TaxTMI 
TaxTMI 
TaxTMI 
2012 (5) TMI 743
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....order. It would be relevant to, however, before proceeding to discuss the merits of the case, recount the background facts of the case, stating the figures for assessment year 2004-05 for the sake of convenience. The assessee, an individual, is in the business of manufacture and export of diamond and diamond studded jewellery. For the years under reference, it disclosed a gross profit (g.p.) rate of 3.83% and 4.1% on sales of Rs. 11.32 lacs and Rs. 10.30 lacs for the two consecutive years respectively. The same being drastically below the g.p. rate of 13.99% disclosed for the assessment year 2003-04, the assessee was called upon to explain the decline during the course of the assessment proceedings. No justifiable reasons for the huge decline in the g.p. rate were, however, put forth by the assessee. On an examination of the books of account, it was noticed that the assessee had shown purchases in its accounts from, among others, twelve concerns, and which were found to be entry providers on the basis of the investigation carried out by the BCTT Wing of the Department. The assessee was required to produce the parties, but failed to do so. Notices u/s. 133(6) were issued to the said....
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....d the overall facts and circumstances of the present case especially the showing of the substantial increase in turnover during the year in comparison to the last year. We thus while setting aside orders of the lower authority for A.Y. 2004-05 direct the AO to apply g.p. rate of 4.50% on the declared sales to estimate the profit and the resultant amount in difference between the estimated profit and the declared profit be added in the income earned on the trade." The findings for the assessment 2005-06 at para 14 (page 11 and 12) of the order by tribunal are again on the same lines, as follows: "14. So far as the reasonableness of G.P. rate shown and applied by the lower authorities ....................We are thus of the view that keeping in mind the result shown and to plug the possible leakage due to unverifiable purchases, it would be reasonable to apply g.p. rate of 4.50% on the declared sales. The AO is directed accordingly to work out the resultant trading addition during the year. The Ground No. 2 of the appeals preferred by the assessee is thus partly allowed and the related ground of the appeals of the Revenue is rejected." 2.2 The quantum proceedings have concluded th....
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....omitted, i.e., w.e.f. 1009-1986. The purchases claimed per the books of account had been found to be false as the parties were found to be non-existent, and the assessee has not brought any material on record to substantiate her claim of the impugned purchases as genuine, leading to the enhancement in income in assessment. Aggrieved, the assessee is in appeal. 3. We have heard the parties, and perused the material on record. 3.1 We may firstly wish to clarify the law in the matter; the assessee's sole case being that the addition as finally sustained in its case being on the basis of an estimate, no penalty u/s. 271(1)(c) of the Act could at all be levied for that reason. We are unable to subscribe to such a broad statement of law. Assessment under the Act can be made only either under section 143(3) or u/s. 144, both of which authorize or sanction the framing of assessment on the basis of an estimate. The only condition is that the estimate should be informed and reasonable, and not arbitrary or capricious. Indeed, accounts, which form the basis of the return, are themselves finalized by applying estimates, termed accounting estimates in the accounting parlance. Besides, the....
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....ting the onus from the Revenue to the assessee. The same, thus, would not be of assistance to the assessee. 3.2 However, it is also trite, that penalty is not automatic. The presumption raised under Explanation to the section is though rebuttable. It merely shifts the burden of proof from the Department to the assessee. When the question of concealment is decided by evidence on record, the question of burden of proof becomes immaterial: CIT vs. Devendra Singh (S) (1977) 108 ITR 314 (All.). Explanation 1 to the section 271(1)(c) of the Act being applicable to the case of levy of penalty there-under, whether based on an estimate or otherwise, the question thus boils down to the facts, i.e., the extent to which the assessee is able to substantiate its case, or the reliability of evidence available on the basis of which a higher estimate has been upheld. This is as plausible explanation saves penalty, and more cogent the reasons and more definite the materials supporting the higher estimate, the weaker - generally speaking - the assessee's case for the non levy of penalty on account of an addition made by making an estimate, and vice versa. 3.3 Coming to the facts of the case, th....