SANDEEP BABULAL DOSHI,MUMBAI vs. INCOME TAX OFFICER WD-26 (3) (1), MUMBAI

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ITA 6011/MUM/2019Status: DisposedITAT Mumbai04 February 2020AY 2010-113 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) is not leviable on additions made on an estimated basis. Since the addition upheld by the CIT(A) was on an estimated commission, the penalty is not sustainable.

What were the facts?

The Assessing Officer reopened the assessment based on information about cash deposits and found the assessee engaged in cheque/DD discounting activities, earning commission. An addition was made at 2% of cash deposits, later reduced by the CIT(A) to 0.25%.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on income added 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

Income Tax Appellate Tribunal, “SMC”, BENCH

Before: SHRI R.C.SHARMA

For Appellant: Shri Goyal Shashikant (AR)
For Respondent: Shri R.K. Galgotra (DR)
Hearing: 03/02/2020Pronounced: 04/02/2020

Assessee by Shri Goyal Shashikant (AR) Revenue by Shri R.K. Galgotra (DR) Date of Hearing 03/02/2020 Date of Pronouncement 04/02/2020 आदेश / O R D E R PER: R.C. SHARMA, A.M. This appeal by the assessee is directed against the order dated 27/05/2019 of ld. CIT(A)-38, Mumbai for the A.Y. 2010-11 in the matter of imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short, the Act).

2.

Rival contentions have been heard and record perused. Facts in brief are that the assessment was reopened by the A.O. on getting information from the Addl. Director of Income Tax, Investigation, Mumbai to the effect that there was cash deposit in the bank account.

Further on investigation, it was found that the assessee was doing Cheque/D.D discounting activities for which commission was earned.

Sandeep Babulal Doshi Vs ITO Accordingly, the A.O. made addition @ 2% of the cash deposit as assessee’s income. By the impugned order, the ld. CIT(A) has reduced the estimated addition from 2 to 0.25%. However, the A.O. levied penalty with respect to addition upheld which was confirmed by the ld. CIT(A).

3.

I have gone through the orders of the authorities below and found that the addition has been made on estimated basis with regard to rate of commission earned by the assessee. There are plethora of decisions wherein it has been held that no penalty is leviable with respect to addition made on estimated basis. In this case, the A.O. has estimated commission of 2% which has been reduced by the ld. CIT(A) to the extent of 0.25%. Thus, the addition has been upheld only with respect to the estimated income. Applying judicial pronouncements to the facts of the case, there is no merit in the penalty so imposed U/s 271(1)(c) of the Act with respect to the estimated addition so upheld by the ld. CIT(A). Hence, I direct to delete the same.

4.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 04th February, 2020.

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