JAISINGH H SOLANKI,MUMBAI vs. ITO 19(2)(1), MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 24.02.2023 for AY. 2010-11 confirming the action of the AO levying penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”).

None appeared for assessee but has filed written submission. At the outset, it is noted that there is delay of 52 days and the assessee has filed a sworn affidavit dated 12.09.2022. After going through the contents of the affidavit, we are of the opinion that there was reasonable cause for belated filing of the appeal. Therefore, we condone the delay and proceed to hear the penalty appeal on its own merit.

Having heard the Ld. DR for the revenue and after perusal of the written submission filed by the assessee dated 22.09.2023, the assessee has assailed the action of the Ld. CIT(A) confirming the penalty of Rs.5,27,640/- on penalty levied by the AO u/s 271(1)(c) of the Act. As noted (supra), the basis of estimated addition in the quantum assessment was based upon information from the Sales Tax Department that the assessee was a beneficiary of accommodation bills to the tune of Rs.2,35,64,090/-. So the AO called upon the assessee to file relevant documents to substantiate the purchase made by the assessee from the six (6) parties named therein. Pursuant to the same, the assessee filed the relevant documents (i) Copy of purchase bills (ii) Sales bills (iii) Ledger account of the parties in the books of the assessee (iv) Details of payments made to them through cheque (v) Corresponding sales made etc. and claimed that the purchase for the parties named therein were genuine but the AO didn’t accept the explanation/relevant documents and he estimated the profit embedded in such purchases and estimated the profit @ 12.5% of Rs.2,35,64,090/- which was to the tune of Rs.29,45,511/-. On appeal, the Ld. CIT(A) confirmed the addition but directed AO to reduce the gross profit already shown by assessee. Thus estimated addition got 4 A.Y. 2010-11 Jaisingh H. Solanki reduced to Rs.12,04,124/-. Thereafter, the AO has levied the penalty to the tune of Rs.5,27,640/- u/s 271(1)(c) of the Act for fault of “concealing of income by furnishing inaccurate particulars of income”. And the Ld. CIT(A) has confirmed the action of the AO. And assessee is aggrieved by the action of Ld. CIT(A) confirming the penalty estimated addition made in question assessment.

Bearing in mind the fact that the related quantum addition was purely on estimated basis with inherent subjectivity involved, we are of the opinion that no penalty is warranted. For taking such an action, we rely on the following decisions of the Hon’ble High Courts wherein the Hon’ble High Courts have upheld the action of Tribunal deleting penalty levied on estimated quantum addition as under: - “CIT Vs. Krishi Tyre Retreadign and Rubber Industries (360 ITR 580) (Raj) CIT Vs. Sangrur Vanaspati Mills Ltd. (303 ITR 53) (P & H) CIT Vs. Subhash Trading Co. Ltd. (221 ITR 110) (Guj).”

Thus, as noted (supra), the issue as to whether the penalty u/s 271(1)(c) of the Act be levied on estimated quantum addition is no longer res-integra, therefore, we are inclined to direct the deletion of the penalty levied to the tune of Rs.5,27,640/-.