ITO, MUMBAI V. SPARK DIAMONDS, MUMBAI

ITA 5566/MUM/2025

AI Insights

The case involves an appeal by the Income Tax Officer (ITO), Ward 19(3)(4), Mumbai against Spark Diamonds, challenging the order of the National Faceless Appeal Centre (NFAC), Delhi, which had deleted a penalty imposed for furnishing inaccurate particulars of income. The penalty was originally levied by the ITO based on an estimated addition of Rs.1,35,719, which was 6% of the bogus purchases amounting to Rs.22,61,986. The CIT(A) relied on a co-ordinate bench decision of the ITAT, Mumbai, which had deleted a similar penalty on estimated additions. The tribunal, after considering the submissions and the precedent, upheld the CIT(A)'s decision and dismissed the revenue's appeal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 826405 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 04-09-2025
• Other Referred Cases: Ajay Loknath Lohia vs ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE SWAPNIL CHOUDHARY; ASSESSEE
• Keywords: Bogus purchase; Bogus
• Section: 271(1)(c)

Judgement Text

"1 ITA No.5566/Mum/2025 Spark Diamonds INCOME-TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER I.T.A No.5566/Mum/2025 (Assessment Year: 2007-08) ITO, Ward-19(3)(4), Mumbai 405, 4th Floor, Piramal Chambers, Lalbaugh, Mumbai vs Spark Diamonds DW-1340, Bharat Diamond Bourse, G Block, Bandra Kurla Complex, Mumbai-400 051 PAN : AAKFS6979A APPELLANT RESPONDENT Present for Assessee None Present for Revenue Shri Swapnil Choudhary, Sr. AR Date of hearing 24/12/2025 Date if pronouncement 07/01/2026 O R D E R Per : Shri Anikesh Banerjee, JM: The instant appeal of the revenue filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter called, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2007-08, date of order 10/06/2025. The impugned order emanated from the order of the Income-tax Officer, Ward 19(3)(4), Mumbai (for brevity, the “Ld. AO”), passed under section 271(1)(c) of the Act, date 26/03/2019. Printed from counselvise.com 2 ITA No.5566/Mum/2025 Spark Diamonds 2. When the appeal was called for hearing none was present on behalf of the assessee. No adjournment petition was filed. After considering the merit of the case, we proceed to dispose of the appeal exparte qua for assessee, after hearing the Ld. DR. 3. We heard the submission of the Ld.DR and considered the documents available on the record. During the impugned assessment year, the addition was confirmed amount to Rs.1,35,719/- being 6% on the bogus purchases of Rs.22,61,986/-. Accordingly, the Ld.AO Levied penalty amount of Rs.41,940/- being 100% of the tax sought to be evaded for furnishing inaccurate particulars of income of Rs.1,35,719/-. The aggrieved assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) considered the assessee’s submission and respectfully relied on the order of the co-ordinate bench of ITAT, Mumbai in the case of Ajay Loknath Lohia vs ITO 25(2)(1), Mumbai in ITA No.2998/Mum/2017 date of pronouncement 25/10/2018 where the penalty on estimated addition was duly deleted. 4. The Ld. DR supported the impugned penalty order; however, he was unable to cite any contrary judicial precedent to rebut the findings recorded by the Ld. CIT(A). 5. In our considered opinion, we observe that the penalty of Rs.41,937/- was levied on the basis of an estimated addition. It is a well-settled legal position, as consistently held by the ITAT, Mumbai Benches, that penalty levied on estimated additions is not sustainable in law. The issue is squarely covered by the decision of the Coordinate Bench of the ITAT, Mumbai, in the case of Ajay Loknath Lohia (supra). In view of the above, we find no infirmity in the Printed from counselvise.com 3 ITA No.5566/Mum/2025 Spark Diamonds impugned appellate order warranting interference. Accordingly, the order of the Ld. CIT(A) is upheld and the appeal filed by the revenue is dismissed. 6. In the result, the appeal of the revenue bearing ITA No. 5566/Mum/2025 is dismissed. Order pronounced in the open court on 07/01/2026 Sd/- Sd/- (PRABHASH SHANKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dt : 07/01/2026 Pavanan Copy of the Order forwarded to: 1. अपीलाथ/The Appellant , 2. ि◌तवादी/ The Respondent. 3. आयकरआयु CIT 4. ि◌वभागीियितिनध, आय.अपी.िअध., मुंबई/DR, ITAT, MUMBAI 5. गाडफाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI Printed from counselvise.com "