Presumptive Assessment Sustains Concealment Penalty but Defeats Books Penalty: ITAT Nagpur

Rajan Keshavraoji Parate Vs ITO (ITAT Nagpur)

Summary: The Nagpur “SMC” Bench heard the assessee’s appeals against two penalties for AY 2016-17. The assessee had filed his original return declaring income of Rs. 3,19,530/-. Following information about cash deposits of Rs. 1,01,53,606/- with M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd., he filed a return on 06.02.2024 declaring Rs. 4,72,600/-. The Assessing Officer noted that books of account had not been maintained and no audit under section 44AB had been carried out. Applying the 8% presumptive rate under section 44AD, the officer made an addition of Rs. 3,39,690/-. The assessee did not challenge that addition. Separate penalties of Rs. 67,153/- under section 271(1)(c) and Rs. 25,000/- under section 271A were sustained by the CIT(A).

The assessee argued that a penalty for concealment could not stand where income was estimated, and that computation at the presumptive rate removed the requirement to maintain regular books. The Tribunal distinguished an estimate made after examining books from this case, where no books had been maintained. It held that the assessee knew of the relevant transactions when filing the return in response to the reopening notice but offered less than the income computed at 8%. It therefore confirmed the Rs. 67,153/- penalty under section 271(1)(c). As the Assessing Officer had himself computed income under section 44AD, the Tribunal found no reason to impose a separate penalty for failing to maintain regular books and deleted the section 271A penalty.