Ratnaram Kohlaram Chaudhary Vs ITO (ITAT Mumbai)
Penalty u/s 271(1)(c) was imposed in reassessment proceedings where AO treated certain purchases as bogus based on Sales Tax Department information and estimated profit element at 25%/12.5%, which was later reduced by CIT(A) to 6.5%/6%. Tribunal observed that additions were purely on estimated profit basis and not on concrete proof of concealment. Relying on jurisdictional Bombay HC decision in Pr.CIT vs Colo Colour Pvt Ltd and settled law, ITAT held that when income is determined on ad-hoc estimation or guesswork, it cannot automatically lead to penalty for furnishing inaccurate particulars.
ITAT noted that AO himself accepted existence of purchases and only estimated profit element, showing absence of clear finding of concealment. Since penalty provisions require conscious concealment or inaccurate particulars, and assessment addition was merely estimation-based, levy of penalty was held unsustainable. Accordingly, penalties for A.Y. 2009-10 to 2011-12 were deleted and assessee’s appeals allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned appeals by the same assessee, arise out of three separate orders, passed by National Faceless Appeal Centre (‘NFAC’ for short), Delhi confirming the penalty imposed u/s. 271(1)(c) of the Income Tax Act, 1961 (`the Act’ for short) for the assessment years (A.Y. for short) 2009-10 to 2011-12.
