Atul Jentilal Gumasna Vs ITO (ITAT Rajkot)
Penalty under section 271AAC(1) cannot be levied on an estimated addition where the quantum addition in respect of unexplained cash deposits has been restricted to an estimated profit element, as an ad hoc estimate does not establish conscious concealment or undisclosed income.
Summary: The assessee, Atul Jentilal Gumasna, filed an appeal against the order of the CIT(A), NFAC, Delhi confirming penalty of Rs. 67,825/- imposed under section 271AAC(1) of the Income Tax Act, 1961 for AY 2017-18. The appeal before the CIT(A) had been filed with a delay of 402 days. The assessee submitted that the delay occurred because of the mistake of the advocate and requested condonation. The Tribunal found mitigating circumstances in the affidavit and condoned the delay. On merits, the penalty arose from an assessment completed under section 147, pursuant to a section 148A(b) notice, an order under section 148A(d) and notice under section 148. The Assessing Officer had treated Rs. 8,78,000/- out of cash deposits as unexplained money under section 69A and initiated penalty proceedings under section 271AAC(1). The assessee contended before the Tribunal that the addition in the quantum proceedings had ultimately been restricted to 10% of the disputed cash deposit on an estimated basis and that there was no conscious concealment. The Revenue argued that penalty could be imposed even on an estimated addition. The Tribunal noted that, in the assessee’s own quantum appeal in ITA No. 488/Rjt/2025, it had directed taxation of only Rs. 87,800/-, being 10% of Rs. 8,78,000/-, considering the documentary evidence furnished and the trading business carried on by the assessee. The Tribunal held that since the quantum addition was made on an estimated and ad hoc basis, there was no conscious concealment warranting penalty. The Tribunal relied upon CIT v. Norton Electronics Systems (P) Ltd. [2014] 41 taxmann.com 280 (Allahabad High Court), where penalty was held unsustainable in circumstances involving additions made on an estimate basis. Accordingly, the Tribunal deleted the penalty of Rs. 67,825/- and allowed the appeal.
