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It is a settled principle of law that where addition to assessee’s income is made on estimate basis penalty under section 271(1)(c) cannot be imposed.

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Sec. 271(1)(c) of Income Tax Act, 1961 - Penalty - Assessee filed the appeal against the order of CIT(A) arising out of the order passed by the ITO, under section 274 r/s. 271(1)(c) of the IT Act, 1961 for the A.Y. 2013-14 submitting that the assessment order was passed making addition purely on estimate basis without any base; neither positive facts nor finding has been found so as to make such addition. High Court allowed the appeal of the assessee holding that ”it is a settled principle of law that where addition to assessee’s income is made on estimate basis penalty under section 271(1)(c) cannot be imposed. It is on record that the addition was made on estimation of net profit @ 1.5% by the Ld. AO and hence there is no merit in levying penalty under section 271(1)(c) of the Act. Thus, in the absence of any merit in the order passed by the authorities below is quashed. The addition is therefore, deleted“.—SHRI SAMATBHAI MALABHAI PARMAR vs. ITO.[2020] 26 ITCD Online 022 (ITAT-RAJKOT)