INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Bogus/non-genuine commission/brokerage - Rejecting the books of account and subsequently net profit of assessee was assessed @ 1% -

Assessee-company claimed bogus/non-genuine commission/brokerage paid to one company. A survey action under section 133A was carried out at the business premises of the said company. During the course of survey, a statement of Director of the said company was recorded in which he admitted that assessee had made the payment in the form of bogus/non-genuine commission/brokerage. Assessee failed to cooperate with AO, therefore, he rejected the books of account and assessed the profit @ 1% of the gross turnover. Thus, penalty proceeding was initiated under section 271(1)(c). Held: Assessment was completed by estimating the profit. No penalty was leviable where the assessment was completed on the basis of estimation of profit. Decision of High Court in the case of National Textiles [2001 164 CTR (Guj) 209 : 2001 TaxPub(DT) 0677 (Guj-HC)] in which it was specifically held that the no penalty was liable to be sustainable where the profit was estimated. Therefore, penalty imposed was liable to be deleted.

Followed:National Textiles v. CIT (2001) 164 CTR (Guj) 209 : 2001 TaxPub(DT) 677 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

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