SHOBHA RAM SHARMA,MATHURA vs. NATIONAL FACELESS APPEAL CENTRE , DELHI
Facts
The assessee, a civil contractor, filed his return declaring income. The case was selected for scrutiny, and due to non-compliance, assessment was completed under Section 144, with additions made based on a 12% net profit rate. Penalty proceedings under Section 271(1)(c) were initiated. The CIT(A) had partly allowed the appeal by reducing the penalty from 200% to 100% of the tax sought to be evaded.
Held
The Tribunal held that penalty cannot be imposed when the income was assessed on an estimated basis. The core contention was that the penalty was based on estimated additions, which were progressively reduced by the appellate authorities. Relying on precedent, the Tribunal stated that if income is assessed based on estimated profit, penalty is not leviable.
Key Issues
Whether penalty under Section 271(1)(c) can be imposed when income is assessed on an estimated basis and subsequent additions have been substantially reduced.
Sections Cited
271(1)(c), 144, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SMT. ANNAPURNA GUPTA & SHRI SUNIL KUMAR SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No.111/Agr/2022 Assessment Year: 2012-13
Shobha Ram Sharma, Vs. DCIT/ACIT Circle 1(3)(1), Barhan Kalan, Mathura. Mathura PAN : AOBPS2246F (Appellant) (Respondent)
Assessee by Sh. Anurag Sinha, Advocate Department by Sh. Shailendra Srivastava, Sr. DR
Date of hearing 27.03.2025 Date of pronouncement 29.04.2025
ORDER Per Sunil Kumar Singh, Judicial Member:
This appeal has been preferred by assessee against the impugned order dated 13.04.2022 passed in Appeal no. CIT(A)-AGRA-1/10058/2020- 21 by the Ld. Commissioner of Income– tax(Appeals)/National Faceless
Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment Year [A.Y.] 2012-13, wherein learned CIT(A) partly allowed assessee’s appeal by reducing the imposition of penalty from 200% to 100% of the tax sought to be evaded.
ITA No. 111/Agr/2022
Brief facts of the appeal state that the assessee is a civil contractor
engaged in the work of construction and e-filed his return of income on
10.04.2013 declaring total income of Rs.43,58,630/-. Case was selected for
scrutiny under CASS. Assessee remained non-compliant for various
statutory notices issued by the Assessing Officer. Hence, assessment was
completed u/s. 144 of the Act and addition of Rs.2,84,61,888/- was made to
the income of the assessee by applying net profit rate at 12% and aforesaid
penalty proceedings were also initiated u/s. 271(1)(c) of the Act on the
ground that assessee has furnished inaccurate particulars of income.
In appeal against the assessment order dated 18.03.2015, first
appellate authority reduced the addition of NP rate @ 8% of total turnover.
Further, this Tribunal vide order dated 04.09.2019 passed in ITA No.
306/Agr/2017 reduced the NP rate @ 6%.
Assessee in appeal against the present penalty order dated
18.03.2020 approached with a prayer that the penalty order cannot stand on
estimation basis. However, ld. CIT(Appeals) was not fully satisfied and partly
allowed relief by restricting penalty from 200% to 100% of the tax sought to
be evaded. Assessee has filed this appeal mainly on the ground that before
passing penalty order, notice was not issued in conformity with the law laid
down by Hon’ble Supreme Court and that no penalty can be imposed on the
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basis of assessing assessee’s income merely on estimation by application of
net profit rate. Reliance is placed on several decisions.
Perused the records and heard learned representatives for both the
parties.
The core contention of learned representative for assessee is that the
imposition of the impugned penalty is based on the addition made by
Assessing Officer merely on estimation. It was further submitted that in
quantum proceedings while making addition, the Assessing Officer estimated
net profit rate at 12%, which got reduced to 8% by first appellate authority
and to 6% by Tribunal. This fact is not disputed by the Revenue. Therefore,
in view of the order of coordinate Bench of this Tribunal in Naresh Katare
Contractor vs. ACIT (2017) 51 CCH 316(Agra-Trib) relied upon by ld.
counsel for assessee, no penalty can be imposed against the assessee
based on estimated addition. Relevant finding of Tribunal recorded in para 9
of the order are as under :
It is undisputed fact that the assessee’s taxable income was assessed on estimated basis. In quantum appeal, before us, the net profit rate is reduced to 3% as against 6% estimated by ld. CIT(A) and 12.5% estimated by the AO, of the gross total receipt as above. The ld. AR contended that it is a case of an estimate against an estimate. As such, there was no concealment of income and accordingly no penalty is imposable as held in the case of ‘CIT vs. Raj Ban Singh’, (2005) 276 ITR 351(All). The Hon’ble Delhi High Court in the case of ‘CIT vs. Aero Traders Pvt. Ltd.’, (2010) 322 ITR 316(Del); and ‘(2010) 231 CTR 524’, and in many decisions of ITAT, Agra Bench, Agra, (Supra), it was held that penalty is not leviable when income was assessed based on estimated profit and substantially reduced 3 | P a g e
ITA No. 111/Agr/2022
by the Tribunal. In the present case, the assessment was based on estimated profit @ 12.5 % which is substantially reduced by the ld. CIT (A) by estimating @ 6 % and further reduced by the Tribunal @ 3% in quantum appeal. The cases referred by the Ld DR are distinguishable on their own peculiar facts.”
There being parity of facts involved in the present appeal, we do not
find any justification for imposition of impugned penalty against the assessee
u/s. 271(1)(c) of the Act when the income of the assessee has been
assessed on the basis of estimated profit. Hence, the impugned order dated
13.04.2022 deserves to be set aside.
In the result, appeal is allowed.
Order pronounced in the open court on 29.04.2025.
Sd/- Sd/-
(ANNAPURNA GUPTA) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29.04.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra
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