Case Law Details
Mohammed Rahimuddin Vs ITO (ITAT Hyderabad)
This article examines the case of Mohammed Rahimuddin Vs Income Tax Officer (ITO) as ruled by the Income Tax Appellate Tribunal (ITAT) in Hyderabad. The case focuses on the validity of the penalty levied under section 271A of the Income Tax Act, 1961 due to an estimation-based addition of income.
The tribunal delved into the question of whether an estimation-based addition of income would warrant an automatic penalty under section 270A of the Act. In this case, there was a significant difference between the income declared by the assessee (Rahimuddin) and the income determined by the Assessing Officer based on local enquiries.
Rahimuddin’s counsel argued that the addition was merely a matter of differing opinions and thus, didn’t necessitate a penalty. On the other hand, the Departmental Representative claimed that the increased income determination warranted an automatic penalty.
The tribunal sided with the assessee, arguing that the estimation was without reference to the assessee’s books and could not, therefore, provide a solid foundation for under-reported income for the purpose of a penalty under section 270A.
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