MR. YOGESH RAHEJA,NEW DELHI vs. DCIT, NEW DELHI

Despite service of notice non-appeared on behalf of the assessee. Therefore, this appeal is being decided on the basis of material available on record and after hearing the ld. DR.

Levy of penalty of Rs. 45,000/- u/s 271(1)(c) of the IT Act by the AO and upheld by the CIT(A) is the only issue raised by the assessee in the grounds of appeal.

Facts of the case, in brief, are that the residence of the assessee was search by the investigation wing of the department u/s 132(1) of the Income Tax Act, 1961 on 10th February, 2010. In response to notice u/s 153A, the assessee filed his return of income on 21st October, 2011 declaring total income of Rs. 3,27,622/-. The AO observed that the income of the assessee consists of income from salary at Rs. 1,99,000/- and income from business of Rs. 1,29,622/-. The AO further noticed from the bank account filed during the course of assessment proceedings that the assessee has deposited Rs. 5,93,797/- through cheques during the year and also deposited cash of Rs. 2,20,000/- on different dates. On being asked by the AO to furnish the source of these deposits in the bank account, the assessee furnished only the details of source of cash deposits. However, no details regarding deposits through cheques were furnished. Rejecting the various explanation given by assessee regarding the source of deposits, the AO made addition of Rs. 1,50,000/- on adhoc basis on account of un-explained deposit through cheques and cash in the bank account.

In appeal the ld. CIT(A) upheld the addition made by the AO. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) of the IT Act. Rejecting the various explanation given by the assessee, the AO levied penalty of Rs. 45,000/- u/s 271(1)(c) of the IT Act which has been upheld by the CIT(A). 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before the Tribunal. 7. I have considered the rival arguments advanced by the Ld. DR and perused the material available on record. I find the penalty of Rs. 45,000/- has been levied by the AO basically on account of adhoc addition of Rs. 1,50,000/- made by him which has been sustained by the CIT(A). It has been held in various decisions that penalty cannot be levied on account of adhoc additions or additions made on estimate basis. Since in the instant case penalty has been levied on account of adhoc additions made by AO which has been sustained by the CIT(A), therefore, in my opinion the penalty so levied by the AO and sustained submitted by the CIT(A) is not justified. I, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty so levied. 9. In the result, appeal filed by the assessee is allowed. (Order Pronounced in the Open Court at the time of hearing itself i.e. on 25.09.2017)