MOHAMMED RAHIMUDDIN,HYDERABAD vs. ITO, WARD-7(2), HYDERABAD

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ITA 227/HYD/2023Status: DisposedITAT Hyderabad22 May 2023AY 2017-183 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that an addition made purely on an estimation basis, without reference to the assessee's books of accounts, cannot form the foundation for levying penalty under Section 270A of the Income Tax Act.

What were the facts?

The assessee declared commission income at Rs. 1.26 lakhs, but the Assessing Officer estimated it at Rs. 8.4 lakhs based on local inquiries, leading to an addition of Rs. 7.14 lakhs. The assessee accepted the quantum addition to purchase peace.

What were the issues?

Whether penalty under Section 270A is leviable when income addition is made solely on an estimated basis without challenging the correctness and completeness of the assessee's accounts.

Which sections of the Income-tax Act were involved?

Section 270A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD

Before: SHRI K. NARASIMHA CHARY

For Respondent: Shri A.P. Babu, DR
Hearing: 17/05/2023

आदेश / ORDER Aggrieved by the order dated 17/02/2023 passed by the learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Mohammed Rahimuddin (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal. 2. Only question involved in this matter is whether any addition made on estimation basis would automatically lead to leavy of penalty under section 270A of the Income Tax Act, 1961 (for short “the Act”)? It could be seen from the record that the assessee declared the commission he received at Rs. 1500/- per truck and thereby worked out the same at Rs. 1.26 lakhs; whereas on local enquiries, the learned Assessing Officer estimated the same at Rs. 10,000/- per truck and determined such commission at Rs. 8.4 lakhs, and made an addition of Rs. 7.14 lakhs.

3.

Learned AR submitted that it is only the difference of opinion that led to the addition and to purchase peace, the assessee accepted the quantum addition. According to him, there is no yardstick with any certainty involved in the addition and, therefore, he submits that mere difference of opinion will not lead to levy of penalty.

4.

Per contra, learned DR submits that the addition is the result of the local enquiries made by the learned Assessing Officer and since there is an increase in determination of the income and, therefore, penalty is automatic.

5.

I have gone through the record in the light of the submissions made on either side. It goes without saying that the quantum addition is the result of estimation made by the learned Assessing Officer. Clause (b) of sub-section (6) of section 270A of the Act refers to the amount of under reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer. The addition made in this case, without reference to the books of the assessee, but on the basis of estimation, therefore, cannot provide foundation for under-reported income for the purpose of levy of penalty under section 270A of the Act. I am fortified in this view by the decision of the Co- ordinate Bench of this Tribunal in the case of Jaibalaji Business Corporation (P.) Ltd. vs. ACIT [2023] 147 taxmann.com 333 (Pune – Trib.) and also many cases decided by the Co-ordinate Benches.

6.

I, therefore, am of the opinion that there is no strong foundation in this case for levy of penalty and the same cannot be sustained. Appeal is accordingly allowed.

7.

In the result, appeal of assessee is allowed.

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