Eklavya Estate Pvt. Ltd. Vs DCIT (ITAT Ranchi)
The ITAT, Ranchi Bench, held that penalty u/s 270A is not leviable where income is determined purely on estimation basis. In this case (AY 2018-19), following a survey u/s 133A, the AO found no books and estimated income @ 10% of gross receipts, and thereafter levied penalty u/s 270A for alleged under-reporting. The CIT(A) confirmed the penalty.
The Tribunal noted that the quantum addition itself was an estimate, with no specific finding of concealment or misreporting. It relied on s.270A(6), which expressly excludes estimated additions from “under-reported income”, and on consistent tribunal precedents holding that penalty cannot rest on estimates. The Bench also observed vagueness in initiation, as the AO failed to clearly specify the applicable limb (under-reporting vs misreporting).
Accordingly, the penalty of ₹2.83 lakh u/s 270A was deleted and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT RANCHI
1. This is an appeal filed by the assessee against the order of the ld. CIT(A), Patna-3, Patna in Appeal No. CIT(A), NFAC/2017-18/10189831 dated 29/12/2023 for the A.Y. 2018-19 by raising following grounds of appeal:
“1. For that the Ld CIT(A) was not justified in confirming the penalty of Rs. 2,83,995/-imposed by the Ld AO invoking section 270A of the Act.
2. For that the initiation of penalty proceedings was itself ab-initio void since the AO has specifically failed to mention the charges for which the proceedings have been initiated i.e. under reporting of income or misreporting of income.
3. For that the penalty imposed by AO and confirmed by CIT(A) is uncalled for since the same has been made towards the addition on estimate basis or any subsequent uncalled for addition.
4. For that in any view of the case the notice issued u/s 274/270A and the conclusion in order of assessment was itself vague and as such, penalty imposed thereby is void.
5. For that other grounds in detail will be argued at the time of hearing.”
2. There is a delay of 92 days in filing of this appeal for which the assessee has filed application for condonation of delay mentioning the fact that since beginning of the proceedings the assessee had always been misrepresented with the facts and legal procedure by the CA/AR of the company. An affidavit to that extent is attached. It is only in 1 week of May 2024 when the assessee contacted their Advocate for legal opinion and payment of outstanding demand that the entire case records were perused and it was suggested to immediately file appeal with prayer for admission of the grounds and this delay petition.
