Puran Chan & Co. Vs DCIT (ITAT Dehradun)
The ITAT held that penalties under Section 271(1)(c) cannot be levied on estimated income, deleting the portion of the penalty attributable to such estimates while sustaining penalty on confirmed additions. Emphasizing that penalties must be based on precise, verifiable income particulars—not assumptions—the Tribunal reaffirmed that only actual taxable income can trigger concealment or inaccurate-particulars penalties.
This appeal concerned penalty u/s 271(1)(c) levied after the quantum order u/s 143(3). Assessee argued that the penalty notice dated 28.12.2018 was invalid since no limb-concealment or inaccurate particulars-was specified. The Tribunal rejected this contention, finding that the operative penalty notice was the later notice dated 02.12.2024, issued after the CIT(A)’s quantum order, & that this notice specifically mentioned the limb “concealed the particulars of income.” No penalty order was ever passed pursuant to the older 2018 notice. This ground was dismissed.
On the merits, the Assessee argued that the penalty was imposed on estimated income, which is impermissible. The Department claimed that the penalty covered both estimated income & other additions, but neither party produced bifurcation details. The Tribunal held that it is a settled legal position that penalty cannot be sustained on additions made purely on estimation, & therefore deleted the portion of penalty relatable to estimated income, while sustaining any remaining penalty on non-estimated additions.
