M/S SHRIRAM STONE COMPANY,JALNA vs. INCOME TAX OFFICER, WARD-1, JALNA, JALNA

This appeal by the assessee against the order dated 03-05-2023 passed by the National Faceless Appeal Centre, Delhi (“NFAC”) for assessment year 2009-10.

The only issue is to be decided is as to whether the CIT(A), NFAC, Delhi justified in confirming the penalty imposed by the AO u/s. 271(1)(c) of the Act in the facts and circumstances of the case.

We note that the AO added an amount of Rs.21,28,534/- to the total income of the assessee on account of hawala purchases vide its order dated 27-03-2015. Aggrieved by the same, the assessee preferred an appeal before the CIT(A), NFAC, Delhi, which in turn, disposed off the appeal restricting the addition on estimation basis to an extent of Rs.3,19,280/- (15% of Rs.21,28,534/-). Before us, the ld. AR vehemently contended that the addition was restricted on estimation basis, the penalty imposed by the AO is not maintainable. On perusal of the penalty order dated 23-03-2018, we note that the AO initiated penalty proceedings after disposal of the quantum appeal by the CIT(A)-1, Aurangabad wherein, as discussed above, modified the addition made by the AO. It is, therefore, clear that the AO initiated penalty proceedings u/s. 271(1)(c) of the Act on the addition which was made on estimation basis. It is settled law that no penalty lies on the addition made on ad-hoc/estimation basis. Therefore, the penalty imposed by the AO u/s. 271(1)(c) and as confirmed by the CIT(A), NFAC, Delhi is not justified. Thus, the ground raised by the assessee is allowed.

In the result, the appeal of assessee is allowed.