SUSHMA NITIN PATIL,MUMBAI vs. ITO WARD 1(4), MUMBAI

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ITA 6110/MUM/2018Status: DisposedITAT Mumbai27 November 2019AY 2014-154 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 estimate basis. Therefore, the penalty order was unjustified.

What were the facts?

The assessee declared Rs. 7,60,000 in their return of income, but their bank account showed credits of Rs. 23,49,721. The AO disallowed 25% of the difference and added it to the assessee's income, initiating penalty proceedings.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on additions made on an estimate basis. Whether the assessee concealed income by not properly explaining bank credits.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 44AD

AI-generated summary — verify with the full judgment below

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

Before: Shri Shamim Yahya (AM) &Shri Pawan Singh (JM)

For Respondent: Shri Akhtar H Ansari

Appellant by None Respondent by Shri Akhtar H Ansari Date of hearing 27-11-2019 Date of pronouncement 27-11-2019 O R D E R

PER PAWAN SINGH, JM :

1.

This appeal filed by the assessee is directed against the order of CIT(A)-2, Thane dated 14th September, 2018, which, in turn arises against the penalty order u/s 271(1)(c) dated 19th May, 2017 for AY 2014-15.

2.

Facts in brief as extracted from the orders of lower authorities are that during the assessment for the assessment year under consideration, the AO noted that in the bank account, there were total credit of Rs.23,49,721/-, whereas in the return of income, assessee declared net receipt of Rs.7,60,000/-. On show cause notice, the assessee stated that the credits were out of business of RCC work / construction work carried out by assessee and accordingly declared net profit of Rs.4,07,270/- on presumptive basis u/s 44AD. The AO not accepted the contention of assessee and the AO disallowed 25% of difference of receipt ( Rs.23,49,721 – Rs.7,60,000 = Rs.15,89,721) and added back to the income of assessee while passing the assessment order u/s 143(3) on 28-11-2016. The AO also initiated penalty for concealment of income. The AO issued show cause notice to the assessee under section 271(1)(c) rws 274 of the Act. The assessee contested the penalty proceedings. The AO recorded that the assessee failed to furnish submission against the show cause notice u/s 274 r.w.s.

271(1)(c). The AO levied penalty @100% of tax sought to be evaded, vide order dated 29-05-2017. On further appeal before CIT(A), the Ld.CIT(A) confirmed the penalty levied by AO. Further aggrieved by the order of Ld. CIT(A), assessee has filed present appeal before this Tribunal. The assessee has raised the following grounds of appeal:-

The Ld.CIT(A)-II has erred in partly confirming the orders of AO the penalty u/s 271(1(c) which is not correct and bad before the eyes of law.” 3. None appeared on behalf of the assessee, when the appeal was taken up for hearing despite the service of notice through RPAD. Therefore, we are left with no option except to hear the Ld. DR and decide the appeal on the basis of material available on record. The Ld. DR for the revenue submits that assessee failed to furnish sufficient cause in response to show cause notice of penalty proceedings. The AO made disallowance of receipts, which were found to have been deposited in the bank account and was not properly explained by the assessee. The Ld. DR prayed for confirming the penalty order.

4.

We have considered the submission of Ld. DR for the revenue and perused the material available on record. We have noted that the AO while passing the assessment order made addition on estimate basis of the receipt/ bank deposits. We have further noted that the AO initiated penalty for concealment of income. While passing the penalty order, the AO also concluded that the assessee concealed her income.

However, the Ld. CIT(A), while confirming the penalty held that assessee has filed inaccurate particulars of income and intentionally evaded the payment of tax. There is no dispute that the impugned penalty is based only on estimate addition. No other addition while passing the assessment order was made by AO. We are of the view that it is settled legal position that on estimates addition no penalty under section 271(1)(c) is leveable. Therefore, we do not find any justification in levying the penalty. Hence, we direct the AO to delete the entire penalty order.

6.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 27-11-2019.

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