Penalty u/s 271(1)(c) of the Act cannot be levied when Tax addition is on estimated Income basis: ITAT

Penalty u/s 271(1)(c) of the Act cannot be levied when Tax addition is on estimated Income basis: ITAT In this matter, additions were made in Taxpayer's Income to the extent of 8% of purchases, and on appeal, the Hon'ble ITAT has restricted to @4%. Subsequently, the A.O. has initiated the penalty proceedings u/s 271(1)(c) of the Act and passed an order for levy of penalty on Taxpayer. Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A), The CIT(A) dealt on the provisions of 271(1)(c) of the Act and relied on the Coordinate Bench of Hon’ble Tribunal and the Hon’ble High Court decisions and observed that no penalty can be levied on estimated income and directed the A.O. to delete the penalty and allowed the assessee’s appeal. Aggrieved by the order of the CIT(A),the revenue has filed an appeal with the Hon’ble Tribunal. ITAT Order: 8. We are of the opinion that when the addition is on estimated basis, penalty u/s 271(1)(c) of the Act cannot be levied on such adhoc estimated. The disallowance of purchases on ad-hoc/estimated basis does not tantamount to furnishing inaccurate particulars of income under the provisions of Section 271(1) (c) of the Act.  To Read Judgment Download PDF Given Below: