Santosh Kumar Burnwal Vs ITO (ITAT Kolkata)
No 271(1)(c) Penalty on Peak Credit Additions: ITAT Deletes Penalty After Quantum Relief on Estimated Basis
The Kolkata ITAT deleted penalty levied under Section 271(1)(c) after holding that once quantum addition itself is restricted on the basis of peak credit theory and estimated computation, penalty for concealment or furnishing inaccurate particulars cannot survive.
The assessee, Santosh Kumar Burnwal, had originally faced addition of ₹1.70 crore on account of unexplained cash deposits in an ICICI Bank account. During appellate proceedings, the assessee explained that he was acting as a middleman and the deposits largely represented funds belonging to clients from whom he collected cash for onward transactions. Details of 24 persons were also furnished before the authorities.
The CIT(A), after examining the facts in the quantum proceedings, applied the peak credit theory and drastically reduced the taxable addition to only ₹2.87 lakh. Based on the reduced peak credit addition, the Assessing Officer nevertheless levied penalty of ₹39,478 under Section 271(1)(c), alleging concealment of income.
The Tribunal held that where income is ultimately determined on estimated basis by applying peak credit theory, it cannot automatically lead to penalty proceedings for concealment or furnishing inaccurate particulars. The ITAT relied upon the Chennai Tribunal ruling in ITA No.728/2023, wherein it was held that estimated peak-credit additions do not justify levy of penalty under Section 271(1)(c).
Observing that the facts of the present case were substantially similar, the Tribunal concluded that the assessee’s explanation had been substantially accepted in the quantum proceedings and the final addition itself rested merely on estimation. Accordingly, the entire penalty was deleted.
Assessee Represented by : Shri Suvo Chakraborty, AR
FULL TEXT OF THE ORDER OF ITAT KOLKATA
