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June 2023

An addition made on the basis of estimation cannot provide foundation for under-reported income for the purpose of imposition of penalty under section 270A of the Act. The penalty cannot be sustained where the only basis of the addition is the estimate made by the DVO.

By Jagdish Punjabi, Chartered Accountant
Devendra Jain, Advocate
Reading Time 3 mins
11. Jaibalaji Business Corporation Pvt Ltd vs. ACIT
ITA. No.840/PUN/2022 (Pune-Trib.)
A.Y.: 2017-18
Date of order: 10th February, 2023
Section: 270A

An addition made on the basis of estimation cannot provide foundation for under-reported income for the purpose of imposition of penalty under section 270A of the Act. The penalty cannot be sustained where the only basis of the addition is the estimate made by the DVO.

FACTS

The assessee, engaged in the business of solar power generation, filed its return of income declaring total income to be Rs. Nil. The AO assessed the total income to be Rs. 2,80,07,310 by making an addition of equal amount under section 43CA. During the year under consideration, the assessee sold certain lands at a price less than stamp duty value. The AO proposed to make an addition on the basis of stamp duty value. The assessee requested for a reference to DVO. The assessee completed the assessment by taking stamp duty value of certain other properties subject to rectification on receipt of report of DVO. Thereafter, the report was received, pursuant to which the rectification order was passed under section 154 of the Act reducing the addition to Rs.7,05,000. The addition was computed by taking note of the value declared by the assessee (sic taken by the AO) at Rs. 71,83,800 and the value determined by the DVO at Rs. 78,88,800. On th
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