MAGAN VADHAJI PRAJAPATI ,MUMBAI V. ITO WARD 19(2)(2), MUMBAI

ITA 5212/MUM/2025

AI Insights

The case involves an appeal by Magan Vadhaji Prajapati against the penalty imposed by the Income Tax Officer (ITO), Ward 42(1)(2), Mumbai, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was levied following an assessment that included an adhoc addition of 12.5% on purchases from entities allegedly managed by Bhanwarlal Jain. The Tribunal's decision hinged on the principle that penalties under section 271(1)(c) are not applicable when additions are made on an estimation basis, as supported by a precedent from the Bombay High Court.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780362 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 25-08-2025
• Other Referred Cases: PCIT vs Colo Colour (P.) Limited [2025] 178 taxman.com 458 (Bombay)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Assessee Lawyers: BHARAT KUMAR
• Keywords: Set aside; Bogus purchase; Bogus
• Section: 147; 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH MUMBAI BEFORE: SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5212/MUM/2025(AY: 2011–12) Magan Vadhaji Prajapati Room No. 15, 2nd Floor, 39/41, Kamal Niwas, Bhandari Street Bhandari Street, Mumbai- 400004 Vs. I.T.O. Ward 42(1)(2), Mumbai Piramal Chambers, Dr SS Rao Marg, Parel, Mumbai- 400012 PAN: ANWPP 7146 B (Appellant) .. (Respondent) Assessee by Shri. Bharat Kumar -AR Revenue by Shri. Virabhadra Mahajan, Sr. DR Date of Hearing 06/10/2025 Date of Pronouncement 06 /10/2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 08.08.2025 for A.Y. 2011-12. In the present appeal the assessee has challenged the validity of penalty levied under section 271(c) vide order dated 26.07.2024. 2. Rival submissions of both the parties have been heard and record perused. The Ld. Authorized Representative (Ld.AR) of the assessee submits that assessment was completed under section 147 r.w.s. 254 and 144B of the Income Tax Act (Act) on 26.02.2024. The assessing officer while passing the assessment order made adhoc addition @12.5% of purchases allegedly shown from various entities managed by Bhanwarlal Jain. The assessing officer made total addition of Rs. 5,83,848/- being 12.5@ of aggregate disputed purchase of Rs. 46,70,785/-. The assessing officer levied penalty under section 271(1)(c) at Printed from counselvise.com ITA No. 5212/MUM/2025 Magan Vadhaji Prajapati 2 the rate of 100% tax shout to be evaded. The assessing officer levied penalty of Rs. 2,17,386/-. The Ld. CIT(A) confirmed the action of the assessing officer. The Ld.AR of the assessee submits that it is settle position under Income Tax proceeding that no penalty under section . 271(1)(c) is liable on addition made merely on estimation basis. Admittedly assessing officer made addition on estimation only thus, penalty order dated 26.07.2024 is not sustainable. To support his estimation he relied upon the decision of Bombay High Court in the case of PCIT vs Colo Colour (P.) Limited [2025] 178 taxman.com 458 (Bombay). 3. On the other hand learned Senior Departmental representative (Ld. Sr. DR) on the revenue supported the order of assessing officer and Ld. CIT(A). 4. We have considered the rival submission of both the parties and had gone through the orders of lower authorities carefully. On perusal of assessment order, we find that assessing officer made adhoc addition/disallowances on account of purchases shown from entities/parties which were allegedly managed by Bhanwarlal Jain. Admittedly the assessing officer made addition of 12.5% of purchases shown from such parties. We find it Hon’ble Bombay High Court in the case of PCIT vs Colo Colour (P.) Limited (Supra) on similar facts held that were assessing officer made addition of alleged bogus purchased merely on estimation basis and on relying upon sales tax department information, levy penalty under section 271(1)(c) is not sustainable. Considering the aforesaid factual and legal position penalty levied under section 27191)(c) vide order dated 26.07.2024 is set aside, thereby entire Printed from counselvise.com ITA No. 5212/MUM/2025 Magan Vadhaji Prajapati 3 penalty levied under section 271(1)(c) is deleted. In the result, the ground of appeal raised by the assessee is allowed. 5. In the result, the appeal of the assessee is allowed. Order was pronounced in the open court while hearing the appeal. Sd/- (GIRISH AGRAWAL) Sd/- (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 06/10/2025 Disha Raut, Steno Copy of the Order forwarded to: BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. Printed from counselvise.com "