VIKRAM SUGRIV KALE,OSMANABAD, V. INCOME TAX OFFICER WARD 1,NANDED, NANDED

ITA 2828/PUN/2025

AI Insights

The case involves appeals by Vikram Sugriv Kale against penalty orders issued by the Income Tax Officer, Ward-1, Nanded, for the assessment years 2010-11 and 2011-12. The penalties were imposed following the addition of Rs. 44,38,138 to the assessee's income, which was deemed as bogus purchases under section 69A of the Income Tax Act. The Tribunal considered previous rulings and the procedural aspects of the penalty notice, ultimately deciding in favor of the assessee by deleting the penalties.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841948 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2025
• Other Referred Cases: PCIT Vs. Colo Colour P. Ltd., Mun Gems Vs. ACIT, Ganga Iron & Steel Trading Co. v/s Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH HALADKAR THROUGH VIRTUAL
• Assessee Lawyers: ROHIT S TAPADIYA
• Keywords: Question of law; Unexplained expenditure; Bogus purchase; Bogus
• Section: 143(3); 271(1)(c)

Judgement Text

" आयकर अपीलीय अधिकरण ”एस एम सी” न्यायपीठ पुणे में। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपऩल सं. / ITA Nos.2827 & 2828/PUN/2025 निर्धारण वषा / Assessment Years: 2011-12 & 2010-11 Vikram Sugriv Kale, Vikram Stoves and Fabricators, Digvijay Construction, A 37, MIDC, Osmanabad – 413501. V s Income Tax Officer, Ward-1, Nanded. PAN: AGAPK8979L Appellant/ Assessee Respondent /Revenue Assessee by Shri Rohit S Tapadiya Revenue by Shri Rajesh Haladkar (through virtual) Date of hearing 19/02/2026 Date of pronouncement 23/02/2026 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the Assessee against the separate orders of ld.Commissioner of Income Tax(Appeal)[NFAC], passed under section 250 of the Income Tax Act, 1961 for the A.Y.2011-12 & A.Y.2010-11 both dated 12.11.2025 emanating from the separate Penalty Orders passed under section 271(1)(c) of the I.T.Act, both dated 29.03.2018. Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 2 1.1 For the sake of convenience both the appeals were heard together and disposed by common order. We treat appeal in ITA No.2827/PUN/2025 as “Lead Appeal”. The grounds of appeal raised in ITA No.2827/PUN/2025 are as under : “1) The Ld. AO erred in (CIT-A) erred in levying the penalty of Rs.1,37,140/- 2) The Ld. AO erred in levying the penalty without recording proper satisfaction in the assessment. 3) The Ld. CIT-A ought to have appreciated the fact that on similar issue, levy of penalty was deleted by CIT-A in earlier year and therefore he ought to have deleted the levy of penalty 4) The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case” Findings & Analysis : 2. We have heard both the parties and perused the records. In this case, Assessment Order for A.Y.2011-12 was passed under section 143(3) r.w.s 147 of the Act, on 24.12.2013. The Assessing Officer made addition of Rs.44,38,138/- under section 69A as Bogus Purchases. The relevant paragraphs 5, 5.1 and 5.2 of the Assessment Order are reproduced here as under : “5. During the course of scrutiny proceedings, details of purchase bills delivery challans, lorry receipts, stock register and bank statement are called to verify the Hawala Transaction at Rs.44,38,138/- (information given by sales tax department). The Counsel of the assessee attended on Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 3 17/10/2013 and furnished confirmation letters alongwith return of income, copy of bank statement,7/12 extract, books of accounts such as cash book, ledger, expenditure vouchers/bills produced which are verified and returned. 5.1 During the scrutiny assessment proceedings, the counsel of the assessee submitted letter dtd. 05/03/2013 stating as under. \"Though all these purchases are from Hawala dealer as specified by sales the sales tax department but actually we have purchased material and also paid the bill with tax. Unfortunately the seller didn't pay the taxes on his sales and sales tax department levies such liability on purchaser and hence we paid these taxes. All these transactions are genuine and not the sham transaction as your department is saying.\" In this regard the counsel of the assessee was asked to produce the stock register and Lorry register pertaining to Hawala transaction. The counsel of the assessee though produced invoices, delivery challans and could not produced lorry receipt and stock register. In absence of stock register and lorry receipt, verification could not be carried out. The absence of the above stock register and lorry receipt indicates that the assessee does not maintain stock register wherein the purchased goods/items entries made. 5.2 In view of the above it is concluded that the purchase bills are obtained without actually receiving the goods with a malafied intention of showing bogus purchases. As a result the payments made by cheque towards these purchases might have been received back in cash by the assessee leaving a small commission to the seller ie. the supplier of the purchase bills. Accordingly, entries in books of accounts are made. Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 4 Treating the above transaction as bogus an amount of Rs.44,38,138/- is added to the total income of the assessee u/s. 69A. Penalty proceedings u/s. 271(1)(c) Initiated on this point.” 3. The Assessing Officer passed penalty order under section 271(1)(c) of the Act, for A.Y.2011-12 on 29.03.2018. The relevant paragraph 3, 4 and 5 of the penalty order are reproduced here as under : “03. The assessee filed an appeal before the CIT(A), Aurangabad which was disposed off on 22/09/2014 and an order was passed in the favour of assessee wherein the addition of Rs. 44,38,138/- was restricted to Rs. 4,43,814/- (10% of the addition). An appeal was filed by the revenue before the ITAT challenging the order of CIT(A). Aurangabad which was disposed off on 05.05.2017 withholding the order passed by CITIA), Aurangabad. However no appeal was filed against this order passed by the ITAT hence a notice u/s 271(1)(c) r.w.s.274 was issued on 13/03/2018 requiring him to attend on 19/03/2018 to show cause as to why an order imposing penalty u/s 271(1)(c) should not be passed. 04. In response the assessee has neither appeared nor filed any submission hence it is assumed that assessee has nothing to say or submit. In this case, the bogus purchase addition of Rs. 4,43,814/-has sustained & the same was rightly added back to the assessee's total income. Further the assessce has offered no explanation to show cause notice as to why an order imposing penalty u/s 271(1)(c) should not be passed. 05. Thus, the undersigned is satisfied that, the assessee has furnished inaccurate particulars of his income to the extent of Rs 4,43,814/- and Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 5 this is fit case for levy of penalty u/s 271(1) (c) of the Act. Therefore, the assessee is directed to pay an amount of Rs. 1,37,140/- Le.100% of the tax sought to be evaded by way of penalty u/s 271(1)(c) of the Act calculated as under.” 4. The ld.CIT(A) has confirmed the penalty u/s.271(1)(c) of the Act, hence, Assessee filed appeal before this Tribunal. 5. At the outset, ld.AR submitted that on identical facts for A.Y.2009-10, the ld.CIT(A) has deleted the penalty u/s.271(1)(c) in assessee‟s own case. Therefore, ld.AR submitted that penalty is not maintainable. Ld.AR further submitted that during assessment proceedings, Assessee had filed all the necessary details like bills, stock register etc. to prove genuineness of the purchases. However, Assessing Officer only on the basis of information from Sales Tax Department, treated the purchases as bogus, without making any independent enquiry. The ld.CIT(A) and ITAT has partly allowed assessee‟s appeal against the assessment order and restricted the addition to 10% of the purchases. Ld.AR submitted that thus, the addition is made on estimation basis, hence, there is no concealment. 6. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of AO. Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 6 7. In this case, during the assessment proceedings, Assessee had filed copies of the bills to prove genuineness of the purchases. Assessee also filed copy of the delivery challans and submitted that entire payments were through banking channel. The Assessing Officer made addition of entire amount of Rs.44,38,138/-. On appeal, ld.CIT(A) held that since there were sales, entire purchases cannot be added to the total income. Therefore, ld.CIT(A) directed to add 10% of the purchases. ITAT upheld the ld.CIT(A)‟s order. 7.1 Thus, in this case, purchases have not been proved to be non- genuine, hence, it cannot be alleged that there was concealment of income. We find support from the decision of Hon‟ble Bombay High Court in the case of PCIT Vs. Colo Colour P. Ltd., [2025] 178 taxmann.com 458 vide order dated 16.09.2025 has held as under : Quote“6. Accordingly, the Assessing Officer estimated that the benefit on account of difference in the purchase price amounted to 12.5% of the purchase price of Rs.59,26,206/- borne out by the bills which were alleged to be bogus, which computed at Rs.7,40,776/-. Accordingly, the Assessing Officer made an addition ofRs.7,40,776/- to the total income. The Assessing Officer also observed that the assessee must have incurred expenditure towards commission, outside the books of account for obtaining the bogus purchase bill at the rate of 1% of the value of Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 7 such bogus bills and on such count made an addition of Rs 59,262/- towards unexplained expenditure. ………………………… 20. We also find that the reliance on behalf of the assessee on the decision of the Gujarat High Court in Vijay Proteins Ltd. (supra) is quite apt. In such decision the Division Bench while referring to the decision in Krishi Tyre Retreading and Rubber Industries (supra) held that penalty could not have been imposed under Section271(1)(c) of the Act, when the addition was sustained purely on estimate basis or when the addition was made which was on a pure guess work, hence, no penalty under Section 271(1)(c) of the Act could be said to beleviable on such guess work or estimation. The Court accordingly answered the question in favour of the assessee, rejecting levy of penalty under Section 271(1)(c). 21. The aforesaid discussion would make us conclude, that the Assessing Officer could not have come to a conclusion of the present case attracting proceedings for levy of penalty, when the Assessing Officer had already taken a position on materials which were available before him in the course of assessment proceedings, in computing the amount of tax payable by the assessee, by making appropriate additions on the basis of estimates derived in passing of the assessment order. In other words, for the purpose of assessment proceedings, the relevant materials were accepted, to be not amounting to concealment of particulars of income or furnishing of inaccurate particulars of income. In such circumstances, under the garb of penalty proceedings, there ought not to be an occasion that such material again be labelled as amounting to concealment of income or furnishing of inaccurate particulars of income. If such approach is accepted, it would result in Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 8 taking away the very basis of the assessment, apart from dragging the assessee into unwarranted penalty proceedings. There cannot be two opinions that Section 271(1)(c) of the Act, would be required to be strictly construed, hence in the absence of such clear position of a concealment of particulars of income or furnishing of inaccurate particulars of income, in the facts of the present case, penalty proceedings could not have been initiated. This more particularly when the penalty proceedings are initiated clearly on the basis of additions made in the re-opening proceedings thereby leaving no room for a doubt of the disclosures made by the assessee, warranting penalty proceedings. In the present case such material essentials were completely lacking. 22. In the light of the above discussion, no interference is called for in the orders passed by the Tribunal. This appeal does not give rise to the substantial question of law. It is accordingly dismissed. No costs.” Unquote 8. Similarly, on identical facts, ITAT Mumbai Bench in the case of Mun Gems Vs. ACIT [2023] 108 ITR(T) 276 (Mumbai - Trib.) vide order dated 31.07.2023 has directed Assessing Officer to delete the penalty. 8.1 Thus, the proposition of law laid down by Hon‟ble High Court and ITAT Mumbai is that when addition has been made on an estimated basis, no penalty u/s.271(1)(c) is leviable. Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 9 9. In the case of the assessee, addition has been made on an estimated basis. We have already reproduced that Assessee had filed bills, delivery challans to prove genuineness of purchases. In these facts and circumstances of the case, Assessing Officer has failed to prove that there was concealment of income. Assessing Officer has also failed to prove that Assessee has filed inaccurate particulars. Accordingly, we direct Assessing Officer to delete the penalty. Accordingly, grounds of appeal raised by the assessee are allowed. 10. In this case, ld.AR also pleaded that no specific charge was mentioned in the assessment order. Ld.AR also invited our attention to notice u/s.271(1)(c) of the Act, wherein, the AO has not struck the appropriate words. 11. We have verified the notice u/s.271(1)(c) and it is noted that Assessing Officer has not struck the words „has concealed the income/filed the inaccurate particulars‟. In the assessment order also, which we have reproduced above, Assessing Officer has not specified the charge i.e. whether it was concealment of income or filing inaccurate particulars of income! Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 10 12. Hon‟ble Bombay High Court has held in the case of Ganga Iron & Steel Trading Co. v/s Commissioner of Income Tax. [2022] 135 taxmann.com 244 (Bombay) order dated December 22, 2021 as under : Quote, “10. We find that the law as laid down by the Full Bench applies on all fours to the facts of the present case as in the show cause notice dated 12-2-2008, the Assistant Commissioner of Income-tax is not clear as to whether there was concealment of particulars of income or that the Assessee had furnished inaccurate particulars of income. We therefore find that issuance of such show cause notice without specifying as to whether the Assessee had concealed particulars of his income or had furnished inaccurate particulars of the same has resulted in vitiating the show cause notice. Heavy reliance was placed by the learned counsel for the Revenue on the decision in Mak Data (P.) Ltd. (supra) to urge that the penalty contemplated by section 271 (1) (c) of the said Act was in the nature of civil liability and mens rea was not essential therein. The decision in Dilip N. Shroff (supra) having been held as not laying down good law in Dharmendra Textile Processors Ltd. (supra), it was submitted that the show cause notice issued in the present proceedings was liable to be upheld. It may be noted that all the decisions relied upon by the learned counsel for the Revenue were considered by the Full Bench while answering the issues referred to it on reference. The Full Bench having considered these decisions and having answered the question as regards defect in the notice under section 271(1)(c) of the said Act resulting in vitiating the penalty proceedings, we find ourselves bound Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 11 by the answers given by the Full Bench. It would not be permissible for us to disregard this aspect and take a different view of the matter. Accordingly substantial question of law no. III is answered by holding that since the show cause notice dated 12-2-2008 does not indicate whether there was concealment of particulars of income or furnishing of incorrect particulars of such income, the same would vitiate the penalty proceedings. ” Unquote. 13. In the case under consideration also the AO has not struck the appropriate words in the penalty notice. Also as mentioned in earlier para , in the assessment order the AO has not mentioned whether the penalty is initiated for concealment or filling inaccurate particulars. Therefore, respectfully following Hon‟ble jurisdictional High Court, it is held that the penalty u/s 271(1)(c) is not maintainable. Hence, the Assessing Officer is directed to delete the penalty u/s 271(1)(c). 14. Accordingly, appeal of the Assessee is allowed. ITA No.2828/PUN/2025 15. The facts pertaining to A.Y.2011-12 and A.Y.2010-11 are same. Therefore, our decision in ITA No.2827/PUN/2025 for A.Y.2011-12 shall apply mutatis mutandis to A.Y.2010-11 also. Accordingly, grounds of appeal raised by the Assessee are allowed. Printed from counselvise.com ITA Nos.2827 & 2828/PUN/2025 [A] 12 16. In the result, appeal in ITA No.2828/PUN/2025 is allowed. 17. To sum up, both penalty appeals of the assessee are allowed. Order pronounced in the open Court on 23 February, 2026. Sd/- Sd/- VINAY BHAMORE Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 23 Feb, 2025/ SGR आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : 1. अपऩलधर्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. नवभधगऩयप्रनिनिनर्, आयकर अपऩलऩय अनर्करण, “एस एम सऩ” बेंच, पपणे / DR, ITAT, “SMC” Bench, Pune. 6. गधर्ाफ़धइल / Guard File. आदेशधिपसधर / BY ORDER, / / TRUE COPY / / सहधयक रनिस्ट्रधर /Assistant Registrar आयकर अपऩलऩय अनर्करण, पपणे/ITAT, Pune. Printed from counselvise.com "