AMRUTBHAI SHANKARBHAI PATEL,AHMEDABAD vs. ITO, WARD 1(2)(1), SURAT

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ITA 1360/SRT/2025Status: DisposedITAT Surat06 July 2026AY 2014-1510 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under Section 271(1)(c) was unsustainable as the addition to income was based on estimation. The penalty under Section 271B was quashed as it was passed beyond the period of limitation prescribed under Section 275.

What were the facts?

The assessee's return of income for AY 2014-15 showed significantly lower receipts than reflected in Form 26AS. The AO made an addition to income based on unexplained receipts, and subsequently levied penalties under Section 271(1)(c) and Section 271B.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on estimated additions and whether penalty under Section 271B is barred by limitation.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 271B,Section 44AB,Section 275

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

Pronounced: 06.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member ITA Nos. 1359 & 1360/SRT/2025 Assessment Year: 2014-15

Amrutbhai Shankarbhai The ITO Patel Ward-1(2)(1), 33, Panchamrut-2, Vs Surat Bungalows, Science City Road, Ahmedabad Ahmedabad-380060 PAN: ACVPP3782D (Respondent) (Appellant) Assessee Represented: Ms. Chaitali Shah, CA Revenue Represented: Ms. Neerja Sharma, Sr. D.R. Date of hearing : 05-05-2026 Date of pronouncement : 06.07.2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These two appeals are filed by the Assessee as against the separate appellate orders both dated 27.10.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and penalty under section 271B of the Act relating to the Assessment Year 2014-15.

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 2 Amrutbhai Shankarbhai Patel vs. ITO

2.

First we will take up ITA No.1359/SRT/2025 AY 2014-15. Brief facts of the case are, the assessee is an individual filed his return of income for the AY 2014-15 on 30.11.2024 declaring total income of Rs.6,97,300/-. The return was taken for scrutiny assessment for the reason that receipts claimed u/s 194C and 194J as reflected in Form 26AS are more than the receipts offered in the return. During the assessment proceedings, on verification of the profit and loss account column of the return, the AO noticed that the assessee has kept all the relevant column as ‘0’ whereas as per the 26AS data available with the department shows that, the assessee received an amount of Rs.2,48,45,279/- as contract income from one Sh. Chhanabhai Kanjibhai Patel. Therefore, a show cause notice dated 04.11.2016 issued specifically asking as to why in the absence of any details, an amount of Rs.2,40,11,359/- being the difference of gross receipts as per 26AS and gross income offered by the assessee, should not be treated as unexplained income and added to the total income of the assessee. The assessee has not replied to the notices as well as to the show cause notice, which has resulted in passing an ex-parte assessment order, thereby determining the total income of the assessee as Rs.2,47,08,569/-.

2.1. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars as well as concealment of income. In the meantime, the assessee filed an appeal against the assessment order, which traveled upto this Tribunal. Coordinate Bench of this Tribunal enhanced the estimation of income made by the Ld. CIT(A) at 8% to 12% by observing as follows:-

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 3 Amrutbhai Shankarbhai Patel vs. ITO

“… The CIT(A) had forwarded the additional evidence The and other financials so as to justify the computation of income to the AO for verification and remand report. In the remand report, the AO, at para 3.4, has stated that the assessee had submitted ledgers / copies of confirmations of Rs.1,66,37,385/- out of total purchases of Rs.2,33,25,538/-. Therefore, it is clear that assessee was able to furnish evidence to the extent of Rs.1,66,37,385/-only. The Id. AR submitted that almost 70% of the expenses have been verified by the AO and hence the income offered by assessee should have been accepted. We find that apart from the purchases, there were other indirect expenses of Rs.5,30,267/-. The assessee had also claimed to have incurred site expenses of Rs.64,630/-, depreciation of Rs.61,963/- and interest on car loan of Rs.29,325/-. Neither the AO has called for the details of these expenses nor the assessee has not given any evidence regarding these indirect expenses. However, we find that the site expenses and other indirect expenses are very small. Moreover, these expenses are needed to run the business. However, in absence of details, the same cannot be accepted in toto.

8.1 The assessee has also not submitted details of purchases to the extent of Rs.66,87,153/- (Rs.2,33,25,538 Rs. 1,66,37,385). The ld. Sr. DR urged that the entire difference should be added whereas the Id. AR relied on the decision of Hon'ble Gujarat High Court in case of Pradeep Shantilal Patel (supra) and submitted that only net income could be added. We find that the CIT(A) has estimated income of the assessee @ 8% of total sales. In absence of complete details, it would be fair and reasonable to estimate income of assessee @ 12% of the total sales. The AO is, therefore, directed to make addition @ 12% of the total sales from which the business income offered by assessee may be reduced. These grounds are partly allowed.”

2.2. It is thereafter in the penalty proceedings, the AO given three opportunities of hearing, the assessee failed to make any submission before the AO, which has resulted in passing ex-parte penalty order imposing Rs.6,32,403/- u/s 271(1)(c) of the Act by observing as follows:-

“… During the course of penalty proceedings, a show cause notice dated 30.01.2025 was issued u/s 271(1)(c) for concealing the particulars of income. The assessee has not furnished any reply. Thereafter a reminder letter dated 26.02.2025 was issued to the assessee for furnishing reply. However, there was no response from the assessee. In view of this, it is obvious that the assessee had concealed the particulars of Its income by not disclosing the

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 4 Amrutbhai Shankarbhai Patel vs. ITO

transactions made during the year under consideration. Hence, the penalty proceedings u/s 271(1)(c) are squarely attracted in this case. However, the assessee has not responded to the penalty show cause notices and subsequent reminders issued. This shows that the assessee has neither any explanation to offer nor is interested to respond to the statutory notices.

Since the assessee has failed to disclose the above transactions for taxation thus concealed the particulars of income and also failed to offer any explanation as to why penalty should not be levied for the said default, it is concluded that this is a fit case for levy of penalty u/s 271(1)(c) of the Act for concealment of income. Further, there is nothing on record to show as to what prevented the assessee from disclosing the actual and correct particulars of income by filing the return of income. Thus, it is clear that the assessee has deliberately tried to avoid disclosing the transaction made and concealed the particulars of income and is accordingly guilty of dishonest conduct. Therefore, there exists a clear circumstance to show that the omission was attributable to an intention on the part of the assessee to hide the income so as to avoid the payment of taxes.

As the assessee failed to avail the opportunities accorded to vide penalty show cause notices and subsequent reminder letters issued, this office has left with no option but to pass an order u/s 274 r.w.s. 271(1)(c) of the I.T. Act, 1961. The minimum leviable penalty is 100% of the tax sought to be evaded and the maximum penalty is 300% of the tax sought to be evaded. The minimum penalty works out to Rs.6,32,403/- (tax including SC & EC) and the maximum penalty is Rs. 18,97,209/- i.e.300%. Considering the facts and circumstances of the case, a penalty of Rs.6,32,403/- is imposed in this case u/s 271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income for the Asst. Year 2014-15.

3.

Aggrieved against the penalty order, assessee filed an appeal before Ld. CIT(A), who has confirmed the levy of penalty u/s 271(1)(c) of the Act.

4.

Aggrieved against the same, assessee is in appeal in ITA No.1359/SRT/2025 before us raising following grounds of appeal:-

1.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in passing the order without issuing notice u/s. 250 of the Act.

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 5 Amrutbhai Shankarbhai Patel vs. ITO

2.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the assessing officer in levying penalty of Rs. 6,32,403/- u/s. 271(1)(c) of the Act. 3. It is therefore prayed that the penalty levied by the assessing officer and confirmed by the learned CIT(A) may please be deleted or order of learned CIT(A) may please be set aside after awarding appropriate cost to the assessee. 4. Appellant craves leave to add, alter or delete any ground(s) before or in the course of hearing of the appeal.

5.

Ld. Counsel appearing for the assessee filed before us a paper book running to 58 pages with case laws compilations. Ld. Counsel argued that no penalty u/s 271(1)(c) of the Act be levied, where the income is nothing but estimation. Therefore, the penalty levied is liable to be deleted.

6.

Per contra, Ld. Sr. DR appearing for the Revenue, supported the order passed by the Lower Authorities as the assessee has clarified ledger and copies of confirmation only to the extent of Rs.1,66,37,385/- out of the total purchases of Rs.2,33,25,538/-. In fact, the AO has levied penalty relating to the differences in amount, which was clarified by the assessee. Therefore, the case laws relied by the assessee are not squarely applicable to the facts of the case and the penalty levied is liable to be upheld.

7.

We have given our thoughtful consideration and perused the materials available on record including the paper book and case laws filed by the assessee. The undisputed facts are that the assessee had filed return of income declaring income of Rs.6,97,300/-. During assessment proceedings, the Assessing Officer treated the difference

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 6 Amrutbhai Shankarbhai Patel vs. ITO

between receipts reflected in Form No.26AS and receipts offered by the assessee as unexplained income and completed the assessment ex-parte. However, in appellate proceedings, the assessee furnished additional evidences and supporting details. The learned CIT(A) estimated the profit at 8% of the gross receipts. Thereafter, the Coordinate Bench of this Tribunal, after considering the remand report and evidences produced by the assessee, modified the estimation and directed the AO to estimate income at 12% of the gross receipts.

7.1. Thus, it is evident that the addition finally sustained is not on account of any specific item of concealed income or any identified bogus claim, but on the basis of estimation of profit. The quantum addition ultimately rests upon an estimated rate of profit determined by the appellate authorities.

7.2. It is a settled proposition of law that where income is determined on estimate basis and there is no conclusive finding regarding concealment of particulars of income or furnishing of inaccurate particulars thereof penalty u/s.271(1)(c) cannot automatically follow. Estimation of income may justify an addition in quantum proceedings; however, the same by itself does not establish concealment warranting levy of penalty. In the present case, the Tribunal itself has estimated the income at 12% of gross receipts considering the peculiar facts and circumstances of the case. The determination of income on estimate basis clearly demonstrates that the exact quantum of taxable income was a matter of estimation and approximation.

8.

The Revenue has not brought any material on record to establish that the assessee had deliberately concealed any particular income or

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 7 Amrutbhai Shankarbhai Patel vs. ITO

furnished inaccurate particulars thereof. The penalty order proceeds primarily on the basis of the addition sustained in quantum proceedings. Such approach, in our considered view, is not sufficient for sustaining penalty under section 271(1)(c) of the Act when the addition itself is founded upon estimation of profit. Accordingly, considering the totality of facts and circumstances and the settled legal position governing estimated additions, we hold that the penalty levied u/s.271(1)(c) and confirmed by the ld CIT(A) are unsustainable in law. Accordingly, the Assessing Officer is directed to delete the penalty levied of Rs.6,32,403/- under section 271(1)(c) of the Act.

9.

In the result, ITA No.1359/SRT/2025 filed by the assessee is allowed.

ITA No.1363/SRT/2025 10. In this case, the AO invoked penalty proceedings u/s 271B of the Act for non-auditing the books of accounts as per Section 44AB of the Act. The assessee given three opportunities of hearing, however, the assessee failed to make any reply which has resulted in levying penalty u/s 271B of Rs.1,24,226/- (being 0.5% of the gross receipts).

11.

Aggrieved against the penalty order, assessee filed appeal before Ld. CIT(A), who has confirmed the penalty.

12.

Aggrieved against the same, assessee is in appeal before us raising following grounds of appeal in ITA No.1360/SRT/2025:-

1.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in passing the order without issuing notice u/s. 250 of the Act.

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 8 Amrutbhai Shankarbhai Patel vs. ITO

2.

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the assessing officer in levying penalty of Rs. 1,24,226/-u/s. 271B of the Act. 3. On the facts and circumstances of the case as well as law on the subject, the assessing officer has erred in passing order u/s. 271B after limitation period. The learned CIT(A) has erred in not adjudicating the ground. 4. It is therefore prayed that the penalty levied by the assessing officer and confirmed by the learned CIT(A) may please be deleted or order of learned CIT(A) may please be set aside after awarding appropriate cost to the assessee. 5. Appellant craves leave to add, alter or delete any ground(s) before or in the course of hearing of the appeal.

13.

Ld. Counsel appearing for the assessee submitted before us a paper book consisting of 15 pages. Ld. Counsel submitted that the assessment order in the case of assessee passed on 29.11.2016 and a statutory notice u/s 274 r.w.s. 271B was issued on 29.11.2016. It is thereafter, the AO issued final show cause notice on 30.01.2025 and passed the penalty order on 24.03.2025, which is time barred as per section 275(1)(c) of the Act.

14.

Per contra, Ld. Sr. DR appearing for the Revenue supported the order passed by the Lower Authorities.

15.

We have given our thoughtful consideration and perused the materials available on record. The facts are not in dispute. The assessment order was passed on 29.11.2016. Simultaneously, penalty proceedings u/s.271B was initiated and notice u/s.274 read with section 271B was issued on 29.11.2016. However, the impugned penalty order came to be passed only on 24.03.2025.

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 9 Amrutbhai Shankarbhai Patel vs. ITO

15.1. Penalty u/s.271B for failure to get the books of accounts audited is independent of the assessment proceedings. The issue is no longer res-integra in view of the judgment of the Hon'ble Supreme Court in the case of CIT vs. Hissaria Brothers (386 ITR 719) affirming the decision of the Hon'ble Rajasthan High Court (291 ITR 244), wherein it has been held that penalties under sections such as 271D are not directly related to assessment proceedings and the limitation prescribed under section 275(1)(c) would apply.

15.2. In the present case, penalty proceedings were initiated on 29.11.2016. Even assuming the limitation is computed in the manner most favourable to the Revenue, the impugned penalty order passed on 24.03.2025 is far beyond the statutory period of limitation as prescribed u/s. 275 of the Act. No material has been brought on record by the Revenue demonstrating any circumstances available under law for exclusion of time or extension of limitation. Therefore, the penalty order suffers from a fundamental jurisdictional defect and is liable to be quashed as being barred by limitation.

16.

Since we have held the penalty order itself to be time barred, the other grounds raised by the assessee on merits are rendered academic and do not require separate adjudication. Accordingly, the penalty order passed under section 271B of the Act and sustained by the learned CIT(A) is hereby quashed.

17.

In the result, ITA No.1360/SRT/2025 filed by the assessee is allowed.

I.T. A Nos. 1359 & 1360/SRT/2025 A.Ys. 2014-15 10 Amrutbhai Shankarbhai Patel vs. ITO

18.

In the combined result both the appeals filed by the assessee are allowed.

Order is pronounced under provision of Rule 34[4] of ITAT Rules, 1963 on 06-07-2026.

Sd/- Sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 06/07/2026 Mittali आदेश क� �ितिलिप अ�ेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत

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