FUN N FOOD RESTAURANT,THANE vs. ACIT, CENTRAL CIRCLE-3,, THANE

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ITA 6856/MUM/2024Status: DisposedITAT Mumbai27 May 2025AY 2019-20Bench: SHRI NARENDER KUMAR CHOUDHRY (Judicial Member), SHRI PRABHASH SHANKAR (Accountant Member)1 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 a penalty on an estimated addition, especially when a major part of the addition has been deleted, is unsustainable. Therefore, the penalty levied by the AO and sustained by the Commissioner was deleted.

What were the facts?

The Assessing Officer made additions on account of suppressed sales and non-verifiable expenses. Penalty proceedings were initiated and a penalty was levied. The addition for non-verifiable expenses was later deleted by the Commissioner, but the penalty on the suppressed sales addition was sustained.

What were the issues?

Whether penalty is sustainable on an estimated addition when a significant portion of the original addition has been deleted.

Which sections of the Income-tax Act were involved?

Section 144,Section 37(1),Section 271(1)(c),Section 270A,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR

For Appellant: Shri Hitesh Shah, Ld. A.R
For Respondent: Ms. Kavitha Kaushik, Ld. Sr. D.R
Hearing: 26.03.2025Pronounced: 27.05.2025

Per : Narender Kumar Choudhry, Judicial Member:

This appeal has been preferred by the Assessee against the order dated 06.02.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2019-20.

2.

In this case, the Assessing Officer (AO) vide order dated 19.08.2021 u/s 144 of the Act has made following additions: "Rs.64,52,870/-on account of suppressed sales. Rs. 12,97,535/ on account of non verifiable expenses @ 10% of the total expenses of Rs. 1,29,75,351/-u/s 37(1) of the Act."

3.

Subsequently, the penalty proceedings were also initiated u/s 271(1)(c)/270A of the Act, which resulted into levy of penalty u/s 271(1)(c)/270A of the Act, to the tune of Rs.57,23,766/- @ 200% of the income escaped/total additions of Rs.77,50,405/- (Rs.64,52,870/- + Rs.12,97,535/-).

4.

Admittedly, the addition of Rs.12,97,535/- was on account of adhoc disallowance of indirect expenses @ 10%, which has subsequently been deleted by the Ld. Commissioner vide impugned order and therefore said addition is not in existence. However, the Ld. Commissioner affirmed the penalty to the tune of Rs.57,23,766/- on the addition of Rs.64,52,870/-, which has also been subsequently reduced to Rs.3,94,915/- @ 6.12% of the suppressed sale of Rs.64,52,870/-, by the Hon'ble Tribunal vide order dated 04.09.2024 passed in quantum appeal i.e. ITA No.4686/M/2023.

5.

Admittedly, the addition, as sustained by the Hon'ble Tribunal ultimately, is also based on the estimation of profit. As it is the mandate of the law that the penalty on the estimated addition, is hardly sustainable and therefore by considering peculiar facts and circumstances in totality and specific to the effect that major part of the addition has already been deleted and therefore penalty on the amount of addition of Rs.64,52,870/- is un-sustainable. Consequently, we are deleting the same. Thus, the penalty levied by the AO and sustained by the Ld. Commissioner is deleted.

6.

In the result, the appeal filed by the Assessee is allowed.

Order pronounced in the open court on 27.05.2025.

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