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3. The appeal of the assessee in ITA No.2521/M/2010. In this appeal only dispute raised by the assessee is regarding levy of penalty under section 271(1)(c). As discussed while dealing with the quantum appeal of the assessee earlier, the AO had estimated income from the BPO project at Rs.1,01,47,914/- which was confirmed by the CIT(A). The AO had also disallowed loss in respect of other power projects and capitalized the expenditure as work in progress. The order of AO on this point has already been upheld by the tribunal. The AO had also initiated penalty proceedings under section 271(1)(c) in respect of the addition of Rs.1,01,47,914/-. In response to the show-cause notice at the time of imposing penalty, the assessee did not file any submission before the AO. AO therefore held that penalty under section 271(1)(c) was leviable as the same was only a civil liability as held by Hon'ble Supreme Court in case of Dharmendra Textile Processors & Others (306 ITR 277) and willful concealment was therefore not required to proved by the revenue. He therefore levied the penalty @ 100% of tax sought to be evaded which was computed at Rs.36,40,563/-. In appeal the assessee submitted that the judgment of Hon'ble Supreme Court in case of Dharmendra Textile & Processors (supra) was in conflict with the earlier judgments of Supreme Court and therefore it could not be followed. CIT(A) however did not accept the contentions raised. It was observed by him that the Hon'ble Supreme Court in case of Dharmendra Textile & Processors (supra) had clearly held that section 271(1)(c) had been incorporated to provide for remedy for loss of revenue and penalty was only a civil liability and that willful concealment was not required to be proved by the department. He accordingly confirmed the penalty imposed aggrieved by which the assessee is in appeal before the tribunal.

3.1 Before us the Learned AR for the assessee argued that it was a settled legal position by several judgments that notional income could not be taxed and the issue was highly debatable and in such cases penalty could not b e levied. It was also argued that no penalty could be levied in case of estimated additions. He placed reliance on the judgment of Hon'ble High Court of Punjab & Hariyana in case of CIT Vs Sangrur Vanaspati Mills Ltd. (303 ITR 53) and several other judgments for the proposition that no penalty could be imposed in respect of estimated additions. He also referred to the decision of tribunal in case of LM Patel & BM Patel HUF (106 Taxman 37) for the proposition that no penalty could be imposed on debatable issues. Learned AR further argued that judgment of Hon'ble Supreme Court in case of Dharmendra Textile & Processors (supra) was not applicable when the issue was debatable or when disclosure had been made by the assessee. He also placed reliance on the judgment of Hon'ble Supreme Court in case of CIT Vs Reliance Petro Products Pvt. Ltd. (322 ITR 158) The Learned AR also submitted that the assessee had given complete information in relation to the claim of expenditure as was clear from auditors note placed at page 11 of the paper book. Therefore it was urged that no penalty should be levied.

3.2 The Learned DR on the other hand submitted that the penalty had been correctly levied in this case by the AO and upheld by the CIT(A). It was argued that penalty could be levied even in respect of estimated additions. He placed reliance in this regard on the judgment of Hon'ble High Court of P& H in case of CIT Vs Warasat Hussain (171 ITR 405) and on the judgment of Hon'ble High Court of Gujarat in case of Addl.CIT Vs Chandravilas Patel (165 ITR 300).

3.3 We have perused the records and considered the rival contentions carefully. The dispute is regarding levy of penalty in relation to the estimation of profit from sale of BPO project. As mentioned earlier the assessee was in the business of development and sale of different projects and during the year it had sold the project at cost price to its group company. The AO had rejected the accounts given by the assessee and estimated the profit from the sale of project at Rs.1,01,47,914/-. We have already upheld the estimation of profit from the BPO project vide para 2.1.11 of this order. The AO had initiated penalty proceedings in respect of the said addition to income. The assessee in response to show-cause notice issued by AO did not file any explanation as to why penalty should not be levied. AO therefore levied penalty @ 100% of tax sought to be evaded. The AO followed the judgment of Hon'ble Supreme Court in case of Dharmendra Textiles & Processors (supra) in which it was held that penalty under section 271(1)(c) was only a civil liability. CIT(A) has confirmed the order of the Assessing Officer. Before us the Learned AR for the assessee has argued that no penalty could be imposed in case of estimated addition or in cases where the issue is debatable.

3.4 We have carefully considered the various aspects of the matter. The penalty under section 271(1)(c) is a civil liability and willful concealment is not required to be proved by the department as held by the Hon'ble Supreme Court in case of Dharmendra Textiles & Processors (supra). However penalty cannot be imposed in each and every case of addition. A case for penalty has to be evaluated in terms of provisions of Explanation 1 to section 271(1)(c). As per the said Explanation if in relation to any addition to total income the assessee offers no explanation or offers and explanation which is found to be false, it will be a case of concealment of particulars of income. Further in case the assessee offers an explanation which it is able to substantiate and the assessee is also not able to prove that the explanation is bonafide and has not furnished all factual details in relation thereto penalty would be leviable. Therefore penalty can be levied even in case of estimated addition if the case is covered by the Explanation 1 to section 271(1)(c). In this case the explanation offered by the assessee was that there were no buyers in the market and the assessee had to sell the project at cost to the group concern but the assessee was not able to substantiate the said explanation. The assessee could also not file any details to show that the assessee had tried to sell the project in the market nor any correspondence with the group concern had been filed to show that the latter was purchasing the project as a distressed sale by the assessee. Under these circumstances the explanation of the assessee cannot be considered as bonafide. The case is therefore covered by the provisions of Explanation 1 to section 271(1)(c) and the penalty is leviable. The plea of the Learned AR that the addition involved a debatable issue is not acceptable as there is no legally debatable issue involved. It was only a question of computation of profit from the sale of the project which involved a finding of fact as to whether the accounts were reliable. The accounts in this case were held not reliable and profit had been estimated resulting into addition to total income which has been upheld by the tribunal. Such addition is covered by the Explanation 1 to section 271(1)(c) as we have seen earlier. Therefore in our view on the facts of the case penalty levied is leviable and the cases cited by the Learned AR are not applicable to the facts of the present case. The order of CIT(A) is accordingly upheld.