JUDGMENT 1. - The Revenue is in appeal under section 260A of the Income-tax Act, 1961, against the order of the Income-tax Appellate Tribunal (for short "the ITAT") dated October 6, 2006, raising the following questions for our consideration : "(i) Whether, under the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied under section 271(1)(c) ? (ii) Whether, under the facts and in the circumstances of the case and in law, the order of the Tribunal can be sustained when the additions made by the Assessing Officer were upheld by the Tribunal and, therefore, the assessee was falling under the four corners of section 271(1)(c) ? (iii) Whether the penalty is imposable or not when the additions are made on estimation and the same are sustained at the appellate stage ?" 2. The issue pertains to the penalty imposed by the Assessing Officer on the amount of Rs. 1,00,000, which was sustained as addition, which was confirmed by the Commissioner of Income-tax (Appeals) (for short "the CIT(A)") under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act of 1961"), for the assessment year 1996-97. The said penalty was, however, deleted by the Income-tax Appellate Tribunal (for short "the ITAT") 3. Brief facts may be observed that the respondent is a registered firm and is engaged in retreading of old (worn out) tyres of all vehicles. Besides the job work, the respondent-assessee was also selling such raw material to local parties. A survey operation came to be carried out at the business premises of the respondent on November 16, 1995, where some documents were found, which, according to the Assessing Officer, was not satisfactorily explained and, accordingly, on account of the said discrepancies, an estimated addition was made of Rs. 1,44,000. The respondent preferred an appeal against the said addition of Rs. 1,44,000, which came to be sustained by the Commissioner of Income-tax (Appeals) and on further challenge before the Income-tax Appellate Tribunal, the Tribunal modified the order passed by the lower authorities and restricted the addition to Rs. 1,00,000 by, inter alia, preferring to the fact that the addition was made on estimate basis by lower authorities and looking to the facts on record and the explanation of the assessee, part relief of Rs. 44,000 was granted, thereby sustaining an addition of Rs. 1,00,000 by, inter alia, preferring to the fact that the addition was made on estimate basis by lower authorities and looking to the facts on record and the explanation of the assessee, part relief of Rs. 44,000 was granted, thereby sustaining an addition of Rs. 1,00,000 on estimate basis. 4. In the penalty proceedings, the assessee submitted that it has not concealed the particulars of income, nor has it deliberately furnished inaccurate particulars of such income. It was further submitted by the assessee that the addition has been made on estimate basis and only because of the estimated addition, penalty in law under section 271(1)(c) of the Act cannot be levied but the Assessing Officer was not satisfied and, accordingly, penalty came to be imposed by the Assessing Officer. In first appeal the penalty was sustained, as aforesaid. However, the Tribunal, as aforesaid has deleted the said penalty. 5. Ms. Parinitoo Jain, learned counsel for the appellant-Department, submitted that the Tribunal was unjustified in deleting the penalty as the addition was sustained by the final fact finding authority, i.e., the Tribunal itself, who came to the conclusion that the addition was called for and sustained major addition. She submitted that the Assessing Officer had to make the estimated addition as during the course of survey, the assessee could not offer proper explanation which was based on the discrepancies and addition was made. She further submitted that though the addition has been sustained on estimate basis, but then it cannot be said that there is no concealment. Accordingly, she submitted that the Tribunal erred in deleting the penalty and question of law do arise and requires consideration of this court. 6. Mr. B.B. Ojha, learned counsel for the respondent, submitted that merely because the addition has been sustained, that too on estimate basis, it cannot be said that the assessee concealed the income or furnished inaccurate particulars of such income. He further submitted that no positive income has been found or admitted. It is merely rejection of a claim, which could not be substantiated by the assessee and the Assessing Officer has not been able to justify the imposition of penalty and the Tribunal had rightly deleted the penalty. He further submitted that merely because proper explanation was not offered, it does not make out that the assessee became liable for imposition of penalty. He further submitted that merely because proper explanation was not offered, it does not make out that the assessee became liable for imposition of penalty. He also submitted that it is basically a finding of fact and no question of law arises for consideration. 7. We have considered the arguments advanced by the learned counsel for the parties and have also perused the impugned order. 8. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) only. Thus, the assessee will get the relief of Rs. 44,000 (Rs. forty four thousand) from the orders of the lower authorities on ad hoc basis". 9. On a perusal of the facts stated hereinbefore, it transpired that the addition has been sustained purely on estimate basis and, in our view, no positive fact or finding has been found so as to even make the said addition. It is, according to us, a pure guess work and, in our view, on such guess work or estimation, no penalty under section 271(1)(c) of the Act can be said to be leviable. For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed. 10. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed. 10. Penalty proceedings are entirely distinct from assessment proceedings and, howsoever relevant and good, the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned. 11. From the above discussion, it can be seen that the opinion of the Tribunal with respect to the deletion is based on appreciation of evidence on record. 12. The hon'ble apex court in the case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) has held that if there is no evidence on material to show that the assessee had deliberately furnished inaccurate particulars and there was any mala fide intention on his part so as to make him liable for penalty. A mere omission or negligence would not constitute deliberate act of concealing particulars of income or suppressed or furnished inaccurate particulars of income. 13. The Patna High Court in the case of CIT v. Kailash Crockery House reported in [1999] 235 ITR 544 (Patna) , had an occasion to consider the issue of penalty under section 271(1)(c) on the basis of the fact that the gross profit rate shown by the assessee was found to be low and trading addition was made on estimate basis though the trading addition was sustained by the Tribunal but in so far as penalty under section 271(1)(c) is concerned, it held that the trading addition had been made on the basis of an estimate and on account of estimated trading addition penalty could not be levied under section 271(1)(c) of the Income-tax Act. 14. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714 (P&H) , has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income. 15. 14. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714 (P&H) , has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income. 15. The Gujarat High Court in the case of CIT v. Whitelene Chemicals (Tax Appeal No. 496 of 2012), vide order dated January 15, 2013, since reported in [2014] 360 ITR 385 (Guj) has observed that no penalty can be imposed merely because account books of the assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. The assessee filed its explanation which could not be termed as not bona fide and, accordingly, the Gujarat High Court came to a conclusion that mere rejection of books of account and estimation of profit cannot be a ground for imposition of penalty. 16. The Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 221 ITR 110 (Guj) , has held as under (headnote) : "Held, that a best judgment assessment had been made. While the assessee in its books of account disclosed the total sales to be Rs. 7,75,000, the Income-tax Officer on rejection of the books of account estimated the sales to be Rs. 8,75,000 which on appeal, the Tribunal reduced to Rs. 8,00,000. So also, while the gross profit dis closed by the books of account of the assessee was 5 per cent., the Income-tax Officer estimated the gross profit rate at 15 per cent. which again was reduced by the Tribunal to 12 per cent. In this circumstance, in the absence of any other material which might reflect on the conduct of the assessee about a deliberate attempt to maintain false books of account, on a preponderance of probabilities, no other conclusion could be reached than that the failure to return the correct income was not on account of any fraud or gross or wilful neglect on the part of the assessee. The Tribunal was right in holding that penalty of Rs. 92,894 imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was not justified." 17. The Tribunal was right in holding that penalty of Rs. 92,894 imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was not justified." 17. The Punjab and Haryana High court in the case of Harigopal Singh v. CIT [2002] 258 ITR 85 (P&H) ; [2002] 177 CTR 580, has held as under (page 86) : "In order to attract clause (c) of section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or if he furnishes inaccurate particulars of such income. What is to be seen is whether the assessee in the present case had concealed his income as held by the Assessing Officer and the Tribunal. He had not maintained any accounts and he filed his return of income on estimate basis. The Assessing Officer did not agree with the estimate of the assessee and brought his income to tax by increasing it to Rs. 2,07,500. This, too, was on estimate basis. The Tribunal agreed that the income of the assessee had to be assessed on an estimate of the turnover but was of the view that the estimate as made by the Assessing Officer was highly excessive and it fixed the total income of the assessee at Rs. 1,50,000 for the year under appeal. It is, thus, clear that there was a difference of opinion as regards the estimate of the income of the assessee. Since the Assessing Officer and the Tribunal adopted different estimates in assessing the income of the assessee, it cannot be said that the assessee had "concealed the particulars of his income" so as to attract clause (c) of section 271(1) of the Act. There is not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department. There has to be a positive act of concealment on his part and the onus to prove this is on the Department. We are also of the considered view that the Tribunal grossly erred in law in relying on Explanation 1(B) to section 271(1)(c) of the Act to raise a presumption against the assessee. The assessee had justified his estimate of income on the basis of household expenditure and other investments made during the relevant period. It is not the case of the Revenue that he had, in fact, incurred expenditure in excess of what he had stated. In this view of the matter, it cannot be said that the explanation furnished by the assessee had not been substantiated or that he had failed to prove that such explanation was not bona fide." 18. The Madhya Pradesh High Court in the case of CIT v. Shivnarayan Jamnalal and Co. [1998] 232 ITR 311 (MP) held thus (page 313) : "We have gone through the orders of the Tribunal and the Com missioner of Income-tax (Appeals). We are satisfied that both the authorities have correctly approached the matter and found that there was no fraudulent attempt on the part of the assessee. The assessee had placed before the authorities whatever books of account it had maintained - whether they were properly maintained or not but it has not withheld or concealed any material or made any deliberate attempt to defraud the authorities. The assessing authority has employed the flat rate for assessing the income of the assessee and on that basis, he has been taxed. Therefore, we are of the opinion that the view taken by the Tribunal in setting aside the penalty appears to be justified and we answer both these questions against the Revenue and in favour of the assessee." 19. The Allahabad High Court in the case of CIT v. Raj Bans Singh [2005] 276 ITR 351 (All) has held that "On appeal, the Tribunal came to the conclusion that it was a case of an estimate against an estimate and there was no concealment and accordingly it was held that no penalty was imposable". 20. The Allahabad High Court in the case of CIT v. Raj Bans Singh [2005] 276 ITR 351 (All) has held that "On appeal, the Tribunal came to the conclusion that it was a case of an estimate against an estimate and there was no concealment and accordingly it was held that no penalty was imposable". 20. This court in the case of CIT v. Chaturbhuj Bhanwarlal [1987] 166 ITR 659 (Raj) observed as under (page 682) : "Having given our anxious consideration to the rival contentions advanced before us and to the law cited by both the sides, we are of the view that the Tribunal proceeded to take into account various circumstances referred to above and had reached the finding after considering those circumstances. It cannot be said that the finding reached by the Tribunal was based on no evidence. All material facts and circumstances positive and negative, constitute evidence and on consideration of the positive and negative circumstances, the finding can be arrived at after weighing the probabilities. Such a finding, in our opinion, cannot be said to be a finding which is vitiated on any count, i.e., such a finding cannot be said to be perverse or based on no evidence. It is true that this course was also open to the Tribunal and the Tribunal should have asked the assessee to submit his explanation with respect to capital accretion considered by the authorities below, but failure to do so by the Tribunal would not in any way affect the jurisdiction of the Tribunal to proceed to decide the appeal on the basis of the material on record. The finding of the Tribunal, therefore, cannot be said to be based on no evidence and the finding that there has been no concealment of income is a finding of fact and it does not raise any question of law and the Tribunal was right in cancelling the penalty imposed on the assessee." 21. The Delhi High Court in the case of CIT v. Aero Traders P. Ltd. [2010] 322 ITR 316 (Delhi) ; [2010] 231 CTR 524 has held that penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal. 22. The Delhi High Court in the case of CIT v. Aero Traders P. Ltd. [2010] 322 ITR 316 (Delhi) ; [2010] 231 CTR 524 has held that penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal. 22. The Punjab and Haryana High Court in the case of CIT v. Modi Industrial Corporation [2010] 195 Taxman 68 (P & H) has held that where the assessment of the assessee was completed on estimated basis penalty under section 271(1)(c) of the Act was not imposable with respect to the additions made on such estimate by the Assessing Officer. 23. The Chhattisgarh High Court in the case of CIT v. Vijay Kumar Jain [2010] 325 ITR 378 (Chhattisgarh) has held that the assessee declared the net profit by estimating it at the rate of 6.36 per cent. of his gross receipt while it was estimated at the rate of 10 per cent. of gross receipts by the Assessing Officer and on these facts held that penalty for concealment cannot be levied as the assessee cannot be said to have concealed any particulars of income or furnished any inaccurate particulars of income. 24. In view of the above facts and what we have observed above, the finding reached by the Tribunal is essentially a finding of fact and no substantial question of law is involved in the present appeal. This appeal has no force and accordingly, the same is dismissed. *******