Little Star Commodities Pvt. Limited Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) of Kolkata dealt with an appeal filed by Little Star Commodities Pvt. Ltd. against a penalty imposed under Section 271(1)(c) of the Income Tax Act for the assessment year 2012-13. The penalty of Rs. 1,99,911 was levied following a dispute over the assessee’s declared commission income. Initially, the company disclosed Rs. 1,34,000 as commission income, calculated at a 0.05% commission rate for providing accommodation entries. However, the Assessing Officer (AO) deemed this rate too low and estimated the commission income at 1%, leading to an addition of Rs. 6,46,955 and the initiation of penalty proceedings. The CIT (Appeals) upheld the penalty, prompting the company to approach ITAT.
Upon reviewing the case, ITAT found that the AO’s revision of the commission rate from 0.05% to 1% was based on estimation rather than any concrete evidence or scientific method. Since the income addition was purely an estimation and not based on substantial proof, ITAT concluded that the penalty imposed was unjustified. Consequently, ITAT ruled in favor of the assessee and deleted the penalty, emphasizing that penalties should not be imposed in cases of mere difference of opinion or estimation. The appeal was thus allowed, providing relief to Little Star Commodities Pvt. Ltd.
