ASST. COMMISSIONER OF INCOME TAX(CENTRAL CIRCLE)-6(1), MUMBAI, MUMBAI vs. SHRIVALLABH PITTIE INFRAPROJECTS LIMITED, MUMBAI

Facts

The Revenue is in appeal against the order dated 20.09.2025 passed by the CIT(A), which deleted the penalty imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The assessment year is 2014-15. The assessee initially declared Nil income. The AO, by order dated 30.12.2019 under Section 143(3) r.w.s. 153A, assessed total income at Rs.14,37,81,240/-, estimating gross profit at 25% and adding unexplained cash credit of Rs.8,54,00,000/- under Section 68. The AO levied a penalty of Rs.99,21,892/- by order dated 29.03.2023. The CIT(A) had previously reduced the addition to 12.5% of total turnover, an order under appeal by the assessee. The CIT(A) deleted the penalty, holding it unsustainable on estimated additions.

Held

The Tribunal held that there is no reason to interfere with the impugned order of the CIT(A). The Tribunal noted that both the AO and the CIT(A) made additions on the basis of estimation, with the AO estimating gross profit at 25% and the CIT(A) reducing it to 12.5% of total turnover. The Tribunal reiterated the well-settled principle that where additions are made on an estimation basis, penalty is normally not called for. The Tribunal referred to the decision of the Punjab & Haryana High Court in Harigopal Singh, which was also relied upon by the CIT(A), as an authority for this proposition. The Tribunal found no illegality in the impugned order and dismissed the appeal as without merit. No issue was expressly left undecided.

Key Issues

1. Whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961, can be levied on additions made on an estimation basis? Assessee's Contention: The assessee contended that penalty cannot be levied on additions made on an estimation basis. Both the AO and CIT(A) proceeded on estimation, rendering the penalty order unsustainable. The assessee relied on the Tribunal's decision in Remi Electrotechnik Ltd. and the Punjab & Haryana High Court's decision in Harigopal Singh. Revenue's Contention: The Revenue argued that this is a case of the assessee indulging in providing accommodation entries. The initial addition was made based on a search and seizure action. The Revenue submitted that since the order of substantive addition is also under appeal and yet to be decided, the CIT(A) could not have deleted the penalty.