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Facts
The assessee is in appeal against the order of the CIT(A) confirming penalty under section 271(1)(c). The penalty was levied on additions made on an estimation basis after a search proceeding. The assessee argued that penalty cannot be levied on estimated additions, citing previous Tribunal orders in similar cases of its sister concerns.
Held
The Tribunal held that the additions on which the penalty was levied were purely estimated additions. Following its own previous decisions in the cases of the assessee's sister concerns, the Tribunal found that penalty under section 271(1)(c) cannot be levied on estimated additions. Therefore, the impugned penalty was ordered to be deleted.
Key Issues
Whether penalty under section 271(1)(c) can be levied on additions made on estimation basis.
Sections Cited
271(1)(c), 143(3), 147
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Income Tax Appellate Tribunal, SURAT ‘SMC’ BENCH, SURAT
Before: Shri Sanjay Garg & Shri Narendra Prasad Sinha
Consolidated Appeals (2)
आदेश/O R D E R
Per Sanjay Garg, Judicial Member:
The captioned six appeals have been preferred by the assessee against the common order of the Commissioner of Income Tax (Appeals), Ahmedabad [hereinafter referred to as ‘CIT(A)’] dated 28/08/2025 pertaining to different Assessment Years (AYs) 2008-09 to 2013-14. Since common facts and issues are involved (except quantum) in all these appeals, these were heard together and are being disposed of by a consolidated order. Assessee’s appeal in for AY 2008-09 is taken as a lead case for the purpose of narration of facts.
:- 2. The assessee, in this appeal, has taken the following grounds of appeal:
“1. 4. Appellant craves leave to add further grounds OR to amend OR to alter the existing grounds of appeal on OR before the date of hearing.
2. 1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming penalty u/s 271(1)(c) of the Income Tax Act, 1961 on the basis of invalid penalty notice in which the limb of levy of penalty under section 271(1)(c) of Income Tax Act, 1961 not mentioned.
3. 2. On the facts and circumstances of the case and law, the d CIT(A) erred in confirming penalty u/s 271(1)(c) of the Income Tax Act, 1961 which is time barred and thus the penalty order is itself bad in law and required to be quashed.
4. 3.On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming penalty of Rs. 1,27,000/- on estimation basis under section 271(1)(c) of Income Tax Act, 1961.”
3. The assessee, in this appeal, is aggrieved by the action of the Ld. CIT(A) in confirming the penalty levied by the Assessing Officer (AO) u/s.271 (1)(c) of the Act. to 1112/SRT/2025 Sun Diam vs. ITO Asst. Years : 2008-09 to 2013-14
4. At the outset, the Ld. AR of the assessee has stated that the assessee along with its sister Concerns namely M/s Nazar Impex Pvt Ltd. and Sanjay Choudhary HUF, Moulimani Impex Pvt Ltd. was covered under the same search proceeding dated 03.10.2013 and treated as concern of Rajendra Jain, Dharmichand Jain and Sanjay Choudhary Group and centralized with same assessing officer. Similar rate of commission was adopted for computing estimated commission income by same assessing officer. Even this Tribunal passed common order in quantum appeal. The Ld. AR in this respect has referred to the common order of the Tribunal dated 29/12/2021 with the lead case “Sanjay Kumar Choudhary (HUF) vs. ACIT” in & Ors., wherein, the assessee’s quantum appeal have also been dismissed. He has further submitted that in similar facts and circumstances, penalty u/s.271(1)(c) of the Act was also levied in the case of assessee’s sister-concerns, namely, Nazar Impex Pvt Ltd. & Sanjay Choudhary HUF and Moulimani Impex Pvt Ltd and the matter reached before the Income Tax Appellate Tribunal Surat Bench. The Co-ordinate Surat Bench of the Tribunal vide order dated 30.06.2022 in in case of M/s Nazar Impex Pvt Ltd. and vide order dated 30.10.2023 in in case of Sanjay Choudhary HUF and vide order dated 29.08.2025 in in Moulimani Impex Pvt. Ltd held that penalty cannot be levied when the commission income computed on estimation basis. He, therefore, has submitted that the issue is squarely covered in favour of the assessee by the aforesaid decisions of the Tribunal in the cases of assessee’s sister-concerns. He, therefore, has requested that the impugned additions may be deleted.
4. We have gone through the orders of the Tribunal in the cases of the sister-concerns of the assessee and find that the Tribunal in identical facts and to 1112/SRT/2025 Sun Diam vs. ITO Asst. Years : 2008-09 to 2013-14 circumstances, has deleted the penalty levied u/s.271(1)(c) of the Act. The relevant observations of the Co-ordinate Bench of the Tribunal vide order dated 30.06.2022 in in case of M/s Nazar Impex Pvt Ltd are reproduced as under:
“4. We have heard the submission of the ld. Authorised Representative (AR) of the assessee and the ld. Departmental Representative (DR) for the Revenue and have gone through the orders of authorities below. The ld. AR of the assessee submits that the Assessing Officer made addition in quantum assessment on estimation basis. It is admitted position under the law that no penalty under Section 271(1)(c) of the Act is leviable on estimated additions. The ld. AR prayed to delete the entire penalty.
5. On the other hand, the ld. Sr. DR for the Revenue supported the orders of the lower authorities. The ld. Sr. DR submits that the assessee was indulged in providing accommodation entries and while filing return of income furnished inaccurate particulars thereby concealed the real income. The assessing officer levied penalty on the additions made in the assessment.
We have considered the rival submission of both the parties and perused the material available on record. We have also gone through the orders of the lower authorities. We find that there is no dispute that the addition in the assessment order under Section 143(3) r.w.s. 147 dated 29/01/2016 was made on estimation basis, which we have recorded above. It is settled law that no penalty is leviable on estimated addition. In this regard, we draw strength from the following decisions:
* Manish Dhirajlal Mehta Vs ACIT in Tax Appeal No.461 & 464 of 2000 and 833 & 836 of 2005 dated 05.02.2014 (Gujarat High Court); * Vijay Proteins Ltd., Vs CIT (Income Tax Reference No.139 of 1996), (Gujarat High Court); * Awadhesh Bansiraj Pandey Vs ITO (ITA No.4784/ Mum/2018) Mumbai Tribunal and * DCIT Vs Anil J Kothari ( 2048/Ahd/2010), Surat Tribunal.
7. Considering the fact that addition in the assessment order, on the basis of which the penalty was levied, is purely an estimated addition. It is settled position in law that no penalty under section 271(1)(c) can be levied on additions made on estimation. to 1112/SRT/2025 Sun Diam vs. ITO Asst. Years : 2008-09 to 2013-14
5 The similar view was taken by the Hon'ble Jurisdictional High Court in Manish Dhirajlal Mehta Vs. ACIT, Vijay Proteins Ltd., Vs. CIT (supra), in Vijay Proteins Vs CIT (supra) and other various cases. No contrary facts or law is brought to our notice by the ld. Sr. DR for the revenue at the time of hearing of these appeals. Therefore, considering the totality of facts and circumstances, we direct to delete the penalty levied under Section 271(1)(c) of the Act.
In the result, appeal of the assessee is allowed.”
The issue is squarely covered in favour of the assessee by the decisions of the Co-ordinate Bench of the Tribunal in the cases of sister-concerns of the assessee, who were covered under the same search action and in whose cases identical additions in identical facts and circumstances were made and the penalty u/s. 271(1)(c) was levied. Respectfully following the aforesaid decisions, the impugned penalty is ordered to be deleted.
6. Since the facts and issues involved in all the captioned appeals are identical, hence, our findings given above will mutatis mutandis apply to all the appeals and the impugned penalty in all the captioned appeals is ordered to be deleted.
In the result, all the appeals of the assessee stand allowed.
Order pronounced in the Open Court on 27 /02/2026.