ITO WARD 17(2)(1), MUMBAI, MUMBAI V. BHUPESH SEVANTILAL SHAH, MUMBAI

ITA 4772/MUM/2025

AI Insights

The case involves an appeal by the Income Tax Officer against the order of the ld. CIT(A), which pertained to the assessment year 2010-11. The core issue was the deletion of a penalty levied on the assessee, Bhupesh Sevantilal Shah, for alleged bogus purchases amounting to Rs. 5,29,672. The Assessing Officer (AO) had added these purchases as bogus and estimated a profit rate of 12.5%, which was later reduced to 7.5% by the ld. CIT(A). The tribunal noted that both the AO and the ld. CIT(A) had estimated the profit rate without any substantial evidence, leading to the conclusion that the penalty under section 271(1)(c) was improperly levied.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 776411 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2025
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-07-2025
• Other Referred Cases: M/s. V. K. Ispat & Alloys Vs. ITO [ITA No. 2326 & 2326 /Mum/2022], ACIT vs. M/s.Fancy Diamonds India Pvt. Ltd. ITA No.5384/Mum/2019
• Laws Referred To: Income Tax Act
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI; AR
• Assessee Lawyers: P.P. JAYARAM VIRTUALLY APPEARED
• Keywords: Bogus purchase; Bogus
• Section: 143(3); 271(1)(c)

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 4772/Mum/2025 Assessment Year: 2010-11 Income Tax Officer, ward– 17(2)(1), Mumbai Vs Bhupesh Sevantilal Shah 82/84, Kazi Syed Street Masjid Mumbai - 400003 [PAN: AAGPS1076C] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri P.P. Jayaram (virtually appeared) Revenue by : Shri Leyaqat Ali Aafaqui, Sr. A/R सुनवाई की तारीख/Date of Hearing : 16/09/2025 घोषणा की तारीख /Date of Pronouncement: 19/09/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the revenue is preferred against the order dated 29/05/2025 by NFAC, Delhi [hereinafter the ‘ld. CIT(A)’] pertaining to AY 2010-11. 2. The sum and substance of the grievance of the revenue is that the ld. CIT(A) erred in deleting the penalty levied by the AO u/s 271(1)(c) of the Act on the confirmed quantum addition to the extent of 7.5% of bogus purchases. 3. The roots for the levy of penalty lie in the assessment order framed u/s 143(3) r.w.s. 147 of the Act by which the returned income of the assessee at Rs. 75,04,580/- was assessed at Rs. 81,62,012/- after making addition on account of bogus purchases of Rs. 5,29,672/-. 4. Briefly stated the facts of the case are that during the course of scrutiny assessment proceedings, the AO noticed that the assessee has Printed from counselvise.com I.T.A. No. 4051/Mum/2025 2 shown purchases of Rs. 42,37,376/- from Shree Ram Steel. The assessee was asked to substantiate the genuineness of the purchases as the information received in respect of such purchases was that the assessee is a beneficiary of accommodation entry. The assessee was asked to furnish the seller along with his books of accounts for verification. Since the assessee failed to produce the seller Shree Ram Steel and also failed to produce the books of accounts of Shree Ram Steel, the AO added the entire purchases as bogus and added 12.5% i.e., Rs. 5,29,672/- as income of the assessee. 4.1. The assessee carried the matter before the ld. CIT(A) and the ld. CIT(A) reduced the addition by 5% thereby sustaining 7.5% of the alleged bogus purchases. The AO levied penalty on such confirmed alleged bogus purchases amounting to Rs. 98,200/- which was deleted by the ld. CIT(A) who, relying upon the decision of the Co-ordinate Bench in the case of M/s. V. K. Ispat & Alloys Vs. ITO [ITA No. 2326 & 2326 /Mum/2022) and ACIT vs. M/s.Fancy Diamonds India Pvt. Ltd. ITA No.5384/Mum/2019, held that in case where an addition is based on estimate basis, penalty u/s 271(1)(c) of the Act cannot be levied. 5. Before us, the ld. D/R vehemently argued that 7.5% has been confirmed on account of the alleged purchases, therefore, there is concrete evidence to show that the assessee has filed inaccurate particulars and, therefore, levy of penalty is justified. The ld. Counsel relied upon the decision of the ld. CIT(A). 6. We have carefully perused the orders of the authorities below. It is true that purchases of Rs. 42,47,376/- from Shree Ram Steel have been treated as bogus. But nowhere the AO has given any reasoning for estimating the profit at 12.5%, no comparable cases have been brought Printed from counselvise.com I.T.A. No. 4051/Mum/2025 3 on record which could justify the alleged profit rate of 12.5%. By reducing the said percentage by 5% even the ld. CIT(A) has not given any reasoning for depicting 7.5% as the profit rate. It appears that both the AO and the ld. CIT(A) as estimated the profit rate for making the impugned additions. In our considered opinion, when the authorities below are estimating the profit without bringing any cogent material evidence on record, penalty u/s 271(1)(c) of the Act cannot be levied for filing inaccurate particulars of income. The ld. CIT(A) has rightly deleted the penalty which calls for no interference. 7. In the result, appeal of the revenue is dismissed. Order pronounced in the Court on 18th September, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 18/09/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "