NMC INDUSTRIES PVT LTD,MUMBAI V. JCIT (OSD) CC2(3), MUMBAI

ITA 5215/MUM/2025

AI Insights

The case revolves around NMC Industries Private Limited, which appealed against a penalty imposed for alleged inaccuracies in income particulars related to the assessment year 2010-11. The penalty stemmed from additions made by the Assessing Officer, who, after a reassessment based on information from the Sales Tax Department, treated certain purchases as inflated due to lack of independent evidence like transport or octroi documents. The CIT(A) upheld this penalty, but the Tribunal found that the assessee had disclosed all particulars of income and that the additions were merely estimations of profit on a segment of purchases. The Tribunal emphasized that without evidence of deliberate concealment, a penalty under section 271(1)(c) cannot be sustained.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785765 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-08-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: NEELKANTH KHANDELWAL
• Keywords: Reassessment proceedings; Cost of acquisition; Bogus purchase; Bogus
• Section: 147; 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & MS PADMAVATHY S, ACCOUNTANT MEMBER ITA No.5215/Mum/2025 (Assessment Year :2010-11) NMC Industries Private Limited Plot No.161, Forth Lane Darukhana Reay Road Mumbai-400 010 Vs. Joint Commissioner of Income Tax (OSD) Central Circle 2(3), Mumbai PAN/GIR No.AACCN0703E (Appellant) .. (Respondent) Assessee by Shri Neelkanth Khandelwal Revenue by Shri Leyaqat Ali Aafaqui Date of Hearing 14/10/2025 Date of Pronouncement 27/10/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The present appeal has been preferred by the assessee against the order dated 15 July 2025 passed by the learned Commissioner of Income Tax (Appeals)-48, Mumbai, confirming the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2010-11. 2. The solitary grievance raised by the assessee is with respect to the sustenance of penalty of ₹42,67,797, which Printed from counselvise.com ITA No.5215/Mum/2025 NMC Industries Pvt. Ltd., 2 emanates from the addition sustained by applying a gross profit rate on alleged bogus purchases. 3. The facts in brief reveal that the assessee company is engaged in the business of trading in iron and steel bars and had filed its return of income declaring total income of ₹3,63,36,810. The said return was selected for scrutiny and assessment was completed under section 143(3). Subsequently, on the basis of information received from the Sales Tax Department of the Government of Maharashtra, wherein certain dealers were identified as hawala operators providing accommodation bills, the Assessing Officer reopened the case under section 147 and issued notice under section 148. 4. During reassessment proceedings, the Assessing Officer noted that the assessee had made purchases from eight such parties alleged to be non-genuine. The assessee, however, produced purchase invoices, ledger accounts, bank statements and copies of sales bills, contending that all transactions were routed through banking channels and duly recorded in its books of account. The Assessing Officer did not accept these explanations and observed that the assessee had failed to furnish independent evidence such as lorry receipts, octroi records or transportation vouchers to prove physical movement of goods. He therefore treated the Printed from counselvise.com ITA No.5215/Mum/2025 NMC Industries Pvt. Ltd., 3 purchases as inflated and, applying the peak-credit method, computed incremental credit for the year at ₹6,52,93,348. 5. In the first appeal, the learned CIT(A) rejected the peak- credit approach and restricted the disallowance to an ad hoc estimate of seventeen percent of the alleged unverifiable purchases. Both the assessee and the Revenue preferred appeals before the Tribunal. The Co-ordinate Bench, vide order dated 26 July 2017, after obtaining a remand report and examining the record, found that purchases from four of the eight parties aggregating to ₹5,43,11,114 were genuine. As regards the remaining four parties involving purchases of ₹8,37,06,932, the Tribunal directed the Assessing Officer to estimate profit at fifteen percent of those purchases, which worked out to ₹1,25,56,040. It is this estimated addition that has now formed the basis for levy of penalty under section 271(1)(c). 6. The Assessing Officer thereafter levied penalty of ₹42,67,797 alleging that the assessee had furnished inaccurate particulars of income. The learned CIT(A) concurred with this view and confirmed the penalty on the reasoning that the assessee had failed to substantiate the genuineness of purchases to the extent confirmed in the quantum proceedings. Printed from counselvise.com ITA No.5215/Mum/2025 NMC Industries Pvt. Ltd., 4 7. After hearing both the parties and perusing the material on record, we find that all the purchases in question were duly recorded in the regular books of account and the corresponding sales of such purchases have been accepted by the Department. The quantitative details of the trading account were neither disturbed nor doubted. Once the trading results are accepted in totality, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars thereof. The disallowance was only a matter of estimation of profit on a segment of purchases considered unverifiable. Such estimation by applying a gross profit rate, being inferential and presumptive, cannot be a valid ground for imposition of penalty. 8. It is well settled through a consistent line of judicial precedents that where income is determined on an estimated basis, particularly by applying a gross profit rate or an ad hoc percentage, no penalty under section 271(1)(c) can be sustained unless there is positive evidence of deliberate concealment. In the present case, there is none. The assessee had produced all primary evidences such as invoices, payment proofs and accounting records to substantiate the purchases. The mere absence of transport or octroi documents does not, by itself, establish that the transactions were fictitious. The Assessing Officer himself, in the remand proceedings, had accepted half of the purchases as genuine. Printed from counselvise.com ITA No.5215/Mum/2025 NMC Industries Pvt. Ltd., 5 Therefore, the allegation of furnishing inaccurate particulars loses all force. 9. At the highest, the case of the Revenue is one of inflated purchase cost, which has already been neutralised by the estimate of profit. Once the Assessing Officer himself has estimated the profit and the trading account remains intact, the charge of concealment cannot stand. The penalty provision being penal in nature has to be interpreted strictly, and any element of doubt must enure to the benefit of the assessee. The edifice of the penalty in the present case rests entirely upon a presumptive addition and cannot therefore be upheld. 10. In these circumstances, we hold that the levy of penalty on an estimated addition of gross profit is both unjustified and unsustainable. The assessee had disclosed full particulars of its income, the books were duly audited, and the Assessing Officer has not unearthed any unrecorded transaction. The foundation for invoking section 271(1)(c) is thus wholly absent. Accordingly, the penalty of ₹42,67,797 imposed by the Assessing Officer and confirmed by the learned CIT(A) stands deleted. Printed from counselvise.com ITA No.5215/Mum/2025 NMC Industries Pvt. Ltd., 6 11. In the result, the appeal of the assessee is allowed. Order pronounced on 27th October, 2025. Sd/- (PADMAVATHY S) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 27/10/2025 KARUNA, sr.ps 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. //True Copy// Printed from counselvise.com "