PAWAN KUMAR GUPTA,DELHI V. INCOME TAX OFFICER, WARD 34(1), DELHI, DELHI

ITA 3504/DEL/2024

AI Insights

The case involves appeals by Pawan Kumar Gupta against the penalty orders issued by the Income Tax Officer (ITO), Ward 34 (1), Delhi, for the Assessment Years 2013-14 and 2014-15. The penalties were imposed following an assessment that significantly increased Gupta's declared income, based on findings that he had engaged in providing accommodation entries and made unexplained cash deposits. The Tribunal considered the appeals together due to the commonality of issues and facts across the two years. The primary legal contention was whether penalties could be imposed on income additions that were estimated rather than precisely quantified. The Tribunal found that the penalties were not warranted given the subjective nature of the estimated additions, referencing several High Court decisions that supported the deletion of such penalties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471592 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Other Referred Cases: CIT vs. Krishi Tyre Retreading and Rubber Industries, CIT vs. Sangrur Vanaspati Mills Ltd., CIT vs. Subhash Trading Co. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: SURESH GUPTA
• Keywords: Accommodation entries
• Section: 143(3); 271(1)(c); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.3504/DEL/2024 (Assessment Year: 2013-14) ITA No.3505/DEL/2024 (Assessment Year: 2014-15) Pawan Kumar Gupta, vs. ITO, Ward 34 (1), A-116, Ashok Vihar, Phase – 3, Delhi. Delhi – 110 052. (PAN :AANPG2625E) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Suresh Gupta, CA REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 13.11.2024 Date of Order : 07.02.2025 ORDER PER S.RIFAUR RAHMAN,AM: 1. These appeals are filed by the assessee against the separate orders of ld. Commissioner of Income-tax Appeals/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 05.10.2023 & 06.10.2023 for Assessment Years 2013-14 & 2014-15 respectively. 2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take ITA No.3504/Del/2024 for AY 2013-14 as lead case. 2 ITA Nos.3504 & 3505/DEL/2024 3. These appeals are filed by the assessee against the penalty order under section 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’). In the penalty order, the AO observed that the assessee is individual and engaged in the business of trading in fabrics under name and style as M/s. Garima Trading Co.. The assessment was completed u/s 143(3) of the Act on 30.03.2016 at an income of Rs.3,25,43,787/- against the returned income of Rs.12,73,271/-. In the assessment proceedings, the AO proceeded to make addition with the observation that assessee has declared turnover of Rs.38.48 crores and it was found that assessee is also proprietor of seven other concerns and it was found that assessee has deposited cash in Jammu and Kashmir Bank account to the extent of Rs.28,04,97,551/-. It was noticed that assessee was indulged in providing accommodation entries and the net profit was estimated @ 3% of the total turnover after rejecting the book profit from two parties and the same was added to the income u/s 68 of the Act. Further addition was made for the unexplained cash deposit made in the various bank accounts to the extent of Rs.1,13,60,995/-. Accordingly, amount of tax sought to be evaded was determined at Rs.96,62,586. Accordingly, penalty was imposed. 4. At the time of hearing, ld. AR of the assessee brought to our notice that in the quantum proceedings, the coordinate Bench deleted the considerable amount by adopting the net profit on estimation basis and deleted the other additions proposed by the AO. Based on the above, he prayed that quantum made by the AO and later sustained by the ITAT is only on estimation basis and penalty cannot be imposed on the income which is on the basis of estimation basis. He also submitted copy of OGE u/s 254/143(3) of the Act which is placed on record at page 30 of the paper 3 ITA Nos.3504 & 3505/DEL/2024 book. Accordingly, he prayed that the above penalty imposed in both the assessment years be deleted. 5. On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities. 6. Considered the rival submissions and material placed on record. We observed that in this case, assessment was completed u/s 143(3) of the Act on 30.03.2016 at an assessed income of Rs.3,25,43,787/- against the returned income of Rs.12,73,721/. We observed that the ld. CIT (A) dismissed the appeal filed by the assessee against the order of the Assessing Officer. We observed that the Assessing Officer made the penalty of Rs.96,62,586/- u/s 271(1)(c) of the Act which was sustained by the ld. CIT (A). Further we observed that ITAT in the quantum appeal being ITA No.789/Del/2024 vide order dated 03.05.2024 partly allowed the appeal of the assessee and sustained the addition on estimation basis. We observed that the assessee is aggrieved against confirmation of penalty on the basis of estimated addition made in quantum assessment. 7. Further we observed that bearing in mind the fact that the related quantum addition was purely on estimated basis with inherent subjectivity involved, we are of the opinion that no penalty is warranted. For taking such an action, we rely on the following decisions of Hon’ble High Courts wherein Hon’ble High Courts have upheld the action of the Tribunal deleting penalty levied on estimated quantum addition as under :- (i) CIT vs. Krishi Tyre Retreadign and Rubber Industries 360 ITR 580 (Raj.); (ii) CIT vs. Sangrur Vanaspati Mills Ltd. 303 ITR 53 (P&H); and (iii) CIT vs. Subhash Trading Co. Ltd. 221 ITR 110 (Guj.) 4 ITA Nos.3504 & 3505/DEL/2024 8. Thus, as noted above, the issue as to whether the penalty u/s 271(1)(c) of the Act be levied on estimated quantum addition is no longer res-integra, therefore, we are inclined to direct the deletion of the penalty levied and the appeal for AY 2013-14 is allowed. 9. With regard to appeal for AY 2014-15 is concerned, since the facts are exactly similar to AY 2013-14 our above findings in AY 2013-14 are applicable mutatis mutandis in AY 2014-15. Accordingly, the appeal being ITA No.3505/Del/2024 for AY 2014-15 filed by the assessee is allowed. 10. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on 7.02.2025. Sd/- sd/- (SUDHIR KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07.02.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "