R. J. Corporation Vs ITO (ITAT Mumbai)
In the ITAT Mumbai allowed the assessee’s appeals and deleted penalties levied u/s 271(1)(c) for A.Ys. 2010-11 & 2011-12, holding that penalty cannot survive where additions are purely based on estimation of profit from alleged bogus purchases.
The assessee firm was subjected to reassessment based on Sales Tax Department information alleging accommodation purchase bills. The AO rejected books u/s 145(3) and estimated profit at 12.5% on such purchases instead of disallowing them fully, after which penalty was levied for concealment/inaccurate particulars. The CIT(A) confirmed the penalties.
The Tribunal held:
- When sales are accepted and only profit element is estimated, it does not establish concealment or furnishing of inaccurate particulars.
- Following Bombay HC ruling in Colo Colour (P.) Ltd., penalty u/s 271(1)(c) is not sustainable on estimated additions.
- Acceptance of quantum addition by assessee does not automatically justify penalty, since assessment & penalty proceedings are distinct.
- The notice u/s 274 was also defective as the AO failed to strike off the irrelevant limb, showing lack of clear satisfaction.
Accordingly, penalties of ₹5,19,336 (A.Y. 2010-11) and ₹1,49,268 (A.Y. 2011-12) were deleted and both appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These two appeals filed by the assessee are directed against the separate orders passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”], both dated 19.09.2025, passed under section 250 of the Income Tax Act, 1961[hereinafter referred to as “the Act”], for Assessment Years 2010–11 and 2011–12 respectively, whereby the Ld. CIT(A) confirmed the penalties imposed by the Assessing Officer under section 271(1)(c) of the Act. Since the issues involved in both the appeals are identical and arise out of similar facts, they are heard together and disposed of by this consolidated order.
