TaxTMI 
TaxTMI 
2014 (2) TMI 21
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....me are sustained at the appellate stage?" The issue pertains to the penalty imposed by the Assessing Officer on the amount of Rs. 1,00,000, which was sustained as addition, which was confirmed by the Commissioner of Income-tax (Appeals) (for short "the CIT(A)") under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act of 1961"), for the assessment year 1996-97. The said penalty was, however, deleted by the Income-tax Appellate Tribunal (for short "the ITAT") Brief facts may be observed that the respondent is a registered firm and is engaged in retreading of old (worn out) tyres of all vehicles. Besides the job work, the respondent-assessee was also selling such raw material to local parties. A survey operation came to be carried out at the business premises of the respondent on November 16, 1995, where some documents were found, which, according to the Assessing Officer, was not satisfactorily explained and, accordingly, on account of the said discrepancies, an estimated addition was made of Rs. 1,44,000. The respondent preferred an appeal against the said addition of Rs. 1,44,000, which came to be sustained by the Commissioner of Income-tax (Appeals) and....
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....Tribunal had rightly deleted the penalty. He further submitted that merely because proper explanation was not offered, it does not make out that the assessee became liable for imposition of penalty. He also submitted that it is basically a finding of fact and no question of law arises for consideration. We have considered the arguments advanced by the learned counsel for the parties and have also perused the impugned order. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) on....
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.... basis of an estimate and on account of estimated trading addition penalty could not be levied under section 271(1)(c) of the Income-tax Act. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714 (P&H), has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income. The Gujarat High Court in the case of CIT v. Whitelene Chemicals (Tax Appeal No. 496 of 2012), vide order dated January 15, 2013, since reported in [2014] 360 ITR 385 (Guj) has observed that no penalty can be imposed merely because account books of the assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. The assessee filed its explanation which could not be termed as not bona fide and, accordingly, the Gujarat High Court came to a conclusion that mere rejection of books of account and estimation of profit cannot be a ground for imposition of penalty. The Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 221 ITR 110 (Guj), has held as under (headnote) : &nbs....
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....ssessee, it cannot be said that the assessee had "concealed the particulars of his income" so as to attract clause (c) of section 271(1) of the Act. There is not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department. We are also of the considered view that the Tribunal grossly erred in law in relying on Explanation 1(B) to section 271(1)(c) of the Act to raise a presumption against the assessee. The assessee had justified his estimate of income on the basis of household expenditure and other investments made during the relevant period. It is not the case of the Revenue that he had, in fact, incurred expenditure in excess of what he had stated. In this view of the matter, it cannot be said that the explanation furnished by the assessee had not bee....