ACIT 18(1), MUMBAI vs. SUNIL BANKELAL GUPTA, MUMBAI

We heard the ld. DR and went through the submissions made by him. We noted that the only issue involved in this appeal relates to deletion of penalty imposed by the Assessing Officer amounting to Rs.10,42,630/-. The facts in this case are that the assessee filed a return declaring an income of Rs.2,65,37,307/-. The Assessing Officer rejected the books of account u/s 145(3) of the Income Tax Act, 1961 (in short ‘ the Act’) as assessee could not produce the books of account and estimated the gross profit @ 8% of the gross receipts. The assessment was completed at an income of Rs.2,93,14,001/- as against returned income of Rs.2,65,37,307/-. The Assessing Officer, therefore, after giving opportunity to the assessee, levied penalty u/s 271(1)(c) of the Act at Rs.10,42,630/- being tax sought to be evaded @ 100% of the addition made due to application of the differential rate in gross profit. When the matter went before CIT(A), we noted that the CIT(A) deleted the penalty levied u/s 271(1)(c) of the Act. It is a settled law that where the income has been estimated and addition has been made or sustained on the basis of estimation of income, it cannot be said that assessee has concealed the particulars of income or filed inaccurate particulars of income. The CIT(A), in our view, has rightly relied on the order of Hon'ble Madras High Court in the case of CIT vs. Smt. K. Meenakshi Kutty, 258 ITR 494 (Mad) in which it has been held that no penalty u/s 271(1)(c) of the Act could be levied on account of estimate made by the Assessing Officer being higher than the estimate of income of assessee. Estimate, in our view, is an estimate. It cannot take place of actuality. No cogent material or evidence was brought to our knowledge which may prove that the assessee has actually earned the income @ 8% of the gross receipts. We, therefore, confirm the order of CIT(A) deleting the penalty levied on the assessee.

In the result, appeal filed by the Revenue stands dismissed.