INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Estimation of income - Assessee failed to produce supporting documents for expenses incurred -

Assessee was engaged in the business of carrying out civil contract works. The disparity between the assessed income and returned income was on account of treating the gross receipts received from M/s. S income without allowing the claim of expenditure. During the assessment proceedings, ITO gave a finding that the receipts from M/s. S were not in nature of contract receipts but in the nature of commission/brokerage or service charges in connection with acquisition of land. It was contended that income was offered under the provisions of section 44AD and therefore, no books of account were maintained by assessee. Since he failed to produce the supporting vouchers for the entire expenses and the same was disallowed by AO. Thereafter, AO initiated penalty under section 271(1)(c). Held: From the evidence on record, it was clear that income was assessed on estimated basis, i.e., rate of 60% of the gross receipts, therefore, income assessed originally by AO had come down whereas penalty was levied with respect to the original assessed income by AO. CIT(A) lost sight of the Tribunal's order passed in the quantum appeal, however, without dwelling further on this aspect. In case where the income was assessed on estimated basis, levy of penalty under section 271(1)(c) cannot be upheld.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08 & 2008-09

SUBSCRIBE FOR FULL CONTENT