Case Law Details
N.B. Builders & Promoters (P) Ltd Vs CIT (ITAT Chandigarh)
The case of N.B. Builders & Promoters (P) Ltd Vs Commissioner of Income Tax (CIT) heard by the Income Tax Appellate Tribunal (ITAT) Chandigarh, presents an important ruling regarding the imposition of penalties for lower gross profit. The tribunal ruled that penalties cannot be imposed for mere lower gross profit based on assumptions and conjectures.
The case stems from a series of appeals filed by the Assessee (N.B. Builders & Promoters) against orders of Ld. CIT(A)-3, pertaining to Assessment Years 2015-16 & 2016-17. The core issue revolved around the imposition of a penalty of Rs. 1,83,917/- u/s 271(1)(c) of the Act, which the Assessee claimed was unjustified. The Assessee maintained that there was no concealment of income or furnishing of inaccurate particulars of income, rendering the imposed penalty invalid.
Despite their contentions, both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the penalty, mainly due to certain discrepancies in the assessee’s accounts during a search and seizure operation and later, during the assessment proceedings.
The Assessee’s main argument was that the lower gross profit could be a reason for making an enquiry or addition but it cannot be a basis for the levy of a penalty for concealment of income. It was also argued that the AO has not recorded any finding in terms of rejection of books of account and therefore, if the book results have been accepted, and a higher gross profit rate has been declared than usual, it cannot form the basis for penalty imposition.
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