A K INFRA PROJECT PVT.LTD,VARANASI vs. ITO, VARANASI

PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Assessee against the order dated 17.04.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2016-17 confirming the order of the Assessing Officer (AO) imposing penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter called 'the Act’).

2.0 The brief facts of the case are that the assesse had filed his Return of Income for the year under consideration under section 139 of the Act on 27.10.2017 declaring a total income of Rs.5,42,680/-, which was selected for scrutiny under Computer- Assisted Scrutiny Selection (CASS) for the reason of “high ratio of

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refund to TDS claimed”. The assessment was completed under section 143(3) of the Act, vide order on 28.12.2018, assessing the total income of the assessee at Rs.2,85,06,075/- after making an addition of Rs.2,79,63,395/- by applying the net profit rate of 8% on the total turnover of Rs.35,63,25,940/- declared by the assessee. Aggrieved by the order of the AO, the assesse preferred an appeal before the Ld. First Appellate Authority, who upheld order of the AO. Subsequently, the assessee filed an appeal before the Tribunal. The Tribunal, vide its order dated 18.10.2019 passed in ITA No.211/VNS/2018, directed the AO to calculate the profit by applying the rate of 4.95% to the gross receipts of the assessee as against the 8% applied by the AO and confirmed by the Ld. First Appellate Authority thereby sustaining the addition to the extent of Rs.1,38,48,992/- (27963395- 14114403) and allowing a relief of Rs.1,41,14,403/- to the assessee.

3.0 The AO, thereafter, initiated penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars and concealment of income. Accordingly, statutory notices were issued to the assessee. The AO, after considering the reply furnished by the assessee, held that it was a fit case for levy of penalty under section 271(1)(c) of the Act as the assessee had deliberately concealed the particulars of income. As per the

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provisions of Section 271(1)(c) of the Act, he imposed the minimum penalty leviable, i.e., 100 per cent of the tax sought to be evaded at Rs.42,79,339/-.

2.1 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee in limine for the reason of delay in filing the appeal before the Ld. First Appellate Authority.

4.0 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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not be treated the service of the notice/order. The appellant placed reliance on the following judgment:- i) Hon'ble Income tax Appellate tribunal Kolkata in case of Sri Loyala High School Vs. ITO Kolkata vide ITA no. 472/KOL/2022 for A.Y. 2016-17 whether the Hon'ble Bench held that, "Only the notice post on the portal this is not proper communication between department, if the assessing officer has not exercise the postal facilities or the departmental channel to serve the notice, the order passed by the assessing officer should be invalid". The appellant also place reliance for service of notice on the following judgment whether the court held that without service of notice on the appellant order passed by the assessing officer deserve to be quashed. iii) That the appellant place reliance on the judgment of Hon'ble Delhi High court in case of Bharat aluminum co. ltd. Vs Union of India and others whether the court held that:- "The order passed by the faceless assessment personal hearing is mandatory to the assessee. The Hon'ble Court held that in section 144B(viii) the word made should be read must or shall. And requirement of giving and assessee a reasonable opportunity of personal hearing is mandatory." a. Failure for the counsel of the assessee to appear before the assessing officer/authority the assessee cannot be penalized. Accordingly the assessee cannot be made to suffer for the negligence of his counsel.

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i) That in this case the operation of the portal password was on the counsel of the appellant, but he could not looked the matter properly. Hence the order has been passed by the assessing officer by ex parte. The appellant case is fully covered by the judgement of Hon'ble Supreme Court. In case of Rafiq Vs Munshi Lal (1981) AIR 1981 SC 1400. The Hon'ble "Supreme Court held that, "It is not proper that an innocent litigant, after doing everything in his power to effectively participate in his proceedings by entrusting his case to the Advocate, should be made to suffer for the inaction, deliberate omission or misdemeanor of his agent. For whatever reason the Advocate might have absented himself from the Court, the innocent litigant could not be allowed to suffer injustice for the fault of his Advocate. [511 B) The respondent's costs should be recovered from the Advocate who absented himself from Court. [511 D][The Court directed the appeal to be restored to its original position in the High Court and heard. In this case due to absence of the counsel from the court the case was dismissed. The Advocate has filed and recall application. And the Hon'ble Supreme Court direct the court that the advocate for his slackness in filling the affidavit for nearly 15 day after it was drafted the Hon'ble Court held that due to lack on the part of the counsel the assessee could not suffered.

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ii) The assessee case is covered by the Judgment of Hon'ble Madhya Pradesh High court in case of Mahabir Prasad Jain 172 ITR 331 whether the court held that” "The failure for the counsel for the assessee to appear before CIT (A) the assessee cannot be penalized. And appeal cannot be dismissed for default. Accordingly to the learned counsel the assessee cannot be made to suffer for the negligence of his counsel." iii) The appellant also placed reliance on the judgment of Allahabad High court in case of Subhash Malik Vs CIT and other 325 ITR. The Hon'ble court placed reliance on the judgment of the Hon'ble court held that if a party had acted in a particular on wrong advice given by his local adviser he cannot be held guilty of negligence. So as to disentitle the party to plead sufficient cause u/s 5 of Limitation act, 1963. It also held that the word "sufficient cause should receive a liberal construction so as to advance substantial and no negligence or in action for want of bonafied in imputable to a party". iv) The Hon'ble ITAT Agra Bench Also realized on the aforesaid judgment and held the same view in case of Jhansi development Authority VS assessee ITA NO. 22/AGR/2010. iv) The appellant also placed reliance on the judgment of Income Tax Appellate Tribunal Chennai vide ITA NO. 540 MDS/2015 v) The appellant also placed reliance on the judgment of Hon'ble ITAT Agra Bench in case of Sevak ICE and

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Cold Storage Pvt. Ltd. VS ASSESSEE ITA no. 457/2010 Whether the Hon'ble Bench Placed reliance on the judgment of Mahabri Prasad Va CIT 172 ITR (331) (MP), Ram Lal && Sons Vs ITO 99 TTA (ASR) 63. Kripa Shankar Vs CWT 181 ITR 183 (Alld), Ganga Sahai Ram Swroop Vs ITAT 271 ITR 512 (Alld). 3. Because the Ld. Commissioner of Income Tax (A) NFAC, was not justify to heard the appeal on the merit whether the penalty has been imposed by the A.O. on the income estimated of the appellant. Whether on the estimate basis no penalty of concealment can be imposed. 4. Because, the appellant craves for a right to raise any additional ground during the course of hearing of the case. 5. Because the order passed by the Id. Commissioner of Income Tax Appeal to confirm the action of the Assessing officer is erroneous, bad in law and on facts and is liable to be deleted. 5.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted before us that in this case, the addition was made purely on estimate basis, which inherently implies that there was no specific detection of concealed income, falsified entries, or omitted transactions. Therefore, a mere difference of opinion or estimation cannot automatically attract penal consequence for concealment under section 271(1)(c) of the Act. He, therefore, prayed that the penalty under section 271(1)(c) of

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the Act, imposed by the AO and confirmed by the Ld. First Appellate Authority, may be deleted.

6.0 Per contra, the Ld. Sr. D.R., placing reliance on the orders of the authorities below, submitted that the appeal of the assessee may be dismissed.

7.0 We have heard the rival submissions and have also perused the material on record. We find that in this case, the addition was made on an estimated net profit rate and the ITAT too had upheld the addition only by scaling down the estimated rate of net profit. In our view an "estimate" does not prove concealment of specific income or furnishing of inaccurate particulars. As per law, for a penalty under section 271(1)(c) of the Act to be imiposed, the Revenue must establish that the receipt or income in question was consciously hidden or that specific particulars supplied in the Return of Income were false. When the books of account are rejected and profits are estimated, the addition is built on hypothetical benchmarks rather than concrete, unearthed untruths. As per the settled legal principle, the findings given in the quantum proceedings (sustaining an estimated addition for tax purposes) do not automatically operate as conclusive proof of concealment or furnishing of inaccurate particulars in penalty proceedings. While an estimated addition may be justified to protect the interest of

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Revenue in quantum, establishing a "default" or "contumacious conduct" is imperative for levying a penalty. We place reliance on the established jurisprudence (including various Hon'ble High Courts and Hon'ble Supreme Court rulings) which holds that no penalty under section 271(1)(c) of the Act can be levied where the income has been assessed on an estimated basis, unless the Revenue brings independent, positive material on record to prove that specific concealed income was hidden behind those estimated figures. The Hon'ble Delhi High Court in the case of CIT vs. Aero Traders Pvt. Ltd. [2010] 322 ITR 316 (Del.) has held that no penalty under section 271(1)(c) of the Act can be imposed when income is determined on an estimate basis. A similar view has been taken by the Hon'ble Punjab & Haryana High Court in Harigopal Singh vs. CIT [2002] 258 ITR 85 (P&H) and the Hon'ble Gujarat High Court in CIT vs. Subhash Trading Co., 221 ITR 110 (Guj.). Since the Department has failed to bring on record any independent material or evidence to prove actual concealment of income apart from relying on the estimated net profit addition as sustained by the Tribunal, the penalty levied under Section 271(1)(c) of the Act lacks legal footing. We, therefore, direct deletion of penalty imposed by the AO and confirmed by the Ld. First Appellate Authority under Section 271(1)(c) of the Act.

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8.0 In the final result, the appeal of the assessee stands allowed.

Order pronounced in the open Court on 04/11/2026.

Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:04/11/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Digitally signed JOHN by JOHN JOSEPH JOSEPH Date: 2026.11.11 10:01:08 +05'30'