ITAT Cancels ₹20,29,394 Penalty u/s 271AAA, Highlighting Variations in Income Assessment Calculations [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) canceled a penalty of ₹20,29,394 imposed under Section 271AAA of the Income Tax Act,1961 emphasizing the significant variations in income assessment calculations during the proceedings for Assessment Year ( AY ) 2008-09.

Asian Granito India Ltd.,the appellant-assessee,filed an appeal concerning the penalty of ₹20,29,394 levied under Section 271AAA for AY 2008-09. The assessee initially declared a total income of ₹23,62,74,550 in its Return of Income ( ROI ) filed on October 10, 2008.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Following a regular assessment under Section 143(3), the total income was determined at ₹42,55,74,550, which included an addition of ₹18,93,00,000 for alleged undisclosed investments.

On appeal, the Commissioner of Income Tax(Appeals) [CIT(A)] reduced the addition by adopting a net profit rate of 13.04% on the alleged suppressed sales. However, the ITAT further scaled down the addition to 1% of the turnover as reported in the audited accounts.

Following these adjustments, the Assessing Officer ( AO ) initiated penalty proceedings under Section 271AAA, asserting that a penalty was warranted due to the alleged concealed income.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The assessee argued against the imposition of the penalty, emphasizing that the basis for the income addition had undergone significant changes during the appellate process. They contended that, in the absence of specific identification of assets related to any undisclosed income, the imposition of a penalty was unwarranted.

Despite these arguments, the AO levied a penalty of ₹20,29,394 under Section 271AAA. On appeal, the CIT(A) upheld the penalty, prompting the assessee to challenge this decision.

The tribunal deleted the penalty of ₹20,29,394 imposed under Section 271AAA for AY 2008-09, citing changes in the basis of income determination. Initially, the AO made an addition of ₹18,93,00,000 based on gross profit, which the CIT(A) reduced to a net profit rate of 13.04%. The tribunal further scaled it down to 1% of the declared turnover.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

It emphasized that the varying estimates indicated a lack of clear evidence for concealment of income. The bench concluded that penalties could not be imposed when income assessments relied on speculative estimates that differed across authorities.

The two member bench comprising T.R.Senthil Kumar ( Judicial Member ) and Annapurna Gupta ( Accountant Member ) ultimately allowed the appeal and deleted the penalty.

To Read the full text of the Order CLICK HERE

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