ITO Vs Vinipul Inorganics Private Limited (ITAT Mumbai)
ITAT Mumbai: No Penalty u/s 271(1)(c) on Estimated Bogus Purchase Additions
The Mumbai ITAT upheld deletion of penalty under Section 271(1)(c) where additions on account of bogus purchases were made purely on an estimated basis.
In this case, although the AO initially added the entire amount of alleged bogus purchases, the Tribunal in quantum proceedings restricted the addition to 12.5%, treating it as an estimate of profit element.
The Tribunal observed that when income is determined based on estimation rather than concrete evidence of concealment or furnishing inaccurate particulars, penalty cannot be sustained. Relying on multiple High Court rulings, it reiterated that estimated additions do not automatically imply concealment.
Accordingly, the ITAT held that penalty u/s 271(1)(c) is not leviable on such estimated disallowances, and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The Revenue has filed the present appeal against the impugned order dated 03.09.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the penalty order passed under section 271(1)(c) of the Act, for the assessment year 2011-12.
