Maruti Infrastructure Ltd. Vs DCIT (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad ruled that penalty under Section 271(1)(c) of the Income Tax Act cannot be levied when income addition is based on estimation. The case involved Maruti Infrastructure Ltd., a real estate development company, for the assessment year 2013-14. The dispute arose when the Assessing Officer (AO) disallowed subcontract payments, treating 40% of them as non-genuine and estimating them as bogus expenses. The CIT(A) reduced the disallowance to 7% of the profit, which was further upheld by the ITAT. However, the AO initiated penalty proceedings and imposed a penalty of ₹4,07,772 under Section 271(1)(c), citing concealment of income.
Maruti Infrastructure Ltd. challenged the penalty, arguing that income additions were purely based on estimation and lacked concrete evidence. ITAT referenced precedents, including Bombaywala Readymade Stores and Thakorbhai & Company, which held that penalties cannot be imposed when assessments are based on income estimation. The Tribunal concluded that the addition of 7% profit, as determined in this case, did not justify the penalty under Section 271(1)(c). Consequently, the appeal by Maruti Infrastructure Ltd. was allowed, and the penalty was deleted. This case reaffirms the principle that penalties for concealment cannot be levied on estimated income adjustments.
