Laxmichand And Company Vs DCIT/ACIT (ITAT Agra)
Penalty u/s 270A Quashed for Estimated Addition and Non-Specification of Limb; NP Rate Difference Cannot Attract Penalty – ITAT Agra
The Agra Bench of the ITAT allowed the assessee’s appeal and deleted penalty of ₹11.76 lakh levied under section 270A for AY 2017-18, holding that penalty was unsustainable both on facts and in law.
The assessee, a civil contractor, had declared net profit at 4.22% on contract receipts of ₹44.31 crore. The Assessing Officer rejected the books under section 145(3) and estimated profit at 4.65%, making an addition of ₹18.84 lakh. Treating this as under-reported income, penalty at 200% was imposed under section 270A, which was confirmed by CIT(A).
The Tribunal held that:
- The addition was purely on an estimated basis by marginally enhancing NP rate, without disturbing turnover or bringing any incriminating material,
- As per section 270A(6)(b), additions made on estimation basis are excluded from “under-reporting of income”, and
- Neither the assessment order nor the penalty notice specified whether penalty was for under-reporting [s.270A(2)] or mis-reporting [s.270A(9)], rendering the initiation itself legally invalid.
Relying on coordinate bench decisions in Chakradhar Contractors & Engineers Pvt. Ltd. (ITAT Pune) and Tasavver Husain (ITAT Agra), the Tribunal held that penalty cannot survive where income is estimated and the charge is not specified.
Accordingly, the ITAT deleted the entire penalty of ₹11.76 lakh and allowed the appeal in full.
FULL TEXT OF THE ORDER OF ITAT AGRA
