Kamlesh Gupta Vs DCIT (ITAT Delhi)
In a landmark ruling, the Income Tax Appellate Tribunal (ITAT), Delhi, in the case of Kamlesh Gupta Vs DCIT, held that an addition made on the account of estimated profit applied to turnover does not constitute concealment. Therefore, no penalty should be imposed. The decision is likely to have significant implications for businesses, particularly in cases where profit estimation methods are used.
The case revolved around the assessment years from 2009 to 2015, where the appellant, Kamlesh Gupta, contested the penalties imposed by the Assessing Officer (AO) under section 271(1)(c) of the Act. The tribunal drew from earlier judgments, notably CIT vs. Aero Traders (P) Ltd, and others, to reaffirm the legal position that the imposition of penalty under section 271(1)(c) is not applicable when income is estimated.
The tribunal also contested the AO’s assertion that the appellant’s failure to appeal the addition implies concealment. It maintained that absence of appeal does not automatically validate a penalty, as the assessment and penalty proceedings are different.
The ITAT Delhi’s ruling in Kamlesh Gupta Vs DCIT is noteworthy, reinforcing the established legal standpoint that estimated profit-based additions do not constitute concealment, hence, no penalty can be imposed.
FULL TEXT OF THE ORDER OF ITAT DELHI
These appeals have been filed by the assessee against the order of ld. CIT(A)-24, New Delhi dated 21.03.2022 for Assessment Years 2009-10 to 2015-16.
2. The assessee has raised the following grounds of appeal:
“1. That the order of learned Commissioner of Income Tax (Appeals) is bad in law as well as on the facts and in the circumstances of the case.
2. That the Id. CIT(Appeals) has erred in summarily dismissing the ground of appeal that appellant was not provided a fair and proper opportunity of being heard.
3. That the Id. CIT(Appeals) has erred in giving a finding that the appellant has chosen not to represent his case on merits and ignoring the written submissions and evidences filed by the appellant in the appellate proceedings
4. That the Id. CIT(Appeals) has erred in not dealing with ground no. 4 raised before him contending that the Id. AO had exceeded his jurisdiction in initiating and imposing penalty u/s 271(1)(c) and in sustaining the penalty imposed by the assessing officer on account of estimated profits amounting to 1,85,924/- from alleged undisclosed sales by ignoring the written submissions and evidences filed by the appellant in the appellate proceedings.
5. That the Id. CIT(Appeals) has erred in sustaining the penalty amounting to Rs. 55,777/- u/s 271(1)(c) of the Act as imposed by the assessing officer.”
3. The issues involving Section 271(1)(c) and Section 271AAB in all the appeals are common in nature and hence being adjudicated by a common order.
4. In the case of M/s German Homoeopathic Distributors Pvt. Ltd., a company in which the appellant is a Director, the AO made the following estimated additions in the assessment order on account of local medicine sales.
