Charanjit Singh Vs ITO (ITAT Delhi)
Estimated Income Cannot Constitute Concealment- No Concealment in Estimation – ITAT Deletes Penalty u/s 271(1)(c)
Delhi ITAT has categorically held that imposition of penalty u/s 271(1)(c) cannot be justified where the income of an assessee is assessed merely on the basis of estimation. The case pertained to assessee wherein AO had treated cash deposits in the bank account as undisclosed income & simultaneously levied penalties for alleged concealment.
Assessee had deposited sizeable amounts of cash in his Bank account during the relevant period but had not filed returns of income originally. AO, acting on information, reopened the assessments u/s 148 & assessed the entire deposits as taxable income. Consequently, incomes of ₹64.44 lakh for AYs 2009-10, ₹1.24 crore for 2010-11 & ₹1.03 crore for 2011-12 were determined. Penalty proceedings u/s 271(1)(c) were also initiated & penalties were imposed on the ground of concealment of income.
On appeal, CIT(A) accepted the deposits as business receipts but estimated profits at 25% of such receipts. While partially reducing the assessed income, CIT(A) nonetheless confirmed the penalties by observing that concealment had taken place.
Before Tribunal, Assessee argued that the additions were made purely on the basis of estimated profit & therefore concealment penalty could not survive. It was pointed out that in earlier years 2007-08 & 2008-09, Tribunal had already taken a similar view & deleted both the additions & the consequential penalties. Tribunal noted that in the earlier years it had categorically accepted the explanation of Assessee that cash deposits were nothing but business turnover & only a percentage of net profit could be brought to tax. Following the same reasoning, the Bench held that in the impugned years as well, the income was determined only on the basis of estimation. It further held that estimated additions, however quantified, cannot amount to concealment of particulars of income or furnishing of inaccurate particulars so as to attract penalty u/s 271(1)(c). Accordingly, Tribunal set aside the orders of the lower authorities & deleted the penalties for all three assessment years, thereby allowing the appeals of Assessee.
