit rate of more than 7% was applied in the case of the appellant, more particularly when two of the past assessments have already been completed as a consequence of the search and incriminating documents as alleged in the year under appeal were also available with the Assessing Officer in those assessments. Keeping in view the peculiar circu....
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....robed the inflation of expenses and, therefore, there is no material which could lead to application of higher rate of profit on this account. The ld. Departmental Representative has also mentioned about inflated payments of Rs-38 lacs. We have verified this allegation with reference to the reply furnished by the assessee at pages 127 & 128. as referred in the preceding paragraph, such withdrawals are being made by the Directors for meeting out business contingencies and necessities at different sites of the appellant company as its works are spread over even to a very small places where adequate facility of each and every material or supplies thereto are not available. Besides this, the assessing officer having neither proved the inflation nor brought on record even a single transaction to show the suppression of profits, it cannot be said that the amounts so withdrawn by the Directors and adjusted at the end of the year are inflated payments. In fact, in the accounting parlance & business circles the purpose of making imprest advance is to meet liability of the business on day to day basis for the convenient handling and accounting and to avoid day to day repeated withdrawals. Be....
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.... the accounting parlance & business circles the purpose of making imprest advance is to meet liability of the business on day to day basis for the convenient handling and accounting and to avoid day to day repeated withdrawals. Before the annual accounts are closed, an account of the imprest advance is taken from the person to whom it is so made. The appellant has resorted to the same practice which is prevalent in the business circles and nothing new has been done by him. The assessing officer might not be aware of such a practice, and his ignorance could have aroused genuine suspicion. But it is settled law that suspicion howsoever strong cannot take the place of proof. No adverse inference thus could have been drawn by the assessing officers." On the issue of disparity between the assessed income and the returned income of Rs.49,87,561/-, it can be said that this ground is not sustainable as the addition was purely on ad hoc estimation of net profit ratio. The Assessing Officer applied a particular flat rate of 11% against the declared profit rate of 3% by the assessee. The ITAT has reduced the estimate income by adopting 8% of profit rate which is also based on ad hoc estimati....
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....8 the Hon'ble Punjab & Haryana High Court held as under :- "Penalty under s. 271(1)(c) Concealment-Additions based on estimate- AO made additions on account of processing of unaccounted rice bran and undervaluation of closing stock-in appeal, Tribunal applied flat rate of 10 per cent for working out unaccounted profits- Therefore, assessee's assessment having been made on estimate basis, penalty under s. 271(1)(c) is not imposable vis-a-vis the addition made to the income-No substantial question of law arises from the order of the Tribunal deleting the penalty." (iii) In the case of CIT v. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158/189 Taxman 322, the Hon'ble Supreme Court has held as under :- "Hon'ble Supreme Court while considering the applicability of section 271(1)(c) of the Income-tax Act, 1961, held that in order to impose a penalty under section, there has to be concealment of income of the assessee and the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate....