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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
O R D E R
PER DR. A. L. SAINI, ACCOUNTANT MEMBER:
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2011-12, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-1, Surat [in short “the ld. CIT(A)”] in Appeal No. CIT(A), Surat-1/10085/2017-18 dated 31.12.2019 which in turn arises out of penalty order passed by the Assessing Officer under section 271(1)(C) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
Grounds of appeal
raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in levying the penalty of Rs.2,31,607/- u/s.271(1)(c) of the I.T. Act, 1961.
2. On the facts and circumstances of the case as well as law on the subject, the assessing officer with Ward-2(3)(1), Surat has wrongly assumed jurisdiction when the assessee was assessed to tax at Ward-2(3)(7), Surat.
3. It is therefore prayed that the above penalty levied by the assessing officer and confirmed by the CIT(A) may please be deleted.
4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
Assessment Year. 2011-12 Alok S. Mehta HUF 3. At the outset, Shri Mehul Shah, Learned Counsel for the assessee, pleads that in the assessee`s case under consideration, the addition made by assessing officer is based on peak estimation. Such peak estimation has been further reduced by ld CIT(A), hence no penalty can be levied on estimation. Therefore, ld Counsel prays that penalty under section 271(1) (c ) of the Act, may be deleted.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, and argued that penalty can be levied on estimated addition also.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessing officer made addition of Rs.47,22,600/- on account of maximum negative cash balance in cash book prepared to account for cash deposits made in the undisclosed bank account of the assessee. The assessing officer further denied the set off of loss incurred in the year on transactions in F & O segment of MCX of Rs.37,93,792/-. The Ld. CIT(A) allowed the set off of this loss and restricted the addition to Rs.9,28,808/-. Therefore, ld CIT(A) reduced the estimated addition from Rs.47,22,600/- to Rs.9,28,808/-. Later on, the matter reached to the Hon'ble ITAT, Surat, where the appeals of both department and the assessee were dismissed by Hon'ble ITAT, Surat. Meanwhile pursuant to order of Ld. CIT(A), the assessing officer resumed the penalty proceedings u/s 271(1)(c) r.w.s. 274 and after hearing the assessee levied penalty u/s 271(l)(c) of Rs.2,31,607/- on the addition confirmed by Ld.CIT(A).
From the facts narrated above, it is abundantly clear that penalty under section 271(1)(c) of the Act, is levied by the assessing officer on estimated addition. We note that penalty under section 271(1)(c) of the Act, is not sustainable, in the eye of law, if it is levied on estimated addition. For this proposition, the reliance can be placed on the judgment of the Coordinate Bench in Assessment Year. 2011-12 Alok S. Mehta HUF the case of Muralilal Ratanlal Agarwal v. ACIT in IT(SS)A Nos. 573 & 615/AHD/2012 for the AY.2004-05, order dated 05.07.2013 wherein it was held as follows: “9. We have heard the rival submissions and perused the material on record. We find that the Assessee had disclosed income of Rs. 5,50,000/- based on the peak credit worked out from the bank account found during the course of search. The peak credit as worked out by the Assessee was not found correct by Assessing Officer and he worked out peak credit of Rs. 15,05,702/- and on the enhanced peak credit penalty u/s. 271(1)(c) was levied by Assessing Officer. The addition made by the Assessing Officer is on estimation basis and is not based on any tangible material on record. It is a settled law that penalty cannot be levied merely on estimation of income. Further the explanation given by Assessee has not been found to be false. In view of aforesaid facts, we are of the view that no penalty can be levied in the present case. Thus the penalty is deleted.”
Apart from this, Learned Counsel submits that assessment proceedings and penalty proceedings are not same. The assessee has recorded all the transactions in his books of accounts, therefore there should not be any case of concealment. Learned Counsel took us through paper book page no.45, wherein he has stated that in last year the bank account was disclosed and the balance was carried forward in the current year, therefore bonafide of the assessee’s claim cannot be disputed i.e. there was a bonafide claim by the assessee, as the transaction was getting reflected in the previous year’s books and opening balance of the said bank account is getting reflected in the current year`s books of accounts. Therefore, it is not a case that bank account has never been disclosed to the Income Tax Authorities. The Learned Counsel submits that in case of a bank account, the addition based on the pick credit can be upheld and any addition on account of pick credit is kind of an estimated addition only, therefore the penalty u/s 271(1)(c) of the Act, should not be levied on such estimation.
We note that assessee submitted before us Form No. 3CD (vide paper book page no.26). The assessee submitted the balance sheet and profit and loss account which is placed at paper book page nos. 40 to 41. The assessee also submitted the schedules to the financial statement and contended that the said bank account has already been disclosed in the previous years’ books of accounts and the opening balance of the said bank has been getting reflected in the current year`s books of Page | 3
Assessment Year. 2011-12 Alok S. Mehta HUF accounts, therefore there is a bonafide claim of the assessee and on account of such bonafide claim, the penalty should not be levied on the assessee. We find merit in the submission of Ld. Counsel that Bank account was reflected in books of accounts in the previous year as well as in assessment year under consideration, hence assessee did not conceal the particulars of bank account. Besides, the penalty has been imposed by Assessing Officer on estimation, which is not sustainable in the eye of law. Hence, based on this factual position, we delete the penalty.
In the result, appeal filed by the assessee is allowed.
Order is pronounced on 24/02/2022 by placing result on notice board.