Chandan Dhingadmal Jain Vs ITO (ITAT Mumbai)
Penalty U/s 271(1)(c) Not Sustainable on Estimated Bogus Purchase Addition – ITAT Mumbai Deletes Penalty
The assessee challenged penalty orders u/s 271(1)(c) for AYs 2010-11 & 2011-12 which were levied pursuant to additions made in reassessment proceedings on account of alleged bogus purchases. In quantum proceedings, the AO had added 12.5% of the purchases as profit element, which was later reduced by ITAT to 5%, thereby confirming that the addition itself was purely on estimation basis.
The Tribunal observed that penalty for concealment cannot be sustained where income is determined only through estimation without concrete evidence of deliberate furnishing of inaccurate particulars. Relying on judicial precedents including Krishi Tyre Retreading & Rubber Industries, Sangrur Vanaspati Mills Ltd., and Subhash Trading Co. Ltd., ITAT held that estimated additions do not automatically justify penalty u/s 271(1)(c). Accordingly, the Tribunal directed deletion of penalty for both assessment years and allowed the assessee’s appeals.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed the present appeals against the separate impugned orders of even date 19.09.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional / Joint Commissioner of Income Tax (Appeals)-1, Vadodara [“learned Addl./Joint CIT(A)”], which in turn arose from the separate penalty order passed under section 271(1)(c) of the Act, for the assessment years 2010-11 and 2011-12.
