2025 (5) TMI 2046 - AT - Income Tax

Penalty u/s 271(1)(c) - additions made purely on estimate guesswork conjectures and surmises - HELD THAT - Minor addition has been confirmed only on estimated basis by applying Gross Profit (GP) rate in respect of deficit in the quantity of goods/cloth sent by the assessee for the job-work against the goods/cloth received from job-workers holding the same was not fully explained. It seems that the impugned minor addition has been confirmed by the Tribunal on estimation basis however the nature of the said addition in our view does not warranted levy of penalty u/s. 271(1)(c). Therefore it is not a case of concealment of income or furnishing of inaccurate particulars of income. Decided in favour of assessee.

Summary

The Appellate Tribunal (ITAT Surat) addressed the assessee's appeal against the CIT(A), NFAC's order dated 21/11/2024 for AY 2008-09, which upheld a penalty under section 271(1)(c) of the Income Tax Act, 1961. The key grounds challenged were: (1) passing the appellate order ex parte without a proper hearing; (2) confirmation of penalty based on additions made purely on "estimate, guesswork, conjectures and surmises" without concealment or inaccurate particulars; and (3) confirmation of penalty on the entire addition of Rs. 5,12,779 despite the ITAT previously upholding only Rs. 36,730.The Tribunal noted that the ITAT Surat Bench had earlier deleted most of the quantum additions except Rs. 36,730, which itself was confirmed on an estimated basis applying Gross Profit rates due to unexplained deficits in job-work cloth quantity. The Tribunal held that such an addition, being estimation-based, "does not warrant levy of penalty u/s. 271(1)(c)" as it is not a case of concealment or furnishing inaccurate particulars. Consequently, the penalty order was "not sustainable" and was set aside.The appeal was allowed, and the penalty under section 271(1)(c) was deleted.