Pawan Kumar Gupta Vs ITO (ITAT Delhi)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi has set aside a penalty of Rs. 96.62 lakh imposed on Pawan Kumar Gupta, proprietor of M/s. Garima Trading Co., for Assessment Years 2013-14 and 2014-15. The tribunal held that penalty under Section 271(1)(c) of the Income-tax Act, 1961, cannot be levied on additions made purely on an estimated basis.
The case involved an individual engaged in the business of trading in fabrics. The assessment for AY 2013-14 was completed under Section 143(3) of the Act, with the Assessing Officer (AO) determining an income of Rs. 3,25,43,787 against a returned income of Rs. 12,73,271. The AO’s assessment was based on observations that the assessee, with a declared turnover of Rs. 38.48 crores, was also proprietor of seven other concerns. Significant cash deposits totaling Rs. 28,04,97,551 were found in a Jammu and Kashmir Bank account.
The AO concluded that the assessee was involved in providing accommodation entries. Consequently, a net profit of 3% of the total turnover was estimated after rejecting book profits from two parties, and this amount was added to the income under Section 68 of the Act. Further, an addition of Rs. 1,13,60,995 was made for unexplained cash deposits in various bank accounts. The tax sought to be evaded was determined at Rs. 96,62,586, leading to the imposition of a penalty under Section 271(1)(c) of the Act. This penalty was subsequently sustained by the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC).
