2025 (6) TMI 237 - AT - Income Tax

Taxpayer Wins Appeal: Penalty Quashed as Income Tax Authorities Cannot Impose Penalties Based Solely on Estimated Income

ITAT Delhi allowed an appeal against a penalty under Section 270A of Income Tax Act. The Tribunal quashed the penalty of Rs. 15,601 imposed on estimated ... Penalty imposed u/s 270A - addition on estimated basis being 10% of income @ 7500 per tempo in 13 tempos whereas assessee was running 10 tempos owned by him - HELD THAT:- Order of penalty having been issued on the basis of addition made by the Ld. AO on estimating income of the assessee from running 13 more tempos at @ 10% per month, receipts x 12 months x 13 tempos, the same is found to be unsustainable in the eyes of law as already been decided [2025 (1) TMI 1565 - ITAT DELHI] respectfully relying upon the same the impugned penalty is found to be not sustainable in the eyes of law and therefore, quashed. Appeal of the assessee is allowed. The Appellate Tribunal (ITAT Delhi) heard an appeal by the assessee against penalty imposed under Section 270A of the Income Tax Act, 1961, for AY 2017-18. The penalty arose from an addition of Rs. 1,17,000 made by the AO on an estimated income basis-calculating 10% of income from 13 tempos, whereas the assessee owned only 10 tempos. The penalty of Rs. 15,601 was confirmed by the CIT(A).The assessee's counsel contended that 'penalty cannot be levied on the addition based on estimation,' relying on judicial precedents and a Coordinate Bench order dated 15.01.2025, which held penalties unsustainable when based solely on estimated additions. The Revenue did not dispute this submission.The Tribunal, after considering the facts and the Coordinate Bench's ruling, held that the penalty imposed 'is found to be not sustainable in the eyes of law and therefore, quashed.' Consequently, the appeal was allowed.