TaxTMI 
TaxTMI 
2025 (2) TMI 650
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....e of Rs. 72,39,660/- against the returned income of Rs. 67,14,314/- by making addition of Rs. 5,25,346/- on account of rejection of books and application of net profit rate. 2.2 Penalty proceedings u/s 271 (l)(c) for concealment of income and for furnishing inaccurate particulars of income were also initiated in respect of above mentioned addition and notice u/s 271(1)(c) read with section 274 of the Income Tax Act, 1961 was issued to the assessee on 08.12.2018 fixing the case for 04.01.2019. 2.3 Thereafter, another opportunity of being heard was given to the assessee vide notice dated 02.05.2019 fixing the case for 10.05.2019 sent by post and by e-mail also. However, on the said dates there was no response from the assessee. 2.4 That ld. AO basis above observed that from the above, it is clear that during the course of penalty proceedings, in spite of opportunities afforded to the assessee, the assessee did not respond to the show-cause notice issued. Therefore, I am satisfied that the assessee is intentionally not complying with the penalty proceedings and has nothing to say in the matter. Failure to file any reply on the part of assessee in fact indicates that the asses....
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..../s AKM Resorts willingly wanted to peg their net profit rate at 24.50%. 3.6 The assessee did not reply by the given date of 07/12/2018. Taking into consideration, the earlier reply of the assessee and the further opportunity provided to the assessee which the assessee did not avail, the assessee's declaration of NP rate at 24.50% (from 22.72% in ITR) is accepted. Applying 24.50% of NP rate on the gross receipts: Rs. 2,95,49,632/- x 24.50%= Rs. 72,39,660/-. The net profit comes to Rs. 72,39,660/-as against Rs. 67,14,314/-. 3.7 In this regard, reference is being made to Section 145 of the Act. Action 145 of the Act is reproduced as under: 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessee's or in respect of any class of income. (3) Where the Assessing Officer is not ....
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....radicts the facts of the case and the provisions of law. 2. The Ld. CIT(A) erred in confirming a penalty of Rs. 1,62,330/- imposed by the AO, disregarding the fact that the show-cause notice issued by the AO failed to specify whether the penalty was levied for concealment of particulars or furnishing inaccurate particulars of income. It is evident that the notice under Section 274 did not strike off either limb but initiated the penalty under both. 3. Without prejudice to the above, the Ld. CIT(A) erred in confirming the penalty based on the estimated addition of Rs. 5,25,346/- made by the AO in the assessment order passed under Section 143(3). The CIT(A) NFAC failed to acknowledge that penalty under Section 271(1)(c) cannot be imposed on estimated income. 4. The Ld. CIT(A) erred in affirming the penalty of Rs. 1,62,330/- imposed by the AO, overlooking the fact that neither any inaccurate particulars were identified by the AO nor was any concealment of income established. The addition concerning the quantum was solely based on an estimation and cannot be construed as concealment or furnishing inaccurate particulars. 5. The Ld. CIT(A) erred in con....
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....,25,346/- was worked out at Rs. 1,62,530/- and accordingly Rs. 1,62,330/- was imposed as 100% penalty under Section 271(1)(c) of the Act. 4.5 The assessee throughout has contended that once estimation of NP rate of 24.50% was found to be just, fair and reasonable and accepted by Revenue, the question of any willful concealment of income does not arise at all and that no penalty should be imposed. When additions to income are made on an estimation basis following the rejection of books of account, penalty cannot be sustained/imposed under Section 271(1)(c) of the Act. The basis for this principle lies in the fact that estimation indicates a lack of precise evidence regarding the taxpayer's actual income, thereby failing to demonstrate any intention to conceal or misrepresent income. When the Assessing Officer resorts to estimating income rather than relying on documented financial records, it cannot be inferred that the taxpayer has engaged in concealment or provided inaccurate particulars of income. Consequently, since the additions arise from estimation rather than deliberate 'misrepresentation' penalty is unwarranted. 4.6 In the present case, the Assessing Officer estimated....