NMC Industries Private Limited Vs JCIT (ITAT Mumbai)
The appeal concerns the penalty imposed under section 271(1)(c) of the Income-tax Act for the assessment year 2010–11. The assessee, engaged in trading iron and steel bars, had filed its return declaring income of ₹3,63,36,810. The return was selected for scrutiny, and assessment was completed under section 143(3). Based on information from the Maharashtra Sales Tax Department identifying certain dealers as hawala operators issuing accommodation bills, the Assessing Officer reopened the assessment under section 147, alleging that purchases from eight such parties were non-genuine.
During reassessment, the assessee submitted invoices, ledger accounts, bank statements, and sales bills, contending that all transactions were routed through banking channels and duly recorded. The Assessing Officer rejected these explanations due to absence of transport-related documents and treated the purchases as inflated. Using the peak-credit method, he computed incremental credit of ₹6,52,93,348.
In the first appeal, the CIT(A) discarded the peak-credit method and instead restricted disallowance to an estimated 17% of the unverifiable purchases. Both sides appealed. The Tribunal, in its order dated 26 July 2017, found purchases from four parties totalling ₹5,43,11,114 to be genuine. For the remaining four parties involving purchases of ₹8,37,06,932, the Tribunal directed estimation of profit at 15%, amounting to ₹1,25,56,040. This estimated addition later became the foundation for penalty under section 271(1)(c).
