High Court of Gujarat in CIT vs Whitelene Chemicals uphled the order of ITAT deleting the penalty u/s 271(1)(c) which was imposed merely because books of account maintained by assessee were rejected and its profit was estimated on basis of fair gross profit ratio.
The judgement is very important one as in the assessment proceedings under Income Tax sometimes the books of accounts of the assessee are rejected and thereby additions to the income are made by estimating the Profit on the basis of enhanced Gross Profit ratio.
In such cases, as is held by the ITAT in its order and upheld by the High Court, no penalty can be imposed merely because account books of assessee were rejected and that profit was estimated on the basis of fair gross profit ratio.
The order seems very justified as there cannot be said to be any concealment on the part of the assessee when the addition is made merely by estimating the Profit on the basis of Gross Profit ratio and there is no other cognet evidence to suggest that the assessee has furnishued inaccurate particulars in his return of income.
The judgement is as follows:
HIGH COURT OF GUJARAT
Commissioner of Income-tax
v.
Whitelene Chemicals*
AKIL KURESHI AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 496 OF 2012
JANUARY 15, 2013
Manav A. Mehta for the Appellant.
ORDER
Akil Kureshi, J. - Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 3.2.2012 raising following question for our consideration :
"Whether on the facts and circumstances of the case, the Hon'ble Tribunal has erred in law in cancelling penalty of Rs. 32,67,643/- levied under Section 271(1)(c) of the Act by the Assessing Officer and confirmed by the learned CIT(A) on addition of Rs. 36,72,605/- and Rs. 8,83,613/- made on account of low gross profit and under section 69C of the Act being unexplained expenditure?
2. Issue pertains to penalty imposed by the Assessing Officer and confirmed by CIT(Appeals) under section 271((1)(c) of the Income Tax Act, 1961 for the assessment year 2001-2002. Such penalty in further appeal came to be deleted by the Tribunal. Primarily, penalty was imposed on two counts. Firstly, that additions were made in the income of the assessee after rejection of book results on the basis of fair gross profit rate. Second limb of the penalty was that assessee had retained 3% of the sales tax with it.
3. With respect to first aspect of the penalty, the Tribunal observed that no penalty can be imposed merely because account books of assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. With respect to retention of the portion of the sales tax, the Tribunal stated that no evidence was brought by the Revenue to suggest that assessee had retained a portion of sales tax with it. Assessee filed its explanation which could not be termed as not bona fide. In absence of any corroborative evidence to prove the charge that the portion of sales tax bill was retained by the assessee, penalty could not be imposed. From the above discussion, it can be seen that the opinion of the Tribunal with respect to deletion of penalty is based on appreciation of evidence on record. With respect to additions made after rejection of book result and on the basis of fair gross profit ratio, the Tribunal found no additional material to sustain the penalty. With respect to so-called retention of the sales tax, the Tribunal found that the Revenue could not establish such charge. Explanation offered by the assessee could not be termed as not bona fide. We do not see any question of law arising. Tax Appeal is therefore, dismissed.
Share |
Posts
0 comments :
Post a Comment