2025 (1) TMI 1565 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition made on estimations - HELD THAT - A perusal of assessment order shows that penalty has been levied by the AO on the additions made on estimations of income of the assessee. The assessee had filed return of income declaring income u/s. 44AE of the Act. The AO made addition by estimating income of the assessee from running 13 more tempos @10% of per month receipts x 12 months x 13 tempos. It is a well settled legal principle that penalty u/s. 271(1)(c) of the Act cannot be levied on the addition based on estimations. Penalty levied u/s. 271(1)(c) of the Act is unsustainable hence deleted. Appeal of assessee allowed.

Summary

The ITAT Delhi, per Shri Vikas Awasthy, JM, allowed the assessee's appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for AY 2016-17. The penalty was levied on additions made by the AO based on estimated income from 13 additional tempos, calculated at 10% of monthly receipts. The Tribunal emphasized the settled legal principle that "penalty u/s. 271(1)(c) of the Act cannot be levied on additions made on ad-hoc basis." Reliance was placed on precedents including CIT vs. Sangrur Vanaspati Mills Ltd., 303 ITR 53 (P&H), CIT vs. Krishi Tyre Retreading & Rubber Industries, 360 ITR 580 (Raj.), and CIT vs. Subhash Trading Company, 221 ITR 110 (Gujarat). Consequently, the penalty was held unsustainable and deleted, setting aside the CIT(A)'s order.