Income Tax Penalty u/s 271AAB deleted as assessee was declaring income on presumptive basis, was not required to maintain books and addition was made on estimated basis.
ABCAUS Neutral Case Law Citation:
ABCAUS 3680 (2023) (03) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming Income Tax Penalty under section 271AAB of the Income Tax Act, 1961 (the Act) imposed by the Assessing Officer (AO).
The appellant assessee was engaged in civil construction business and was offering income on presumptive basis. He was subjected to a search action u/s 132 of the Act leading to seizure of cash. The cash seized by the assessee was not taken into consideration in the return of income.
During the course of assessment proceedings, the assessee submitted that cash was kept for medical emergencies and the same could not be supported by any books of accounts since the income was offered on presumptive basis.
It was also submitted that most of the earnings were in cash. However, rejecting the same, the AO made additions for the cash seized.
On appeal, CIT(A), considering the income of the assessee for past 10 years, held that it would be reasonable to hold approx. 60% of the cash seized as explained money and the balance would be unexplained money. Accordingly, the addition was restricted to the extent of approx. 40% .
Consequently, penalty proceedings were initiated by the AO and penalty of 30% was levied u/s 271AAB on alleged undisclosed income as sustained by the CIT(A).
The Tribunal observed that the assessee was offering income on presumptive basis and most of the earnings were in cash only. Also, the assessee was not required to maintain any books of accounts.
The Tribunal opined that addition sustained by the CIT(A) was on mere estimation which could not be visited with impugned penalty.
Accordingly, the penalty was deleted.
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