Penalty under s.271(1)(c) invalid where income assessed on estimated basis as estimation precludes concealment or partial concealment

ITAT Delhi (AT) held that a penalty under s. 271(1)(c) cannot be sustained where income is assessed on an estimated basis, since estimation precludes a finding of concealment or partial concealment. The tribunal deleted the penalty and allowed the assessee's grounds on merits, directing removal of the levy imposed on the estimated income.

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Assessment under section 147 read with section 143(3) for AY 2011-12 found returned income declared under section 44AD at Rs.1,87,132 on gross turnover of Rs.22,50,000. Form 26AS showed receipts of Rs.38,00,000 as commission/brokerage; assessee claimed Rs.15,50,000 received in next year and taxed on cash basis. AO rejected explanation, made addition of Rs.36,12,868 and levied penalty under section 271(1)(c) (penalty order dated 16.03.2022) amounting to Rs.4,29,510. CIT(A) reduced the quantum addition to 25% of commission income and reduced the penalty from 300% to 100%, fixing penalty at Rs.1,43,170. Appellate Tribunal held that the penalty was imposed on an estimated income and applied the principle that "no penalty could survive on estimated income as there cannot be any partial concealment and non-concealment of income." Consequently, levy of penalty under section 271(1)(c) was deleted and the appeal was allowed; other legal challenges to penalty proceedings were left open.

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