Case Number: ITA 5602/DEL/2019
Appellant: Shravan Kumar Mohta, Faridabad
Respondent: ITO, Ward-2(3), Faridabad
Assessment Year: 2008-09
Case Filed On: 2019-06-27
Order Type: Final Tribunal Order
Date of Order: 2022-06-27
Pronounced On: 2022-06-27
This case involves an appeal filed by Shravan Kumar Mohta, Faridabad against the Income Tax Officer (ITO), Ward-2(3), Faridabad. The appeal was filed on 2019-06-27, and the order was pronounced on 2022-06-27. The main issue in this case was related to the penalty estimation dispute for the assessment year 2008-09.
Shravan Kumar Mohta, the appellant, is an individual residing in Faridabad. The Assessing Officer (AO) noted that as per the AIR information, the appellant had deposited cash aggregating to Rs.17,57,000/- in his savings bank account during the financial year 2008-09. Consequently, a notice under Section 148 of the Income Tax Act, 1961 was served through affixture. The case was then taken up for scrutiny, and assessment was framed under Section 147 read with Section 144 of the Act vide order dated 17.10.2016, completing the assessment on a total income of Rs.17,57,000/-. Additionally, a penalty of Rs.4,89,600/- was levied under Section 271(1)(c) of the Act.
The appellant challenged the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)], Faridabad. However, the CIT(A) sustained the penalty levied under Section 271(1)(c) of the Act for the assessment year 2008-09. The CIT(A) noted that the appellant failed to prove the genuineness of purchases made from M/s. Maa Durga Trading Company, leading to an estimation of the profit element from such purchases at 12.5% as against 30% made by the AO.
The case was presented before the Income Tax Appellate Tribunal (ITAT), Delhi ‘SMC’ Bench, New Delhi. The Tribunal noted that multiple notices had been issued to the appellant for hearing, but no response was received. The Tribunal decided to proceed with the hearing based on the submissions of the Departmental Representative (DR).
The DR submitted that the AO had required the appellant to prove the genuineness of purchases from M/s. Maa Durga Trading Company. As the appellant failed to do so, the AO treated the purchases as unproved and estimated the profit element at 30%, resulting in a disallowance of Rs.45,70,500/-. The penalty of Rs.6,47,297/- was levied for concealment of particulars of income.
Upon hearing the DR and reviewing the orders of the authorities below, the Tribunal observed that both the AO and the CIT(A) had estimated the profit element from the purchases on an ad-hoc basis. It is a settled position of law that penalty cannot be levied when an income is assessed on an estimate basis.
The Tribunal referred to several precedents, including the case of Shri Deepak Gogri vs. ITO (ITA. 1396/Mum/2017), where the Mumbai Bench of the Tribunal held that no penalty is leviable on the estimate of profit element on alleged non-genuine purchases. Similarly, in the case of DCIT vs. Manohar Manak Pvt. Ltd. (ITA. 5586/Mum/2015), the Tribunal held that no penalty can be imposed on estimated additions.
The Tribunal also cited the Hon’ble Punjab & Haryana High Court’s decision in the case of Hari Gopal Singh vs. CIT [258 ITR 85], where it was held that when income is assessed on an estimate basis on turnover, there is no concealment of income or furnishing of inaccurate particulars by the assessee. The Hon’ble Delhi High Court in the case of CIT vs. Aero Traders Pvt. Ltd. [322 ITR 316] affirmed the Tribunal’s decision that an estimated rate of profit applied on the turnover does not amount to concealment or furnishing inaccurate particulars.
In light of these precedents, the Tribunal concluded that the penalty levied under Section 271(1)(c) of the Act could not be sustained as the income was estimated. Therefore, the AO was directed to delete the penalty levied for the assessment year under consideration.
In conclusion, the appeal filed by Shravan Kumar Mohta was allowed, and the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, was deleted. The Tribunal’s decision emphasized that penalty cannot be imposed based on estimated income without conclusive proof of concealment or furnishing of inaccurate particulars of income.
Order pronounced in the open court on 2022-06-27
Signed by:
(C. N. PRASAD) JUDICIAL MEMBER
Date: 2022-06-27
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
Shravan Kumar Mohta vs ITO Ward 2(3), Faridabad – Penalty Estimation Dispute
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