Case Law Details
Jaisingh H. Solanki Vs ITO (ITAT Mumbai)
Introduction: In a recent decision, the Income Tax Appellate Tribunal (ITAT) Mumbai addressed an appeal filed by Jaisingh H. Solanki against the order of the Commissioner of Income Tax (Appeals)/NFAC, Delhi. The dispute revolved around the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2010-11. The ITAT’s ruling focused on the AO’s levy of the penalty, which was based on estimated quantum additions derived from information provided by the Sales Tax Department.
Detailed Analysis: Jaisingh H. Solanki, an individual and proprietor of M/s. Blue Star International, engaged in the trading of ferrous and non-ferrous metals. The AO initiated proceedings after receiving information from the Sales Tax Department indicating that the assessee benefited from accommodation entries/bills amounting to Rs.2,35,64,090. The AO, considering the inability of the assessee to produce certain documents, estimated the profit from these transactions at Rs.29,45,511. The Ld. CIT(A) partly allowed the appeal, reducing the estimated addition to Rs.12,04,124.
Subsequently, the AO levied a penalty of Rs.5,27,640 under section 271(1)(c) of the Act. The assessee, aggrieved by the penalty, appealed to the Ld. CIT(A)/NFAC, who confirmed the penalty. The appeal was then brought before the ITAT Mumbai.
Considering the inherently subjective nature of the estimated quantum addition, the ITAT relied on precedents from various High Courts. The decisions cited emphasized that penalties should not be levied on estimated additions. In line with this principle, the ITAT concluded that no penalty was warranted in this case.
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