MANGAL SINGH RATHORE,MUMBAI V. ASSISTANT COMISSIONER OF INCOME TAX CIRCLE 32(2), MUMBAI

ITA 5368/MUM/2025

AI Insights

The case involves Mangal Singh Rathore, the appellant, who contested a penalty of Rs. 10,00,000 imposed by the assessing officer under section 271(1)(c) for the assessment year 2009-10. The penalty was based on additions made due to disallowances of non-genuine or bogus purchases, which were allegedly shown from hawala operators. The assessing officer had made an addition of 12.5% on the aggregate purchases amounting to Rs. 2.26 crores. The CIT(A) upheld this penalty, which was then challenged in the Tribunal. The Tribunal, referencing several case laws, concluded that penalties cannot be levied on additions made on an estimation basis, thus allowing the appeal and deleting the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786294 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2025
• Other Referred Cases: PCIT vs Colo Colour Private Limited, ITO vs Tisya Jewels, OM Sai Traders vs ITO, Khodiyar Impex
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: SUBASH CHHAJED
• Keywords: Bogus purchase; Bogus
• Section: 144; 271(1)(c)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER& SMT.RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 5368/MUM/2025 (AY: 2009-10) (Physical hearing) Mangal Singh Rathore, D-1, Building No. 6, Sat Krupa CHS Ltd, Prem Nagar, Behind Natural Ice Cream, Boriwali (West),Mumbai – 400092. [PAN: AAIPR 6967 M Vs ACIT Circle -32(2) Mumbai, Kautilya Bhawan, Bandra Kurla Complex, Mumbai-40005. Appellant / Assessee Respondent / Revenue Assessee by Shri Subash Chhajed, CA Revenue by Shri Surendra Mohan Sr-DR Date of Institution 29.08.2025 Date of hearing 30.10.2025 Date of pronouncement 30.10.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 30.07.2025 in confirming penalty of Rs. 10,00,000/-, levied under section 271(1)(c) dated 23.03.2018 for A.Y. 2009-10. 2. Rival submissions of both the parties have been heard and record perused. The ld. AR of the assessee submits that assessment was completed under section 144 r.w.s. 147 on 27.03.2015. The assessing officer while passing the assessment order made addition on account of disallowances of non-genuine purchases / bogus purchases by taking view that assessee is beneficiary of purchases shown from hawala operators. The assessing officer made addition @ 12.5% of aggregate purchases Rs. 2.26 crores, shown from various alleged Printed from counselvise.com Mangal Singh Rathore ITA No. 5368/Mum/2025 2 tainted parties. The assessing officer levied on the penalty of Rs. 10,00,000/- vide order dated 23.03.2018. On further appeal before ld. CIT(A) the order of penalty was sustained. The ld. AR of the assessee submits that it is settled position in the law that no penalty under section 271(1)(c) is leviable on the addition/disallowances made or sustained on estimation basis. To support his submission, the ld. AR relied upon the decision the following decision:  PCIT vs Colo Colour Private Limited in Tax Appeal No. 48 of 2022 (Bombay High Court dated 16.09.2025)  ITO vs Tisya Jewels, in ITA No. 869 & 870/M/2025 dated 27.06.2025 and  OM Sai Traders vs ITO in ITA No. 6022& 6023/M/2024 dated 09.01.2025 3. On the other hand, learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of lower authorities. 4. We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that there is no dispute that addition in the quantum assessment was made at adhoc basis @ 12.5% of the impugned purchases. We find that it is settled position under the income tax proceedings that no penalty under section 271(1)(c) is leviable when the addition is made on estimation/adhoc basis. Similar view was taken in the case laws relied by ld. AR of the assessee. Similar view was taken by this combination in Khodiyar Impex in ITA No. 2199/M/2025 dated 26.08.2025. Thus, respectfully following Printed from counselvise.com Mangal Singh Rathore ITA No. 5368/Mum/2025 3 such decisions of penalty levied by assessing officer and confirmed by ld. CIT(A) is deleted. In the result, grounds of appeal of assessee are allowed. 5. In the result, the appeal of the assessee is allowed. Order was pronounced in the open Court on 30/10/2025. Sd/- RENU JAUHRI ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated:30/10/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "