2018 (1) TMI 896

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....83/- and N.P rate of 9.73% (subject to interest and depreciation) in his return of income. The AO rejected the books of accounts invoking provisions of section 145(3) and enhanced the N.P rate to 10.36% (subject to interest and depreciations). Thus, the AO made an addition of Rs. 25,95,796/- to the declared income of the assessee. However, no satisfaction was recorded in respect of levy of penalty during the course of assessment proceedings and no penalty proceedings were separately initiated by issuance of notice u/s 274 of the Act. 3. In the first appeal, the ld. CIT(A) upheld the application of section 145(3) of the Act and also issued a show cause proposing enhancement of income. After considering the assessee's submission, the ld. CIT....

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....at the assessee is guilty of concealing the particulars of income to the extent of Rs. 80,07,358/- and penalty was accordingly levied u/s 271(1)(c) @ 100% of the tax sought to be evaded amounting to Rs. 26,95,277/-. 6. On appeal by the assessee against such levy of penalty, the ld. CIT(A) referred to the decision of Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton & Ginning Factory 35 taxmann.com 250 (Karnataka) where it was held that the imposition of penalty may be done at the stage of assessment or at the stage of appeal. At the stage of assessment, the Assessing Officer has to issue a notice to the assessee and the imposition of penalty has also to be done by the Assessing Officer. In the case of initiation of penalty ....

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....hout taking into consideration the order of the Co-ordinate Bench in the quantum proceedings wherein the additions so made by the AO and the ld. CIT(A) have been substantially reduced to Rs. 3,00,000/- only. It was further submitted that the penalty imposed by the AO was completely without jurisdiction and same has rightly been quashed by the ld. CIT(A) and in support, the ld AR relied upon the decision of the Hon'ble Karanataka High Court in case of Manjunatha Cotton & Ginning Factory (supra). On merits, it was further submitted that the additions so sustained in the quantum proceedings was merely on estimation basis and on such estimation, there cannot be a question of levy of penalty u/s 271(1)(c) of the Act and reliance was placed on th....