TaxTMI 
TaxTMI 
2010 (10) TMI 1058
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....ion no. 3 would not override Explanation 1 which is a Rule of Evidence rebuttable as provided in the said Explanation 1 itself. 2. On the facts and in the circumstances of the case and in law the penalty u/s 271(1)(c) levied by A.O and confirmed by ld. CIT(A) as there is no finding in the assessment order that the addition made to total income and sustained by Hon'ble ITAT which addition was only on the basis of estimation of income @ 1.5% as against estimated by the assessee while filing the return as no books of account were maintained. The penalty deserves to be cancelled. 3. On the facts and in the circumstances of the case and in law and since the addition to total income is on estimation basis such addition has not been established or can be reasonably inferred that it was on account of contumacious conduct or can be inferred or established that the assessee's explanation was not bonafide. In such a scenario no penalty u/s 271(1)(c) would be sustained even after the pronouncement of the judgment of the Hon'ble Supreme Court in Dharmanedra Textile's case. The penalty be quashed. 4. On the facts and in the circumstances of the case and in law the pena....
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....nd A.O is as under: Financial year A.Y. Total credits Net profit % of Agarwal group Income escaped 97-98 98-99 4,176,340 -- 1,041,760 98-99 99-00 88,894,920 0.19 168,898 99-00 00-01 32,798,920 0.34 111,516 00-01 01-02 25,712,875 0.71 182,561 01-02 02-03 47,204,510 0.66 311,549 02-03 03-04 83,209,114 0.4 332,836 03-04 04-05 126,280,134 0.21 265,188 04-05 05-06 70,591,417 -- Return not yet due 478867,377 -- 2,414,308 4.1 For the A.Y. 1998-99 the income was offered on the basis of cash credits in the bank account at Rs. 10,41,760/- whereas for the other years the income was offered on the basis of turnover of total credits in the bank accounts and estimating the profits at different percentages as can be seen from the above table. 5. In the assessment completed subsequently the A.O estimated the profit at 1.5% of the turnover and also added the peak credit in the respective years wherever the income offered so far was short of peak credit arrived at. The CIT(A) has reduced the profit to 1% of the turno....
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.....Y. 1998-99 however, the penalty levied u/s 271(1)(c) read with Explanation 3 is justified and therefore confirmed." The assessee is contesting the same. 7. The learned counsel placed on record the synopsis of 11 pages and assessment orders of various years in pages 12 to 53, notices issued from pages 54 to 71 and various copies of judgments from pages 72 onwards in the paper book. The learned counsel's arguments are two fold. One being that the A.O did not specify invoking explanation 3 to section 271(1)(c) and the said explanation was not applicable to the assessee. Detailed written submissions are made explaining the history of Explanation 3 and its analysis. The other being that the income was being determined on the basis of estimation and penalty is not leviable when income was estimated. The following cases were relied for the above proposition. 1) CIT Vs. Sangrur Vanaspati Mills Ltd. SLP (Civil) No. 31541 of 2008 2) CIT Vs. Sangrur Vanaspati Mills Ltd. (2008) 303 ITR 53 (P & H) 3) CIT Vs. Ravail Singh co. (2002) 254 ITR 191 P & H) 4) Harigopal Singh Vs. CIT (2002) 258 ITR 85 (P & H) 5) CIT Vs. Dhillon Rice Mills (2002) 256 ITR 447 (P & H) 6) Silver P....
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....ly on estimate basis and declared his income at Rs. 52,000/-. Whereas in the case of the assessee, the returns of income was never filed and the assessee never intended to file returns. The present return is filed only in response to notice issued by the department. In order to attract clause (c) of section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or if he furnishes inaccurate particulars of such income. What is to be seen is whether the assessee in the present case had concealed his income or not. The answer to this question is yes. Had the department not taken action u/s 133A the assessee would not have filed the return and would have enjoyed the income earned without paying tax. As such concealment is very clear. The mens-rea is also established that assessee never intended to file the return and to pay tax, therefore, I am satisfied to levy penalty on assessed income of Rs. 10,41,760/- which became the final on receipt of ITAT's order. Therefore, penalty u/s 271(1)(c) is levied at Rs. 3,64,616/- which at 100% of the tax sought to be evaded being minimum penalty." 9.1 Similar reasons were in other ye....
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....bove in this order. Since there is no basis for estimating at different rates in various years, the A.O is correct in taking the rate of estimation at 1.5% uniformly which was however restricted to 1.0% ultimately. As seen from the facts, only quantification of income was on the basis of 1% estimation whereas there is no doubt about the escapement of income in respective years as the assessee has kept the entire transactions outside the purview of department by not filing the returns in time. There is no explanation why the returns were not filed and as per Explanation 1 to the provisions of section 271(1)(c, there is no bonafide explanation and so the penalty proceedings are attracted even though the income determined was on estimation. We are of the opinion that the assessee deserves penalty u/s 271(1)(c) as the proceedings were initiated for escapement of income u/s 147 and assessee admitted incomes consequent to those proceedings. Even though the AO levied penalty on the whole of income determined correctly, the CIT(A) for A.Y. 1999-00 to 2005-06 has reduced it only to additional income brought to tax. Since revenue is not in appeal, this part of the CIT(A) order also has to be....