The Chennai bench of the Income Tax Appellate Tribunal (ITAT) in its recent ruling in the case of Sri Saibaba Swamigal Thirumana Mandapam has held that the penalty order under section 271(1)(c) of the Income Tax Act, 1961 cannot be levied merely based on estimated additions.
Facts of the Case:
Penalty proceedings were initiated against the assessee, Sri Saibaba Swamigal Thirumana Mandapam, in the assessment order on the addition made towards estimated rental receipts generated by the assessee by conducting the functions during the year. Upon further appeal, Ld. CIT(A) allowed 50% of the amount as estimated expenditure and also upheld the penalty on the ground that concealment was established.
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.
Order of ITAT:
ITAT 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.
ITAT adjudged that 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. ITAT view was 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.
In view of above deliberations the Tribunal bench comprising Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, AM deleted the impugned penalty and allowed the appeal of the assessee.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
