Imposition of penalty based on estimation of income not justified

By TG Team Income Tax Judiciary March 12, 2013

TaxGuru Citation: 2013 taxguru.in 417
Case Name: The Commissioner of Income Tax Vs P Rojes (Madras High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Madras High Court

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Here, it is the admitted case that the assessee filed revised profit and loss account statement showing the net profit of Rs. 3,92,649/- being 5% on Rs. 78,52,980/- and the same having been done before the assessment was completed, we fail to understand as to how the Revenue is justified in imposing penalty under Section 271 (1) (c) of the Act. Therefore by applying the decision of the Hon’ble Supreme Court in (2010) 322 ITR 158 (SC) as well as the decision of the Division Bench of this Court in Tax Case (Appeal) No.273 of 2012 dated 12.09.20012, we reject the appeal filed by the Revenue by answering the substantial question of law against the Revenue.

IN THE HIGH COURT OF MADRAS

Tax Case (Appeal) No. 341 of 2010

THE COMMISSIONER OF INCOME TAX, CHENNAI

P ROJES

R Banumathi And K Ravichandrabaabu, JJ

Dated : February 5, 2013

JUDGEMENT

Per : K Ravichandrabaabu, J :

The Revenue is on appeal against the order passed by the Tribunal in ITA.No.531/Mds/2009 dated 05.10.2009, for the relevant assessment year 2005-2006 by raising the following substantial question of law:-

“Whether on the facts and circumstances of the case, the Tribunal was right in cancelling the penalty contrary to the law laid down in 306 ITR 277 by the Apex Court?”

2. The assessee, is an individual. He originally admitted the income of Rs. 1,99,440/- under Section 44 AF of Income Tax Act. The said assessment was selected for scrutiny under ‘CASS’ based on AIR information, that the assessee had deposited cash of Rs. 47,36,000/- on 31.03.2005. On notice, the assessee filed a letter on 30.11.2007 along with the revised Profit and Loss Account statement with copy of the bank statement and stated that he had not deposited cash of Rs. 47,36,000/- on a single day and that the cash deposit was spread over for the period of twelve months and the deposit was made out of sales and also recovery from the sundry debtors. As such the assessee had admitted the net profit of Rs. 3,92,649/- being 5% of the total gross income of Rs. 78,52,980/-. Further, the assessee agreed for addition of 3% being the profit which works out to Rs. 2,35,589/-. Thus the Income Tax Officer assessed the income as Rs. 6,58,240/-. Consequently, the Assessing Officer imposed penalty of Rs. 4,28,706/- being 300% by invoking his power under Section 271(1)(c) of the said Act.