RAMALINGAM KANAGASAPAI,ARIYALUR vs. ITO, WARD-1,, PERAMBALUR

This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 25.10.2024 for the Assessment Year (hereinafter referred to as "AY”) 2014-15 confirming the penalty levied by the AO u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) to the tune of Rs.4,47,204/-.

None appeared for the assessee. Having heard the Ld.DR and after perusing the records, it is noted that in the relevant year under consideration, the assessee didn’t file any return of income (RoI) for AY 2014-15. The AO received information that assessee had deposited Rs.1,55,70,000/- in his Savings Bank account. In order to verify the transaction in the bank account of the assessee, the case of the assessee was re-opened; and during the assessment proceedings, the assessee is noted to have filed computation of income along with documents called for by the AO; and the AO noted in this regard that the assessee has shown Rs.12,27,250/- as total income from business. The AO after hearing the assessee, estimated the income of the assessee by making addition of 5% on the total deposit made in the bank i.e.

From the impugned order, it is discerned that the assessee was an agriculturist and labor-supply-contractor; and didn’t file any RoI for AY 2014-15; and after receiving notice u/s.148 of the Act, duly filed the requisite documents and admitted that the amount deposited in the bank was on account of his business of supplying labourers to various contractors. The assessee admitted a net income of Rs.12,27,250/- and also paid tax on it. However, the AO made further addition of Rs.7,78,500/- by estimating 5% of the total cash deposit of Rs.1,55,70,000/- which according to the assessee was unreasonable & arbitrary. The main grounds of appeal of the assessee against levy of penalty is that since the AO had only estimated the income over and above the admitted net income of Rs.12,27,250/-, the penalty ought not to have been levied u/s 271(1)(c) of the Act. In the factual back ground, we find force in this grounds of appeal of the assessee and note that quantum addition made by the AO of Rs.7,78,500/- was purely on estimated basis with inherent subjectivity involved. Therefore, we are of the opinion that penalty needn’t have been levied and hence, it is directed to be deleted and therefore, we direct the AO to delete penalty of Rs.4,47,204/-

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