No penalty u/s 271(1)(c) can be levied when addition is made on estimate basis: ITAT

Delhi Income Tax Tribunal in the matter of Sushila Goyal vs ITO has said that it is a settled position that on the addition made on estimate basis, no penalty u/s 271(1)(c) of the Act is leviable as for levying of penalty u/s 271(1)(c) of the Act, AO has to clearly prove that assessee has concealed his income or has furnished inaccurate particulars of income.

The issue in the present ground is with respect to the levy of penalty u/s 271(1)(c) of the Act. It is an undisputed fact that during the year under consideration, assessee had taken aggregate loans and advances from various parties (listed at page 2 of the assessment order). On the aggregate of such loans of Rs.11,09,45,000/- and in absence of details to the satisfaction of AO, AO calculated the income @ 0.5% of the aggregate loans and advances and determined the income to be taxed under ‘income from other sources’ at Rs.5,54,725/-. On such additions, AO has levied the penalty u/s 271(1)(c) of the Act.

Considering the undisputed fact that the addition on which the penalty has been levied is on an estimate basis, ITAT was of the view that AO was not justified in levying the penalty u/s 271(1)(c) of the Act. Accordingly, AO was directed to delete the levy of penalty u/s 271(1)(c) of the Act. Thus the ground of the assessee was allowed.