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of <h1>Penalty under Section 271(1)(c) not justified when income estimated under Section 44AD in accepted business activity</h1> The ITAT Chennai held that since the assessee's business activity was accepted and income was estimated under section 44AD, the penalty under section ... Penalty u/s 271(1)(c) - assessee deposited cash in its bank accounts - income estimated u/s 44AD - AO reopened the case of the assessee and estimated income of 8% on total deposit - CIT(A) confirmed the same n the ground that the assessee failed to explain the sources of the same - HELD THAT:- It clearly emerges that the fact of carrying out of business has been accepted by Ld. AO and income has been estimated u/s 44AD. In our considered opinion, penalty could not be levied on estimation of income. It is not a fit case for levy of penalty. Assessee appeal allowed. The Appellate Tribunal (ITAT Chennai) allowed the assessee's appeal against the penalty u/s 271(1)(c) of the Income Tax Act amounting to Rs. 77,639/- for AY 2013-14. The penalty was imposed by the AO following reopening of the case due to non-filing of return and unexplained cash deposits of Rs. 74.59 lakhs, with income estimated at 8% under section 44AD. The CIT(A) had confirmed the penalty on the ground that the assessee failed to explain the source of deposits. The Tribunal held that since the AO accepted the business and estimated income under section 44AD, 'penalty could not be levied on estimation of income' and 'it is not a fit case for levy of penalty.' Consequently, the appeal was allowed and the penalty set aside.
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