The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that penalty u/s 271(1)(c) is not applicable when income is computed on an estimated basis.
During the scrutiny assessment of the appellant, NBK Infrastructure P. Ltd., the Assessing Officer (AO) made an addition of Rs.15,78,761/- by estimating the net profit at 6.50% as against 5.89% declared by the assessee on its turnover. The Assessing Officer rejected the books of accounts and estimated the net profit and imposed a penalty under Section 271(1)(c) of the Act which was sustained by the CIT (Appeals).
On appeal before ITAT, the counsel for the appellant submitted that the AO estimated net profit by rejecting the books of accounts as there was a substantial increase in expenditure and by observing that no wage registersor stock register was produced and, therefore, the books of accounts are not complete.
The counsel for the appellant further submitted that when the income is computed on an estimated basis penalty under Section 271(1)(c) of the Act cannot be levied for concealment of income or for furnishing inaccurate particulars of income.
The Tribunal by relying on the decisions of Punjab & Haryana High Court in the case of Hari Gopal Singh Vs. CITand Delhi High Court in the case of CIT Vs. Aero Traders Pvt. Ltd.observed that the estimated rate of profit applied on turnover of the assessee does not amount to concealment or furnishing inaccurate particulars of income.
Mr. G. S. Pannu, President,and Shri Challa Nagendra Prasad, Judicial Member have held that “the Assessing Officer has only estimated the net profit by rejecting books of accounts and estimation of net profit at a higher percentage than the declared percentage by the assesseeand, therefore, it cannot conclusively prove of any concealment of income or furnishing of inaccurate particulars of such income. Thus, respectfully following the above said decisions, we delete the penalty levied under Section 271(1)(c) of the Act”.
AdvocateMr. Kapil Goel appeared on behalf of the appellant and Ms. Garima Sharma appeared on behalf of the revenue
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