TaxTMI 
TaxTMI 
2013 (6) TMI 68
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....ns of law (i) and (iii), which are reproduced as under:- (i) Whether on a true and correct interpretation of the section 275 of the Act, the Tribunal was legally correct in holding that the penalty order dated 28.09.2006 had been passed within the limitation period as prescribed thereunder, and in upholding the validity thereof? (iii) Whether on a true and correct interpretation of the provisions of section 271 (1) (c), the Tribunal was legally correct in holding that the assessee's case fall within the said penal provisions and in upholding the levy of penalty thereunder? The brief facts of the case are that during the assessment year under consideration, the assessee-appellant was engaged in the business of civil contract in his propri....
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....ut the A.O. has rejected the books of account and made the addition on estimate basis being inspired from Section 44 AD, where the net profit rate was estimated @ 8% from contract business. The A.O. in its penalty order dated 28.09.2006, imposed the penalty of Rs.4,00,000/- (four lacs) on two counts i.e. firstly, additions were made in income of assessee after rejection of book results and the net profit rate was fixed @ 8% on the total turnover. Secondly, interest on FDRs of Rs.2,23,344/= was treated as a 'income from other sources'. He further submits that no penalty for concealment can be imposed in respect of the addition made after rejection of the books of account; and on the basis of application of net profit rate. He also submits th....
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.... the net profit rate was computed @ 8% prescribed in the statute. Lastly, he justified the levy of the penalty of Rs.4,00,000/- under Section 271 (1)(c). Heard both the parties and gone through the material available on record. In the instant case, the penalty was imposed in the second round by the A.O. after making the addition by rejecting the books of account. In the case of T. Ashok Pai vs. Commissioner of Incme Tax, [2007] 292 ITR 11 (SC), the Hon'ble Apex Court observed that:- "If any explanation given by the assessee with regard to the mistake committed by him has been treated to be bona fide and it is found as a fact that he had acted on the basis of wrong legal advice, the question of his failure to discharge his burden in terms....
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.... the law is stringent, more strict a construction thereof would be necessary. Even when the burden is required to be discharged by an assessee, it would not be as heavy as that on the prosecution." Further, in the case of C.I.T. vs. Reliance Petro Products Pvt. Ltd. [2010] 322 ITR 158 (SC), Hon'ble Apex Court observed that:- "a glance at the provisions of section 271 (1)(c) of the Income Tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, 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 ....
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.... not applicable, nonetheless the A.O. has inspired with the provision of Section 44 AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) of the Income Tax Act, can be imposed as per the ratio laid down in the case of C.I.T. vs. Arjun Prasad Ajit Kumar, (2008) 214 CTR (All) 355, where it was observed that: "Appeal (High Court)-Substantial question of law-Penalty under section 271 (1)(c) CIT (A) deleted penalty under section 271(1)(c) on the ground that there being nothing on record that assessee's explanation lacked bona fides, penalty under section 271(1)(c) ....