PIYUSH AMRITLAL MEHTA ,MUMBAI V. INCOME TAX OFFICER WARD 19(2)(4), MUMBAI

ITA 8562/MUM/2025

AI Insights

The case involves Piyush Amritlal Mehta, who appealed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, following an assessment that included additions for non-genuine purchases. The Assessing Officer had initially added 12.5% of the total non-genuine purchases to the assessee's income, which was later adjusted to 8% by the Tribunal in quantum proceedings. The penalty was levied based on these additions. The Tribunal, referencing decisions from the Rajasthan, Punjab & Haryana, and Gujarat High Courts, concluded that penalties cannot be imposed on estimated additions alone, leading to the decision to allow the assessee's appeal and remove the penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840191 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2025
• Other Referred Cases: CIT v/s Krishi Tyre Retreading and Rubber Industries, CIT v/s Sangrur Vanaspati Mills Ltd., CIT v/s Subhash Trading Co. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Keywords: Bogus purchase; Bogus
• Section: 147; 148; 143(3); 271(1)(c)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.8562/MUM/2025 (Assessment Year : 2009-10) Piyush Amritlal Mehta, 10/11 Ground Floor, 48th Khetwadi Lane, Mumbai - 400004 PAN: ALHPM6546K ............... Appellant v/s Income Tax Officer, Ward - 19(2)(4), Piramal Chamber, Mumbai - 400012 ……………… Respondent Assessee by : None Revenue by : Shri Virabhadra Mahajan, Sr. DR Date of Hearing – 26/02/2026 Date of Order - 27/02/2026 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 16.10.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the penalty order passed under section 271(1)(c) of the Act, for the assessment year 2009-10. 2. In this appeal, the assessee has raised the following grounds: - Printed from counselvise.com ITA No.8562/Mum/2025 (A.Y. 2009-10) 2 “1. On the facts and in the circumstances of the case and in law, the penalty proceedings initiated u/s 271(1) (c) of the Act is invalid and bad in law. 2. On the facts and in the circumstances of the case and in law,the penalty order levying a penalty of Rs 3,01,600/- passed u/s 271(1) (c) of the Act is invalid and bad in law. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal and confirming the penalty levied of Rs 3,01,600/-u/s 271(1) (c) of the IT Act. 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal and confirming the penalty levied of Rs 3,01,600/-u/s 271(1) (c) of the IT Act although there has been neither any concealment of income nor furnishing of inaccurate particulars of income. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in dismissing the appeal and confirming the penalty levied of Rs 3,01,600/-u/s 271(1) (c) of the IT Act and that too without even appreciating fully and properly the facts of the case.” 3. The only grievance of the assessee, in the present appeal, is against the levy of penalty under section 271(1)(c) of the Act. 4. We have considered the submissions and perused the material available on record. The brief facts of the case are that the assessee is an individual, and during the year under consideration, was engaged in the business of dealing in ferrous and non-ferrous metals under the name and style of M/s Quality Forge & Fittings. Pursuant to information received from the DGIT (Investigation) Wing, Mumbai, that the assessee is a beneficiary of accommodation entry transactions of bogus purchases, notices under section 148 of the Act were issued, and proceedings under section 147 of the Act were initiated. Vide assessment order dated 07.03.2015 passed under section 143(3) read with section 147 of the Act, the Assessing Officer (“AO”) made an addition of 12.5% of the total non-genuine purchases amounting to Rs.1,22,03,666/- by the assessee. In further appeal, the learned CIT(A) Printed from counselvise.com ITA No.8562/Mum/2025 (A.Y. 2009-10) 3 enhanced the addition to 100% of the total non-genuine purchases. The Coordinate Bench of the Tribunal, in further appeal by the assessee in quantum proceedings, vide order dated 01.10.2021 passed in ITAs No. 735- 737/Mum/2020, for the assessment years 2009-10 to 2011–12, restricted the disallowance to 8% of the bogus purchases and thus granted partial relief to the assessee. 5. In the meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated separately by the AO for the year under consideration. After considering the submissions of the assessee, the AO vide order dated 15.03.2022 passed under section 271(1)(c) of the Act, levied a penalty of Rs.3,01,600/- being 100% of the amount of tax sought to be evaded by the assessee for the year under consideration. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the levy of penalty under section 271(1)(c) of the Act. 6. Thus, it is evident from the record that the AO made an addition, in quantum proceedings, on account of bogus purchases by bringing to tax the estimated profit element embedded in such purchases, being 12.5% of the total non-genuine purchases by the assessee in the year under consideration, which was further reduced by the Tribunal to 8%. Therefore, the entire addition for the year under consideration has been made solely on the basis of estimates. 7. We find that the Hon'ble Rajasthan High Court in CIT v/s Krishi Tyre Retreading and Rubber Industries, reported in [2014] 360 ITR 580 (Raj.), held Printed from counselvise.com ITA No.8562/Mum/2025 (A.Y. 2009-10) 4 that where an addition is made purely on an estimate basis, no penalty under section 271(1)(c) of the Act is leviable. Similar view has been expressed by the Hon'ble Punjab & Haryana High Court in CIT v/s Sangrur Vanaspati Mills Ltd., reported in [2008] 303 ITR 53 (P&H), wherein the Hon'ble High Court held that when the addition has been made on the basis of estimate and not on any concrete evidence of concealment, penalty under section 271(1)(c) of the Act is not leviable. Further, the Hon'ble Gujarat High Court in CIT v/s Subhash Trading Co. Ltd., reported in [1996] 221 ITR 110 (Guj.) has taken a similar view in respect of the levy of penalty under section 271(1)(c) of the Act on estimated additions. Therefore, it is evident that the issue about the justification for the imposition of a penalty where the addition is made on the basis of an estimate is no longer res integra. 8. Thus, respectfully following the aforesaid decisions, we are of the considered view that a penalty under section 271(1)(c) of the Act cannot be levied merely on the basis of an estimated addition. Accordingly, we direct the AO to delete the penalty levied under section 271(1)(c) of the Act for the assessment year in appeal before us. 9. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 27/02/2026 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/02/2026 Prabhat Printed from counselvise.com ITA No.8562/Mum/2025 (A.Y. 2009-10) 5 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 "