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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: Shri Joginder Singh, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. order of Ld. Commissioner of Income Tax (Appeals)- 35 Mumbai, {(in short ‘CIT(A)’}, dated 12.05.2004 passed against penalty order u/s 271(1)(c) 03.03.2012 for A.Y. 2006-07.
2 Hiraram P. Patel 2. During the course of hearing, arguments were made by Shri Vipul J. Shah, Authorised Representative (AR) on behalf of the Assessee and by Shri Abhishek Sharma, Departmental Representative (DR) on behalf of the Revenue.
In this case, the brief background was that during the course of assessment proceedings it was noted by the AO that assessee was engaged in the business of transportation. During the course of assessment proceeding, the AO issued notice u/s 133(6) to sundry creditors. Since, there was no proper response from the creditors, the AO rejected the books of accounts and estimated the net profit of the assessee at 4% of the total turnover and computed income of the assessee accordingly. Subsequently, the penalty proceedings were initiated and AO levied the penalty on the amount of addition made by the AO. 3.1. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) wherein it was submitted that an appeal against quantum order was not filed only to buy peace of mind. But, there was no concealment of income. It was also submitted that merely because the creditors could not appear before the AO, it would not prove that transactions of the assessee was bogus. It was also argued that addition was made on estimate basis without proving any concealment and therefore, penalty was wrongly levied. But, Ld. CIT(A) did not find force in the submissions of the assessee and upheld the penalty on the ground that since the AO had no other alternative but to 3 Hiraram P. Patel estimate the income therefore, addition was made on estimate basis and therefore, penalty has been rightly levied by the AO.
3.2. Being aggrieved, the assessee filed an appeal before the Tribunal wherein submissions made before the Ld. CIT(A) have been reiterated.
3.3. We have gone through the facts of this case and considered the submissions made by both the sides. It is noted by us that while levying the penalty, the AO was not sure whether it was case of concealment of income or furnishing of inaccurate particulars of income. Further, while making addition in the assessment order, the AO estimated the net profit @ of 4% of the total receipts. The AO did not give any basis much less any scientific or concrete basis to adopt the rate of profit at 4%. Thus, it was a pure exercise of estimation. Further, merely because the creditors did not choose to appear before the AO, it would not ipso facto mean that the transactions of the assessee with these persons were bogus. Nothing has been brought on record in the penalty proceedings to show that the transactions of the assessee were false. The case of the assessee was not disproved at any stage. The income of the assessee has been computed on the basis of pure guess work, it is certainly not a case of levy of penalty. Under these circumstances, we direct the AO to delete the penalty.
4 Hiraram P. Patel 4. In the result, the appeal filed by the Assessee is treated as partly allowed. Order pronounced in the open court on 3rd October, 2016.