Addition on estimation basis does not lead to concealment or inaccurate particulars for levy of penalty: ITAT

Addition on estimation basis does not lead to concealment or inaccurate particulars for levy of penalty: ITAT

The Assessing Officer issued notice u/s 143(2) and 142(1) along with a questionnaire requiring the assessee to furnish the details and explanations on the return filed by the assessee. In the assessment made u/s 143(3) of the Act the Assessing Officer estimated the income of the assessee at 8% of the gross receipts as the assessee was not coming forward to furnish explanations. The AO brought to tax an amount of Rs. 22,93,543 by estimating the income. On appeal filed by the assessee, the Ld. CIT(A) reduced the percentage of gross profit to 5% against 8% estimated by the AO. The AO levied a penalty u/s 271(1)(c) on the addition sustained by the Ld. CIT(A) i.e. 5% of gross receipts of Rs. 10,53,540. Aggrieved the assessee filed an appeal before the Tribunal which relied on the case of Hari Gopal Singh Vs. CIT and held that addition made on estimation basis that by itself does not lead to the conclusion that the assessee either concealed the particulars of income or furnished inaccurate particulars of such income. The same view was expressed in CIT Vs. Aero Traders Pvt. Limited, that the estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars. The ratio of these decisions were applied to the facts of the assessee’s case. Therefore, the AO was directed to delete the penalty levied u/s 271(1)(c) of the Act and the appeal of the assessee was allowed.