The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that the penalty order under section 271(1)(c) of the Income Tax Act, 1961 cannot be levied merely based on estimate addition.
Penalty proceedings were initiated against the assessee, Sri Saibaba Swamigal Thirumana Mandapam, in the assessment order. The assessee challenged the order contending that the additions were estimated additions without reference to regularly maintained books of accounts. It was also contended that the penalty would not be automatically attracted merely because there were some estimated additions which were made solely on the basis of statement recorded during the course of survey action.
The Tribunal bench comprising Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, AM observed that the additions as made by Ld. AO in the quantum order were estimated additions on the basis of a register containing the details of number of functions conducted at assessee’s premises.
“However, the same are mere estimated additions and there is no corroborative material on record to establish that the assessee actually received receipts of that magnitude. The same is further evident by the fact that Ld. CIT(A) has granted allowance of 50% for estimated expenditure and reduced the quantum addition. In our considered opinion, additions which are mere estimated additions do not attract penalty u/s 271(1)(c) and it is not a fit case of levy of penalty. Our view is duly fortified by the decision of coordinate bench of Chennai Tribunal in the case of Sri Saibaba Guest House V/s ITO (ITA No.2784/Chny/2018 dated 04.08.2021) wherein the penalty, on similar factual matrix, has been cancelled. Accordingly, we delete the impugned penalty and allow the appeal of the assessee,” the Tribunal said.
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