INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - Net Profit rate enhanced during assessment -

Assessee was engaged in the business of construction work and, therefore, AO proceeded to assess net profit @8% of turnover. CIT(A) reduced rate to 6.75%. Subsequently, penalty under section 271(1)(c) was imposed by AO on differential amount of net profit. Held: Net profit rate, as directed to be applied, was just an estimate without having any sound basis as past financial results of assessee were not considered. It is settled law that penalty for furnishing inaccurate particulars of income can neither be imposed nor sustained on enhancement of net profit rate based on an estimate. Accordingly, no penalty was imposable under section 271(1)(c).

Relied:CIT v. Aero Traders (P) Ltd. (2010) 322 ITR 316 (Del-HC) : 2010 TaxPub(DT) 1381 ( Del-HC), Harigopal Singh v. CIT. (2002) 258 ITR 85 (P&H-HC) : 2002 TaxPub(DT) 1625 (P&H-HC) and CIT v. Subhash Trading Company (1996) 221 ITR 110 (Guj-HC) : 1996 TaxPub(DT) 591 (Guj-HC),

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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