The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that addition made on account of estimated rate of profit applied to turnover did not amount to concealment. Therefore, the bench deleted the penalty imposed by the Assessing Officer (AO).
The assessee, Kamlesh Gupta is a Director of M/s German Homoeopathic Distributors Pvt. Ltd. During the assessment proceedings, the Assessing Officer made estimated additions in the assessment order on account of local medicine sales.
Aggrieved by the order, the assesee filed an appeal before the Commissioner of Income Tax (Appeals) who deleted the additions made by the assessing officer and directed the AO to make the additions on account of transaction of sale of local medicines has been made on estimate basis by applying G.P rate of 9.11% on the sales appearing the bank account.
While reviewing the arguments of the both parties the tribunal determined that “It is a trite law that any addition made on account of estimated rate of profit applied to the turnover does not amount to concealment”.
The tribunal relied upon the decision of Gujarat High Court in CIT vs. Subhash Trading Company held that when income is estimated, then, there could be no question of imposing penalty under Section 271(1)(c) of the Income Tax Act.
The AO stated that since the appellant has not filed any appeal in this matter it shows that the appellant has no plea to offer and concluded that the above transaction is concealed. However, merely because the appellant has not filed any appeal against the addition could not be a ground for imposing a penalty.
Therefore the two member bench comprising Kul Bharat (Judicial Member) and Dr. B. R. R. Kumar (Accountant Member ) allowed the appeal filed by the assessee and deleted the penalty.
Neeraj Jain, counsel appeared for the assessee and Sanjay Kumar, counsel appeared for the revenue.
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