AJIT KUMAR JAIN,DELHI V. ACIT, CENTRAL CIRCLE- 2 , NEW DELHI

ITA 3405/DEL/2019

AI Insights

The case involves Ajit Kumar Jain, the appellant, who contested a penalty imposed by the Commissioner of Income Tax (Appeals)-23, New Delhi, under section 271(1)(c) of the Income Tax Act, 1961, following an enhanced assessment for the assessment year 2009-10. The penalty was levied after the CIT(A) enhanced the income assessed by the Assessing Officer by Rs.23,35,240, based on estimations of income from contract receipts and commission work. The appellant argued that penalties should not be levied on estimations, supported by various judicial precedents. The department defended the penalty, but the Tribunal, referencing decisions from the Delhi and Punjab & Haryana High Courts, concluded that penalties are not applicable where additions are made on estimations.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126402 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Other Referred Cases: CIT vs Aero Traders P. Ltd. (2010) 322 ITR 316 (Delhi), CIT vs Vatika Construction P Ltd. 45 taxmann.com 471 (Delhi), Harigopal Singh vs. CIT 258 ITR 85 (P&H)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI
• Assessee Lawyers: PARUL AGGARWAL; CHARTERED ACCOUNTANT
• Keywords: Set aside; Question of law; Dismissed; Judgment; Commissioner; Commissioner of Income Tax; Substantial question of law; Deleted; 153A; Income from contract receipts; Department
• Section: 147; 143(3); 271(1)(c); 153A; 274; 258

Judgement Text

" आयकर अपीलीय अिधकरण िदʟी पीठ “ए”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी एस įरफौर रहमान, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER आअसं.3405/िदʟी/2019(िन.व. 2009-10) ITA No. 3405/DEL/2019 (A.Y. 2009-10) Ajit Kumar Jain, 22E, Gali No. 18, Kailash Nagar, Gandhi Nagar, Delhi 110092 PAN: AHYPJ-7479-H ...... अपीलाथᱮ/Appellant बनाम Vs. Commissioner of Income Tax(Appeals)-23, New Delhi ..... ᮧितवादी/Respondent Assessee by : Ms. Parul Aggarwal, Chartered Accountant Department by: Shri Ashish Tripathi, Sr. DR सुनवाई कᳱ ितिथ/ Date of hearing : 24/04/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 24/04/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-23, New Delhi (hereinafter referred to as 'the CIT(A)'), dated 08.02.2019, for assessment year 2009-10 levying penalty u/s.271(1)(c) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) on enhanced assessment. 2 ITA No. 3405/Del/2019 (AY 2009-10) 2. Ms. Parul Aggarwal, appearing on behalf of the assessee submits that a search was conducted at the premises of assessee on 10.03.2015. Subsequently, two parallel proceedings were initiated against the assessee, one u/s. 147 of the Act by Assessing Officer (AO) of Ward-59(2), New Delhi and another u/s. 153A r.w.s. 143(3) of the Act by the AO of Central Circle -2, New Delhi. Aggrieved by two aforesaid assessment orders, the assessee filed two separate appeals before the CIT(A). The CIT(A) vide single order dated 16.10.2018 decided both appeals of the assessee. The CIT(A) allowed appeal of the assessee against the assessment order passed u/s. 147 of the Act. Whereas in respect of assessment order passed u/s. 153A r.w.s 143(3) of the Act, the CIT(A) enhanced the addition made by the AO by Rs.23,35,240/-. The CIT(A) also initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of particulars of income and furnishing inaccurate particulars of income. The CIT(A) thereafter passed order dated 08.02.2019 u/s. 271(1)(c) r.w.s. 274 of the Act levying penalty of Rs.7,68,105/-. The ld. Counsel submits that a perusal of the assessment order and the order of CIT(A) would show that the additions/enhancement is merely on the basis of estimations. She vehemently asserted that it is a settled proposition that no penalty is leviable on additions based on estimations. To support her argument, the ld. Counsel placed reliance on following decisions:- (i) CIT vs Aero Traders P. Ltd. (2010) 322 ITR 316 (Delhi); (ii) CIT vs Vatika Construciton P Ltd. 45 taxmann.com 471 (Delhi); and (iii) Harigopal Singh vs. CIT 258 ITR 85 (P&H). 3. Per contra, Shri Ashish Tripathi representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. 3 ITA No. 3405/Del/2019 (AY 2009-10) 4. Both sides heard, orders of the authorities below examined. This appeal by the assessee is against the order of CIT(A) levying penalty u/s. 271(1)(c) of the Act. The AO in assessment proceedings u/s. 153A r.w.s. 143(3) has assessed total income of the assessee at Rs.23,35,242/-. The CIT(A) in First Appellate proceedings enhanced the income of assessee by Rs.22,59,800/- and has thereafter levied penalty u/s. 271(1)(c) of the Act. A perusal of the assessment order reveals that the AO has estimated net income of the assessee, that is, income from contract receipts has been estimated at the rate of 8% and income from commission work has been estimated at the rate of 12%. The CIT(A) has thereafter enhanced aforesaid income by Rs.22,59,800/- and vide order dated 08.02.2019 has levied penalty u/s. 271(1)(c) of the Act on enhanced assessed income. 5. It is no more res integra that penalty proceedings u/s. 271(1)(c) of the Act are unsustainable where the addition has been made on estimations. The Hon’ble Jurisdictional High Court in the case of CIT vs. Aero Traders P Ltd. has upheld the order of Tribunal where penalty u/s. 271(1)(c) of the Act by the Tribunal was deleted where penalty was levied on additions merely based on estimations. For the sake of completeness relevant extract of the judgment rendered by the Hon’ble Delhi High Court in the case of CIT vs. Aero Traders P Ltd. is reproduced herein below:- 5. Against this order, the assessee filed an appeal before the CIT(A), who deleted the penalty imposed vide order dated 07.09.2007, holding that the addition made by the Assessing Officer on the basis of estimated profit cannot be a subject matter of penalty for concealment of income. The CIT(A) further found that penalty was not imposable in view of the substantial deduction given by the Tribunal and observed as under: 4 ITA No. 3405/Del/2019 (AY 2009-10) \"I have considered the submissions of the assessee and perused the facts that are ruling in the instant case. There is no doubt that there are certain discrepancies noticed in the course of special audit as brought out in their report. However, such discrepancies by itself ipso facto lead to the conclusion that the assessee has concealed the income. Ultimately the AO has to resort to estimated addition only. He could not point out any specific item of any addition with any conclusive evidence. Even the addition made by the AO on estimated basis is substantially reduced by the CIT (A) after considering the various facts and figures and circumstances of the case. The said action of the CIT (A) has become final consequent to the decision of the Hon‟ble ITAT in dismissing the department appeal. Resultantly the income of Rs.1,02,980/- is on the basis of estimated profit ratio only. It is not on account of any specific item of addition or disallowance. Such an addition made on the basis of guess work cannot be subjected matter of penalty for concealment of income. Penalty being a quasi criminal proceeding there is a duty cast on the AO to establish the guilt of the assessee in concealing the income or furnishing of inaccurate particulars of such income. As stated the seizure of the books of the police is not an act of the assessee. No motives can be attributed to the non- availability of books of accounts to examine and verify the various claims made by the appellant.\" 6. Aggrieved by this order, the revenue filed an appeal before the Tribunal. The Tribunal, after hearing the submissions made on behalf of the revenue, came to the conclusion that the CIT(A) had taken the correct decision in deleting the penalty. The operative portion of the impugned order dated 04.12.2008 is as follows: \"As the facts emerge the substantial quantum relief was given by the CIT (A) which has been confirmed by the Tribunal, the balance pertains to estimated rate of profit applied on the turnover of the assessee which in our view does not amount to concealment or furnishing inaccurate particulars. In our view, the CIT (A) has taken right decision in deleting the penalty which is upheld.\" 7. The appeal is filed against the abovementioned order of the Tribunal dated 04.12.2008. The finding arrived at by the Tribunal does not warrant interference from this Court as it is purely a finding of fact. No perversity has been pointed in such a finding. Consequently, no substantial question of law arises for consideration. As a result, the appeal is dismissed. 6. Similar view has been expressed by Hon’ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT (supra) where penalty u/s. 271(1)(c) of the Act was levied on additions based on estimations. 7. Thus, in light of facts of the case and the decisions referred above, we find merit in submissions of the ld. Counsel for the assessee. Accordingly, we hold that 5 ITA No. 3405/Del/2019 (AY 2009-10) penalty levied u/s. 271(1)(c) of the Act in instant case is unsustainable, hence, deleted. 8. In the result, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Thursday the 24th day of April, 2025. Sd/- Sd/- (S RIFAUR RAHMAN) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 24/04/2025 NV/- ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "