Sharad Jain Vs ITO (ITAT Surat)
Summary: The Surat Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal against the order dated 30 January 2026 passed by the CIT(A)-NFAC, Delhi, which had confirmed penalty under Section 271(1)(c) of the Income Tax Act, 1961 for AY 2007-08. The penalty of ₹37,30,939 had originally been imposed by the Assessing Officer on 29 March 2019 in relation to an addition arising from alleged bogus purchases.
The assessee, an individual engaged in the diamond business, had originally filed his return under Section 139. The assessment was subsequently reopened under Section 147 based on information obtained during a search of the Bhanwar Lal Jain Group, which allegedly revealed accommodation-bill transactions. The assessee was identified as one of the beneficiaries. The Assessing Officer treated purchases of ₹8,93,53,079 as bogus and initially made an addition of ₹2,23,38,270, equivalent to 25% of the purchases. The CIT(A) reduced the addition to 12.50%, sustaining ₹1,11,69,135. On further appeal, ITAT Surat, in ITA No. 1390/Ahd/2017 by order dated 18 July 2022, reduced the addition further to 6% of the alleged bogus purchases.
Penalty proceedings under Section 271(1)(c) had been initiated simultaneously with the assessment. The Assessing Officer subsequently imposed penalty of ₹37,30,939 with reference to the addition of ₹1,11,69,135 sustained by the CIT(A), and the CIT(A) upheld the penalty.
