Penalty cannot be levied on the basis of estimated additions

Laxman Trimbak Gule Vs ITO (ITAT Pune)

In the present case, the Assessing Officer estimated the disallowance at 50% being Rs.9,90,685/- and initiated penalty proceedings u/s.274 r.w.s 271(1)(c) of the Act. It is a basic need of the provisions of law that definite finding is required to be recorded by the Assessing Officer for reaching to a conclusion with regard to concealment of income or furnishing of inaccurate particulars of income and without any such findings, there cannot be any question of imposition of any penalty u/s.271(1)(c) of the Act. We find that the Ld. CIT(Appeals) relying on the written submission filed by the assessee adjudicated the claim of commission and also improvement expenditure but failed to make specific enquiry regarding the same and came to a conclusion based on only materials on record. We find that the disallowance upheld by the Ld. CIT(Appeals) is merely on estimate basis without any categorical statement of facts whether there is „concealment of income‟or „furnishing of inaccurate particulars of income‟. More so, when the disallowances have been enforced by the Ld. CIT(Appeals) on estimation basis, in such scenario, the settled legal position is that no penalty u/s.271(1)(c) of the Act cannot be imposed.

Hon‟ble Delhi High Court in CIT vs. Aero Traders Pvt. Ltd.(supra.) has held that no penalty u/s.271(1)(c) of the Act can be imposed when income is determined on estimate basis.

Therefore, keeping in view the totality of the facts and circumstances of the case, we are of the considered view that in this case, the additions were made on the basis of estimation and as discussed in the cases referred above, the penalty cannot be levied on the basis of estimated additions and thus, it is not a fit case for levying penalty.

FULL TEXT OF THE ORDER OF ITAT PUNE

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