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November 2012

Penalty: Search and seizure: Section 158BFA(2): Addition on estimate basis: Penalty u/s. 158BFA(2) not justified:

By Kishor Karia, Chartered Accountant
Atul Jasani, Advocate
Reading Time 2 mins
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[CIT Vs. Dr. Giriraj Agarwal Giri; 253 CTR 109 (Raj):]

In the assessment pursuant to search, an addition of Rs. 4,82,028 was made on estimate. The Assessing Officer also imposed a penalty of Rs. 2,89,217/- u/s. 258BFA(2) . CIT(A) deleted the penalty and the same was upheld by the Tribunal.

On appeal by the Revenue, the Rajasthan High Court upheld the decision of the Tribunal and held as under:

“i) So far as the case law referred by the learned counsel for the appellant is concerned, it is sufficient to mention that Hon’ble Apex Court in UOI Vs. Dharmendra Textile Processors; 219 CTR 617 (SC), was dealing with the provisions of Central Excise Act, 1944 and learned counsel for appellant is unable to point out that the provisions of section 11AC of Central Excise Act, 1944 and section 158BFA(2) of IT Act are pari materia.

ii) That apart, it is also relevant to mention that imposition of penalty depends on facts and circumstances of each case. In the present case, the AO imposed the penalty on so-called three items of so-called concealed income. Each item was examined, thoroughly and in detail, by CIT(A) as well as Tribunal and by a reasoned order, both came to the conclusion that additions are based on estimation only.

iii) A fact or allegation based on estimation, cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly imposed by the AO.”

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