JASMIT SINGH TIBB,MUMBAI vs. ITO 20(1)(3), MUMBAI

The assessee has filed the present appeal against the order dated 08.02.2016 passed by the Commissioner of Income Tax (Appeals)-36, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2007- 08 wherein the penalty levied by the Assessing Officer by virtue of order dated 30.09.2014 to the tune of Rs.3,31,315/- was confirmed.

The assessee has raised the following grounds:-

The brief facts of the case are that the appellant was an individual and was deriving income from running outlets for the sale of frankies. The assessee filed his return of income for A.Y.2007-08 declaring total income to the tune of Rs.1,72,880/-. The return was processed and selected for scrutiny. At the time of scrutiny, it was noticed that the sales effected by the appellant was very low when compared to the number of outlets run by the assessee and the volume of business. The Assessing Officer recorded the statement of the elder brother of the appellant who was actively involved in the business and also carried out an exercise to quantify the production of frankies on the basis of usage of raw material such as mutton, chicken, paneer etc. and arrived net profit of Rs.38,96,989/-. The appellant filed an appeal against the said assessment order and the CIT(A) upheld the addition to the tune of Rs.19,12,268/-. Thereafter, the Assessing Officer initiated penalty u/s.271(1)(c) of the Income Tax Act, 1961 ( in short “the Act”) and levied the penalty to the tune of Rs.3,31,315/- u/s.271(1)(c) of the Act. In the interim period the assessee filed an appeal before the Hon’ble Income Tax Appellate Tribunal and Hon’ble Income Tax Appellate Tribunal decided the ITA No.2225.M.16 A.Y. 2007-08 matter of controversy by virtue of order in dated 22.01.2014 (order M.A. No.266/Mum/2014 dated 18.08.2014), wherein the Hon’ble Tribunal allowed wastage @ 15%. Since assessment proceedings was also confirmed by the CIT(A) on 07.05.2014, therefore considering this fact that assessment has been upheld by the CIT(A) and the Hon’ble ITAT only reduced 15% wastage, the Assessing Officer levied the penalty to the tune of Rs.3,31,315/- which was confirmed. Feeling aggrieved, the assessee filed the present appeal before us. ISSUE NO.1 & 2:- 4. Under this issue the assessee challenged the confirmation of the penalty order by the CIT(A) on the ground of that the original assessment was based on estimate basis and based on conjunctures and surmises, therefore, no penalty is liable to be leviable in the interest of justice. However, assessee failed to appear before us. The learned departmental representative has strongly relied upon the order passed by the CIT(A) in question. Anyhow, it is not in dispute that the original assessment was done on estimation basis. Nothing came into the notice that the assessee furnished the inaccurate particulars and concealed his income. The addition if any is on the estimated basis. No penalty is liable to be leviable if the assessment is based on the estimation basis and in this regard we support of the law settled in the decision of the Hon’ble Delhi High Court in case titled as CIT Vs. Aero Traders Pvt. Ltd. (2010) 322 ITR 316 (Delhi) and Hon’ble Punjab and Hariyana High Court in case titled as Harigopal Singh Vs. CIT (2002) 258 ITR 85 (P&H) and Hon’ble Gujarat High Court in case titled as CIT