AWADHESH BANSJRAJ PANDEY,MUMBAI vs. INCOME TAX OFFICER 31(1)(2), MUMBAI

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ITA 4784/MUM/2018Status: DisposedITAT Mumbai05 February 2020AY 2008-095 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 penalty under Section 271(1)(c) cannot be levied on additions made on an estimated basis. Since the addition on which the penalty was initiated was based on estimation and further reduced by the Tribunal, the penalty was deleted.

What were the facts?

The assessee declared income and later offered profit from sale of mixer grinders for taxation. The Assessing Officer (AO) made an addition based on AIR information regarding cash deposits. This addition was confirmed by the CIT(A) but restricted by the Tribunal.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on income addition made on an estimated basis.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

PER PAWAN SINGH, JUDICIAL MEMBER;

1.

This appeal by assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-52, Mumbai [ld. CIT(A)] dated 22.08.2015, which arises from the penalty levied under section 271(1)(c) dated 26.10.2016. The assessee has raised the following grounds of appeal:

In the facts and Circumstance of the case and in law the learned C.I.T (A) erred in confirming the levy of penalty u/s 271(1)(c) Rs.104288/- without appreciating the facts. a. The appellant has neither concealed any particulars of Income nor submitted any inaccurate particulars of Income. b. Penalty u/s 271(1)(c) is invalid since in the assessment order A.O has not mentioned as to which limb penalty was imposed. c. The penalty proceedings are district from assessment proceedings. d. The No Penalty can be levied where the Income is estimated.

Mum 2018-Awadhesh Bansiraj Pandey

2.

Brief facts of the case are that the assessee filed its return of income declaring total income of Rs. 1,17,004/-. The case was selected for scrutiny.

During the assessment, on the basis of AIR information, the Assessing Officer noted that there was huge cash deposit in the bank account of the assessee with State Bank of India. The assessee was asked to substantiate the cash deposit. In response to the show-cause, the assessee stated that he has sold 1500 Mixer Grinder at the profit margin of Rs. 300/- per piece and has offered the said amount for taxation. The contention of assessee was not accepted by Assessing Officer, the Assessing Officer added profit on sale of 1500 Mixer Grinder and added a sum of Rs. 4,50,000/- to the income of assessee. On appeal before the ld. CIT(A), the addition was upheld.

However, on further appeal before the Tribunal, the addition was restricted to Rs. 3,37,500/- by adopting Net Profit on sale of Mixer Grinder at Rs. 225/- per piece. The assessee was allowed expenses of Rs. 75/- per Mixer Grinder.

3.

The Assessing Officer initiated the penalty on the addition restricted to Rs. 3,37,500/- vide notice dated 07.10.2016. The assessee filed its reply dated 24.10.2016 and contended that he has neither concealed any particular of income nor furnished any inaccurate particulars. In the assessment, the Assessing Officer estimated the addition of Rs. 4,50,000/-, however, on further appeal before Tribunal, the addition was restricted to Rs. 3,37,000/- only. The reply of assessee was not accepted by Assessing Officer. The Mum 2018-Awadhesh Bansiraj Pandey Assessing Officer levied the penalty @ 100% of the tax sought to be evaded.

On further appeal before the ld. CIT(A), the action of Assessing Officer was affirmed. Further aggrieved, the assessee has filed the present appeal before us.

4.

We have heard the submission of ld. Authorized Representative (AR) and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that the assessee neither concealed any particular of income nor furnished any inaccurate particulars thereof. The Assessing Officer while passing the assessment order made addition on estimate basis. On further appeal before the Tribunal vide dated 03.02.2016, the addition was restricted to Rs. 3,37,500/- by adopting profit on estimation basis @ Rs. 225/- after allowing administrative expenses of Rs. 75/- per Mixer Grinder/per piece, thus admittedly the addition is on adhoc basis. It is settled law that no penalty is leviable on addition made on estimation basis.

5.

On the other hand, the ld. DR for the revenue supported the order of Assessing Officer. It is settled position under the law the no penalty under section 271(1) is leveable on estimated additions made in the assessment order.

6.

We have considered the submission of both the parties and perused the material available on record. There is no dispute that the Assessing Officer initiated and levied the penalty only on the addition made on account of Mum 2018-Awadhesh Bansiraj Pandey profit margin on sale of Mixer Grinder. The Assessing Officer estimated the profit @ Rs. 300/- per piece on sale of 1500 Mixer Grinder. The Assessing Officer estimated the profit of Rs. 4,50,000/-. On appeal before the ld. CIT(A), the addition was upheld. However, on further appeal before the Tribunal, the addition was restricted to Rs. 3,37,500/- in ITA No. 6485/Mum/2012 dated 03.02.2016. We have further noted that in reply to the show cause, the assessee stated that no penalty is leviable on addition made on estimation of income and relied upon the decision of Jodhpur Tribunal in ITO vs. Gurunanak Oil Agency [(2013) 154 TTJ, Jodhpur]. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded.

The ld. CIT(A) affirmed the action of Assessing Officer. There is no dispute that addition on which penalty was initiated was based on estimation basis.

The addition was further reduced by Tribunal by allowing administrative and other expenses and estimated the profit @ Rs. 225/- per piece/per Mixer Grinder. It is settled position that no penalty is leviable on adhoc/estimated addition. Hence, we direct the assessing officer to delete the entire penalty levied under section 271(1)(c) vide order dated 26.10.2016. 7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 05/02/2020.

Sd/- Sd/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 05 .02.2020 4 Mum 2018-Awadhesh Bansiraj Pandey SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “A” Bench, ITAT, Mumbai 6. Guard File

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