INCOME TAX OFFICER- 23(3)(1), MUMBAI, MUMBAI V. TISYA JEWELS, MUMBAI

ITA 870/MUM/2025

AI Insights

The case involves appeals by the Revenue against the orders of the CIT(A) which deleted the penalties imposed on Tisya Jewels for the Assessment Years 2007-08 and 2012-13. The penalties were originally levied by the Assessing Officer following the addition of alleged bogus purchases from hawala dealers, which were categorized as 'hawala' transactions. The CIT(A) found that the penalties were not justifiable as the additions were made on an estimated basis and there was no clear evidence of concealment or inaccurate furnishing of particulars by the assessee. The Tribunal upheld the CIT(A)'s decision, referencing various judicial precedents that support the non-imposition of penalties when additions are made on an estimated basis.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668719 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs. Simit P Seth, K.P. Madhusudhan Vs. CIT, CIT Vs Chanchal Katiyal, Union of India Vs Dharmendra Textiles Processors & ors, CIT Vs Atul Kumar Gupta, Naresh Chand Agarwal Vs. CIT, Harigopal Singh Vs Commissioner of Income Tax, Mohammed Sharif Vs. ITO, Farrukhabad Investment (India) Ltd vs. DCIT, Anil Abhubhai Odedara Vs. ITO, ACIT Vs. Shivam Projects, DCIT Vs. D. Nitin & Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: NISHIT GANDHI AW
• Keywords: Set aside; Bogus purchase; Tax effect; Accommodation entries; Bogus
• Section: 147; 143(3); 271(1)(c); 133(6); 44AD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER) ITA No. 869/MUM/2025 Assessment Year: 2007-08 & ITA No. 870/MUM/2025 Assessment Year: 2012-13 Income Tax Officer- 23(3)(1), Mumbai 525A, 5th Floor, Piramal Chambers, Parel, Mumbai-400012 Vs. Tisya Jewels G-2 Sagar Fortune, 184 Waterfield road, Bandra West, Mumbai- 400050 PAN NO. AADFT 8056 G Appellant Respondent Assessee by : Mr. Nishit Gandhi a/w Ms. Aadnya Bhandari Revenue by : Mr. Hemanshu Joshi, CIT-DR Date of Hearing : 18/06/2025 Date of pronouncement : 27/06/2025 ORDER PER OM PRAKASH KANT, AM These appeals filed by the Revenue is directed against two separate orders, both dated 12.12.2024, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’], in relation to penalty levied Tisya Jewels 2 ITA No. 869/MUM/2025 u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’), for assessment years 2007-08 and 2012-13 respectively. In these appeals, identical grounds have been raised challenging deletion of the penalty levied by the Assessing officer, therefore for the brevity, we are reproducing only the grounds raised in 2007-08 as under: “1. Whether on the facts and circumstances of the case and in low, Id. CIT(A) has erred in deleting the penalty levied of Rs. 21,005/ of the Act, by ignoring the fact that the Maharashtra Sales Tax Department thru DGIT(Investigation Wing), Mumbai has proved beyond doubt that M/s. Prime Star, M/& Mohit Enterprises & M/s. Mayur Exports, all were paper companies, controlled and operated by Mr. Bhavarlal Jain, a hawala trader, who were involved in providing accommodation entries of bogus purchases and the assessee firm has availed accommodation entries of bogus purchases of Rs. 5,06,530/- from three hawala traders and deliberately furnished inaccurate particulars of income for the A.Y. 2007-08?\" “2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the penalty levied of Rs. 21,005/-of the Act, by ignoring the provisions of the Section 2988 of the Act, which is relevant this case which defines that, no return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid ar shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act ?\" “3. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the penalty levied of Rs. 21,005/-u/s 271(1)(c) of the Act, without considering the fact that AO has clearly stated his reason for levying the Penalty 12% which is on reduced profit percentage to 12.32% of unproven bogus purchases of Rs. 5,06,530/-, and this view was confirmed by Hon'ble ITAT in the case of CIT Vs. Simit P Seth in ITA No. 3345/Mum/2017, while restricting only GP %?\" “4. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred night in deleting the penalty levied of Rs. 21,005/- u/s 271(1)(c) of the Act, bij ignoring the fact that there was a conscious concealment of particulars of income and a deliberate Tisya Jewels 3 ITA No. 869/MUM/2025 failure to furnish accurate particulars of the income and relevant evidences by the assessee, even at the penalty proceedings, which attracts the provision of section 271(1)(c) and explanation thereto, as held in the case of K.P. Madhusudhan Vs. CIT reported in 251 ITR 99 (SC) ?\" 5. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the penalty levied of Rs. 21,005/ u/s 271(1)(c) of the Act, by ignoring the observations of Hon'ble High Court in the CIT Vs Chanchal Katiyal 173 Taxman 71(all), which is relevant in the facts and circumstances of this case, that if the assessee did not furnish particulars or inaccurate explanation for the concealed income, penalty is justified?\" 6. \" Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the penalty levied of Rs. 21,005/- u/s 271(1)(c) of the Act, without appreciating the decision of the Hon'ble Supreme court in case of Union of India Vs Dharmendra Textiles Processors & ors( 306 ITR 277), wherein it was held that explanation appended to sec. 271(1)(c) of the Act, entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return and that the said section has been enacted to provide for a remedy for loss of revenue?\" 7. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the Act, without appreciating judgment on the decision of Hon'ble Delhi High Court in the case of CIT Vs Atul Kumar Gupta in ITA No. 479/2014, which reinforces the Revenue Authority to impose penalties under section 271(1)(c), in the cases where the assessee fails to provide accurate and satisfactory explanations for discrepancies in their accounts even if the addition is made of estimate basis?\" 8. The Tax- Effect involved in the instant case is Rs. 21,005/-, which is below the prescribed limit as per CBDT's Circular F.No.279/Misc.142/2007-ITJ(Pt) amended vide No 09/2024 dated. 17.09.2024. However, the case fall under one of the exceptions laid down in CBDT Circular No. 05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving \"organized tax evasion\" the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit. 9. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.” 2. Briefly stated, the facts of the case are that the Assessing Officer, while completing the assessment, made an addition on account of alleged bogus purchases purportedly made from certain Tisya Jewels 4 ITA No. 869/MUM/2025 entities categorized as ‘hawala’ dealers. This action was taken on the basis of information received from the Sales Tax Department of the State of Maharashtra, which was transmitted through the office of the Director General of Income-tax (Investigation), Mumbai. In consequence thereof, the Assessing Officer rejected the books of account maintained by the assessee and proceeded to estimate the net profit attributable to such purchases at the rate of 25%. Upon appeal, the learned CIT(A) reduced the estimated rate of profit to 12% of the said purchases. 2.1 Pursuant to the said assessment, the Assessing Officer initiated penalty proceedings and levied penalty under Section 271(1)(c) of the Income Tax Act, 1961, with reference to the addition as sustained by the CIT(A). In appeal, the CIT(A), while disposing of the penalty proceedings for Assessment Year 2007–08, deleted the penalty on three grounds. 2.2 Firstly, the CIT(A) observed that the penalty had been initiated on the ground of furnishing inaccurate particulars of income, whereas the final levy was imposed on the ground of concealment of income, thereby vitiating the penalty proceedings on the ground of ambiguity and lack of clarity in the charge. 2.3 Secondly, the CIT(A) held that mere failure of the assessee to produce the concerned parties before the Assessing Officer, in the Tisya Jewels 5 ITA No. 869/MUM/2025 absence of any other incriminating material, could not ipso facto justify the levy of penalty. 2.4 Thirdly, and most significantly, the CIT(A) recorded that the underlying addition itself was sustained only on an estimated or ad hoc basis, and it is a well-settled principle of law that no penalty under Section 271(1)(c) can be levied in cases where additions are made purely on estimation. 3. On the issue of inconsistency in the limb under which penalty was initiated and ultimately levied, the learned counsel for the assessee has fairly submitted that the CIT(A) erred in observing that the penalty was initiated under the limb of ‘furnishing inaccurate particulars’, whereas the record reveals that the penalty was indeed initiated and levied under the limb of ‘concealment of income’. We find merit in this submission and to this extent, the finding of the learned CIT(A) is set aside. 3.1 However on the issue of addition on estimate basis the Ld. CIT(A) has deleted the penalty observing as under: “2.3 Penalty cannot be levied where addition is on estimation/adhoc basis: 1.1. 1. The AO vide his assessment order dated 12.3.2015 rejected the book results of the Appellant under section 145(3) and disallowed estimated 25% of the alleged bogus purchases as element of profit embedded in the purchases. This estimation was reduced to 12.32% by the CIT(A) vide his order dated 26.2.2018 on the basis of average of gross profit for 3 preceding and subsequent years. Tisya Jewels 6 ITA No. 869/MUM/2025 It is submitted that this clearly shows that the addition was purely based on an estimation of profit embedded in the alleged purchase by the AO/CIT(A). 1.1. 1. In the following cases, in the context of alleged bogus purchases, the jurisdictional Tribunal has held that no penalty can be imposed where the addition is made on adhoc/estimated basis- (a) ITO v. Vipul P. Shah, I.T.A. No.4437/Mum/2019 (order dated 9.2.2021): In this recent case, the assessment was reopened on the basis of Information received from the Investigation Wing of the Department in which it was conveyed that the assessee had taken the bogus purchase entry from the eight parties. In the quantum proceedings, AO made an addition to the extent of 12.5% of the bogus purchase. Penalty was also levied which was deleted by CIT(A). On Revenue's appeal, the Tribunal observed as follows: \"5. On appraisal of the above mentioned finding, we find that the CIT(Appeals) has deleted the penalty on the basis of this fact when the profit was estimated then no penalty was leviable. The CIT(A) has relied upon the Hon'ble Allahabad High Court in the case of Naresh Chand Agrwal Vs. CIT 357 ITR 0514 (All) and the decision of the Hon'ble ITAT, Mumbai in the case of DCIT Cir 4(2)(2) Vs. M/s. Manoharmanak Alloys Pvt. Ltd. in ITA. No.5586/Mum/2015 dated 16.01.2017and the decision of Hon'ble ITAT Delhi Bench in the case of Shruti Fastners Ltd. Vs. DCIT (2017) 49 CCH 0183 Del Trib and ITAT Mumbal in the case of Rakeshkumar M. Gupta Vs. ITO (2017) 49 CCH 0066 Mum Trib. Moreover, the Hon'ble Gujarat High Court in the case of National Textiles Vs. CIT 2001 164 CTR 2009 (Guj) has held that the penalty is not leviable when the profit has been estimated on estimation basis. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(Appeals) has decided the matter of controversy judiciously and correctly which is not liable to be interfered at this appellate stage.\" Tisya Jewels 7 ITA No. 869/MUM/2025 Applying these observations to the facts of the Appellant, it is submitted that the penalty based on addition which was estimated deserved to be deleted. (b) Ajay Loknath Lohia v. ITO, (ITA No. 2998/Mum./2017) (order dated 5.10.2018) In this case, the AO reassessed the income of the assessee at Rs.15,90,000 by making addition towards 25% gross profit on alleged bogus purchase made from hawala dealers. Thereafter, the AO levied penalty under section 271(1)(c) of Rs.3,40,980 on the ground that the assessee has failed to offer any explanation with regard to the alleged bogus purchases made from hawala dealers. The penalty was upheld by CIT(A). The Tribunal observed as follows: \"8. The AO has made such addition on adhoc basis by estimating gross profit on alleged bogus purchases. From these facts, it is very clear that the AO failed to make a case of deliberate attempt by the assessee to furnish Inaccurate particulars of income. Therefore, we are of the considered view that mere disallowance of purchases on adhoc basis does not tantamount to willful furnishing inaccurate particulars of Income within the meaning of section 271(1)(c) of the Income-tax Act, 1961. Hence, we are of the considered view that the AO was erred in levying penalty u/s 271(1)(c) of the Act. Accordingly we direct the AO to delete penalty levied u/s 271(1)(c) of the Act.\" In the Appellant's case also, the addition is made on adhoc basis by estimating profit embedded in the alleged bogus purchases. Applying the observations of the jurisdictional Tribunal to the Appellant, it is submitted that penalty on the basis of such estimated addition cannot be upheld. (c) Elcon Pipe and Fittings Pvt. Ltd. v. ITO, ITA No.496/Mum/2018 (order dated 11.2.2019) The assessee was a private limited company, engaged in the business of trading of Pipe material. The AO reopened Tisya Jewels 8 ITA No. 869/MUM/2025 the assessment on the basis of information received from Sales Tax Department, Government of Maharashtra that the assessee is one of the beneficiaries who has taken accommodation entries from hawala dealers. He disallowed the aggregate purchase of Rs. 71,58,777/-. On further appeal before the Id. CIT(A) the addition was sustained to the extent of Rs. 8,94,847/- (@ 12.5%) and balance of Rs. 62,63,930/- was deleted. On further appeal of department before the Tribunal, the disallowance was confirmed @ 12.5% of the bogus purchases. The A.O levied the penalty u/s. 271(1)(c) @ 100% of tax sought to be evaded. In appeal against the penalty levied u/s. 271(1)(c), the Id. CIT(A) directed the A.O to restrict the levy of penalty to the extent of addition confirmed in the appeal. Further aggrieved by the order of Id. CIT(A), the assessee filed the appeal before ITAT. The Tribunal observed as follows: \"We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on the various case laws referred and relied by lower authorities. We have noted that in appeal in quantum assessment, the co-ordinate bench of this Tribunal in cross appeal for Assessment Year 2009-10 & 2011-12 of both the parties, restricted the disallowance of alleged bogus purchases@ 12.5% of the alleged bogus purchases. It is settled legal position that no penalty under section 271(1)(c) is leviable on adhoc disallowance Considering the peculiar facts and circumstances of the case, we direct the Assessing Officer to delete the entire penalty levied under section 271(1)(c) of the Act.\" Thus, the Tribunal held that it is settled legal position that no penalty under section 271(1)(c) is leviable on adhoc disallowance and deleted the penalty. In the Appellant's case, the disallowance was made by AO on the basis of information from DGIT(Inv) alleging that the Appellant has made bogus purchase and thereby added adhoc 25% of the alleged purchases, which was reduced to 12.32% by CIT(A). Applying the ratio of the jurisdictional Tribunal, it is submitted that penalty cannot be levied on such adhoc disallowance. Tisya Jewels 9 ITA No. 869/MUM/2025 (d) Mohammed Sharif v. ITO, ITA No. 2408/M/2018 (order dated 20.5.2019) The facts in brief were that the assessment was framed under section 143(3) read with section 147 vide order dated 24-3-2015 assessing the income at Rs. 20,45,180 as against the return of income of Rs. 3,91,034 by adding Rs. 16,54,146 on account of bogus purchases. The penalty proceedings were also initiated for furnishing of inaccurate particulars of income and concealment of two particulars of income in the assessment order by issuing penalty notice under section 271(1)(c). Thereafter, the assessing officer framed the assessment by levying minimum penalty equal to 100% of the tax sought to be evaded at Rs. 5,53,318. On further appeals, the Tribunal observed as follows: \"We have heard the learned D.R. and perused the material on record. We find that in this case the assessment was framed by the assessing officer after making ex parte addition of Rs. 16,54,146 towards 100% of the bogus purchases which the co-ordinate bench of the Tribunal in quantum proceedings reduced to 12.5% of such purchases. In our opinion, this is a clear cut case where the Income has been estimated by applying a percentage of 12.5% and therefore the penalty under section 271(1)(c) can not be imposed. We are, therefore, setting aside the order of learned Commissioner (Appeals) and direct the assessing officer to delete the penalty.\" Applying this, it is submitted that the addition in Appellant's case is also on estimation basis and therefore, no penalty can be levied on such addition. (e) ITO v. Bandu Hatwar, ITA No.1567/Mum/2017 (order dated 10.10.2018) In the context of penalty on the basis of addition on account of alleged bogus purchases, the Tribunal observed as follows: \"We have carefully considered the impugned order wherein we find that the penalty has been deleted by Ld. first appellate authority upon noticing that the quantum Tisya Jewels 10 ITA No. 869/MUM/2025 additions of Rs.280.28 Lacs has finally been estimated at Rs.20 Lacs by the Tribunal vide ITA No. 2056/Mum/2013. Nothing on record suggest that the aforesaid order of the Tribunal has subsequently been reversed by any higher authority. This being the case, the impugned penalty does not survive since the final addition of Rs.20 Lacs is on estimated basis only. Therefore, finding no infirmity in the impugned order, we dismiss the appeal.\" (f) Ganesh Industries v. ITO, ITA No. 93/Ahd/2016 (order dated 10.10.2018) In this case, CIT(A) enhanced the assessment by holding that total purchases made by the assessee from certain concerns were bogus . He also initiated penalty proceedings under section 271(1)(c). On appeal, the Tribunal following the ratio of the Gujarat High Court in Rameshchandra A Shah v. ACIT (Tax appeal no.800 of 2008) observed as follows: \"Basically, Hon'ble High Court was of the view that conclusively it was not brought on record whether the purchases are to be treated as bogus or not. The income has been estimated on the basis of circumstances brought on record. There is no disparity on facts. In the present appeal also, on the basis of circumstantial evidence, It has been concluded that the purchases made by the assessee to some extent are non-genuine, and therefore profit element Involved in such purchases deserves to be assessed as income of the assessee. Respectfully following the judgment of Hon'ble jurisdictional High Court we allow this appeal of the assessee and delete the penalty.\" Thus, the Tribunal deleted the penalty on the ground that the additions on account of bogus purchases were on estimated basis. 2.3.3. A number of other High Courts / Tribunal have also held that no penalty can be levied where an addition is made on estimate basis- (a) Naresh Chand Agarwal v. CIT, (2013) 357 ITR 514 (All) Tisya Jewels 11 ITA No. 869/MUM/2025 The High Court observed as follows: \"In the instant case, nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed under Section 44 AD. In the instant case, the turnover is more than 40 lacs, so Section 44AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) of the Income Tax Act, can be imposed as per the ratio laid down in the case of CIT v. Arjun Prasad Ajit Kumar [I.T. Appeal No. 13 of 1999, dated 3-12008]\" (b) CIT v. Arjun Prasad Ajit Kumar, (2008) 214 CTR 355 (All.): The assessee was a country liquor contractor/vendor. In the assessment proceedings, the account books of the assessee were rejected on the ground that the sales alleged by the assessee were not verified. Thereafter, sales were estimated and penalty was imposed under section 271(1)(c). The Tribunal held that even though the assessee's explanation had not been found to be satisfactory, there was nothing on record to show that the explanation offered by the assessee lacked bona fide and that only because the addition has been made in the assessment by applying the net profit rate and estimating the sales, the penalty for concealment could not be levied. The Tribunal therefore deleted the penalty. The High Court dismissed the Revenue's appeal observing that there is no infirmity in the order of the Tribunal. (c) Hema R. Gupta v. ITO, (ITA No. 2639/Mum/2015) (order dated 30.9.2016) [followed in Rakeshkumar M. Gupta v. ITO. (ITA No. 2595 to 2600/Mum./2015) (order dated 3.2.2017) The Tribunal observed as follows: Tisya Jewels 12 ITA No. 869/MUM/2025 \"Admittedly, the AO had levied penalty in question under section 271 (1) (C) of the Act on the addition made on the basis of estimation and the basis of estimation was further changed substantially by the Tribunal in quantum appeal. As per the settled law penalty proceedings are different from assessment proceedings because the standard of proof required for imposition of penalty is different from that on which an addition could be maintained. Mere addition to the income of the assessee does not mean that the assessee has concealed In Naresh Chand Agarwal vs.CIT(2013)38 taxmann.com 397 Hon'ble Allahabad High Court has held that when addition is made on estimate basis, penalty under section 271(1)(c) cannot be imposed. The Hon'ble Punjab & Haryana High Court in case of Harigopal Singh Vs Commissioner of Income Tax reported in (2002) 125 Taxman 242, wherein the estimated addition made by the AD was considerably reduced by the Tribunal, has held that in such cases, provisions of section 271 (1)(c) of the Act are not attracted. The same view have been taken by the ITAT Chandigarh in JCIT v. Bhagwan Dass Garg (2014) 48.taxmann185 (Chandigarh-Trib), Jodhpur Tribunal in ITO v. Gurunanak Oil Agency (2013) 35 taxmann 562(Jodhpur-Trib.) and other Benches of ITAT. So, in view of the decisions of the Hon'ble High Courts and Tribunals, we are of the considered opinion that this is not a fit case where penalty can be imposed under section 271(1)(c) of the Act for concealment of income or for furnishing incorrect particulars of Income. We, therefore, set aside the impugned order and allow the grounds of appeal of the assessee.\" Applying this, it is submitted that that the addition made in the case of the Appellant is also on estimation basis and therefore, no penalty can be levied. (d) Farrukhabad Investment (India) Ltd vs. DCIT, I.T.A No. 141/Agra/2009 (order dated 11.9.2018)(TM) In this case, the AO disallowed the entire interest expense of Rs. 1.18 crores. The CIT(A) restricted it to 10% on estimate basis which was confirmed by the Tribunal. The AO levied penalty on the disallowance. CIT(A) confirmed it. On appeal, the Third Member observed as follows: Tisya Jewels 13 ITA No. 869/MUM/2025 \"It is a trite law that no penalty can be imposed u/s 271(1)(c) of the Act on an estimated income/additions... What follows from the above discussion is that where income is estimated or disallowance of expenses is made on estimate basis, there can be no penalty. The raison d'etre for nonimposition of penalty in both the situations is that there is lack of precision as to concealment of income or furnishing of inaccurate particulars of income. It is only an estimation shorn of any certainty or accuracy.\" Applying the ratio to the facts of the Appellant, it is submitted that the penalty which is based on an estimated disallowance is liable to be deleted. 1. Anil Abhubhai Odedara v. ITO [2021] 183 ITD 313 (Rajkot) 2. ACIT v. Shivam Projects [2018] 97 taxmann.com 88 (Surat) 3. DCIT v. D. Nitin & Co. [2015] 59 taxmann.com 146 (Ahd.) Hence, it is submitted that viewed from any angle, the penalty of Rs. 21,005 is totally uncalled for and liable to be deleted. 4. I have carefully considered the penalty order, the grounds of appeal, and the written submission of the appellant. The appellant, referring to paragraphs 3 and 7 of the penalty order, submitted that the penalty proceedings were initiated for furnishing inaccurate particulars of income, but the assessing officer ultimately levied the penalty for concealment. In this context, the appellant relied on the decision of the Honourable Bombay High Court in the case of Ventura Textiles Limited vs. CIT and the Honourable Karnataka High Court decision in the case of CIT vs. Manjunatha Cotton and Ginning Factory. From the perusal of the penalty order, it is noted that the penalty was originally initiated under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income. Tisya Jewels 14 ITA No. 869/MUM/2025 However, the assessing officer, while concluding the penalty, determined that the appellant had concealed the particulars of income as per Explanation 1 to Section 271(1)(c) of the Act. Accordingly, by applying the decisions referred to by the appellant, I find that the assessing officer deviated from the original charge for which the penalty proceedings were initiated. Therefore, the penalty levied is cancelled. The appellant also argued that no penalty can be levied because the appellant was unable to produce the parties before the assessing officer, and similarly, penalty cannot be levied where the addition is on an estimated or ad hoc basis. Since the penalty levied is cancelled based on the above legal issue raised, these additional issues raised by the appellant are not considered for separate adjudication.” 4. Before us Ld. counsel for the assessee also relied on the three decision (i) in the case Income Tax Officer Vs. Sunil Bhagwandas Vorani (HUF) reported in [2024] 169 taxmann.com23 (Mumbai- Trib.), (ii) Naresh Chand Agarwal reported in [2013] 38 taxmann.com 397(Allahabad) and (iii) Commissioner of Income-tax Vs. Arjun Prasad Ajit Kumar reported in [2008] 214 CTR 355 (Allahabad). The relevant findings of the Tribunal in the case of Income Tax Officer Vs. Sunil Bhagwandas Vorani (Supra) is reproduced as under: “6. In this case as is evident from the observation of the para 5.1 of the Ld. AO's order, the addition was made on estimation of total turnover after rejecting the books of accounts. Notice u/s. 133(6) were also issued to the various purchase parties and all the notice were returned by the postal authority and the assessee has not produced the party to confirm the same. These observation of the lower authorities shows that it is not established by the revenue that the assessee had concealed the particulars of income or has submitted inaccurate particulars of income so as to attract Section 271(1)(c) of the Act. Admittedly, the addition has been made on estimate basis, therefore, the ratio of judgment of the Karnataka High Court referred (supra) and various pronouncements of the Tisya Jewels 15 ITA No. 869/MUM/2025 judicial ITAT covers the facts of the present case of the addition was made on the estimate basis and for the aforesaid discussion, the penalty is m rightly deleted by the Ld. CIT(A). We find no illegality in the order of the Ld. Cr accordingly confirmed.” 5. Thus Tribunal in the case of ITO v. Sunil Bhagwandas Vorani (HUF) [2024] 169 taxmann.com 23 (Mumbai-Trib.), held that the mere fact that purchases could not be verified and were disallowed on estimation would not ipso facto justify penalty under Section 271(1)(c). We find that the Ld. CIT(A) has followed the binding precedents of various Hon’ble High Courts and Tribunals on the issue in dispute. Before us also the Ld. counsel for the assessee has relied on decisions, a list of which is reproduced above. In the instant case, the books of accounts were rejected, and addition was made purely on estimation of profit embedded in the alleged non- genuine purchases. The Revenue has not brought any material on record to establish that the assessee has either concealed particulars of income or furnished inaccurate particulars thereof. The penalty has been levied solely on estimated additions without any conclusive finding of deliberate concealment. 5.1 In view of the foregoing legal position and respectfully following the binding judicial precedents, we find no infirmity in the said order warranting interference and accordingly, we uphold the order of the CIT(A) deleting the penalty for the Assessment Years 2007–08 and 2012–13. The ground Nos. 1 to 7 of the appeal raised by the Revenue in both the years are accordingly dismissed. Tisya Jewels 16 ITA No. 869/MUM/2025 6. Ground No. 8 raised in both appeals pertains to the applicability of the CBDT Circular on monetary limits for filing appeals. We find merit in the submission advanced by the learned Departmental Representative that the penalty in question arises from an addition linked to an organized tax evasion activity. In view thereof, the case falls within the exceptions carved out in the said Circular, which permit filing of appeals notwithstanding the monetary threshold. Accordingly, this ground raised by the Revenue is allowed. 6. In the result, both the appeals of the Revenue are accordingly partly allowed. Order pronounced in the open Court on 27/06/2025. Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 27/06/2025 Disha Raut, Stenographer Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// Tisya Jewels 17 ITA No. 869/MUM/2025 (Assistant Registrar) ITAT, Mumbai "