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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), Mumbai, dated 28-8-2014, for the assessment year 2009-2010, in the matter of imposition of penalty u/s.271(1)(c) of the I.T.Act.
We have considered rival contentions and found from the record that penalty has been levied with respect to the estimated addition of 5% made in respect of liability of creditors. The AO made addition u/s.41(1) on sundry creditors of Rs.11,25,964/- on this addition penalty of Rs.3,82,715/- was levied which was confirmed by CIT(A).
It was contended by ld. AR that such addition had been made purely on the basis on estimation and adhoc basis. The ld. AO made the 2 addition @5% of the outstanding creditors without pointing a specific remission or cessation of the liability. The assessee due to poor financial condition is unable to furnish the relevant details since it have bitter relations with the creditors. Reliance was placed on the decision of Hon’ble Rajasthan High Court in the case of Mahendra Singh Khedla, 71 DTR 189, Delhi High Court in the case of Nokia India Pvt. Ltd., 343 ITR 434, P&H High Court in the case of Ravail Singh & Co., 254 ITR 191 and Chattishgarh High Court in the case of Vijay Kumar Jain, 325 ITR 378. In support of the proposition that addition u/s.41(1) cannot be made if the liability is recognised in the books of account, reliance was placed on the decision of Hon’ble Gujarat High Court in the case of Bhogilal Ramjibhai Atara, 222 Taxman 313, Delhi High Court in the case of Jaipur Jewellers (Exports), 77 CCH 599.
On the other hand, ld. DR relied on the order of lower authorities.
We have considered rival contentions and deliberated on the judicial pronouncements referred by ld. AR during the course of hearing before us. The Hon’ble Rajasthan High Court in the case of Mahendra Singh Khedla (supra), held that no penalty is imposable with respect to addition made on estimated basis. The High Court observed that basis for levy of penalty was only estimation which is purely question of fact. Similar view has been taken by Delhi High Court in the case of Nokia India Pvt. Ltd.(supra), wherein it was held that addition made on estimated basis without finding claim of assessee to be false, no penalty was leviable. In the instant case also, the AO has levied penalty with