M/S. PERQ ADVERTISING PVT LTD, MUMBAI vs. DCIT, CIRCLE 2(3)(1), MUMBAI

The authorities below failed to appreciate that the Appellant had produced primary evidences including invoices and account-payee cheque payments. No evidence was brought on record to show the purchases were bogus.

The CIT(A) erred in replying on generic ‘hawala dealer’ lists and non- service of notices u/s.133(6), neither of which constitute proof of concealment.

Penalty on estimated income is contrary to settled judicial principles and has been consistently deleted in similar cases by various ITAT benches.

The penalty order is bad in law as there is no clear and specific satisfaction recorded by the Assessing Officer during assessment regarding concealment or inaccurate particulars.”

From the above, it is apparent that the addition has been made in the hands of the Assessee on estimate basis. During the course of hearing Learned Authorized Representative for the Assessee had relied upon the decision of the Tribunal in the case of Income Tax Officer, Ward – 41(2)(2) Vs. In Coach Builders [ITA No.7993/Mum/2025, Assessment Year 2009-2010, dated 18/02/2026] wherein penalty levied under Section 271(1)(c) of the Act in respect of alleged bogus purchases was deleted for the reason that the additions were made on estimate basis estimated by the Tribunal holding as under:

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 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 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.

Thus, respectfully following the aforesaid decisions, we are of the considered view that the penalty under section 271(1)(c) of the Act cannot be levied merely on the basis of an estimated addition. Accordingly, the grounds raised by the Revenue are dismissed, and the decision of the learned CIT(A) in deleting the penalty is upheld.

In the result, the appeal by the Revenue is dismissed.

The above decision is squarely applicable to the facts of the case. Accordingly, respectively following the same we delete the penalty of Assessment Year 2010-2011 & 2011-2012 INR.1,58,955/- levied upon Assessee under Section 271(1)(c) of the Act. Thus, Ground No. 4 raised by the Assessee is allowed while all the other grounds are dismissed as having been rendered infructuous.

In result, in terms of paragraph 11 above, the appeal preferred by the Assessee is allowed.

Now we would take up appeal preferred by the Assessee for the Assessment Year 2011-2012 against the Order, dated 28/11/2025, passed by the Learned CIT(A) whereby Learned CIT(A) had dismissed the appeal against the Penalty Order, dated 04/02/2022, passed under Section 271(1)(c) of the Act.

The Assessee has raised following grounds of appeal :

The authorities failed to appreciate that the Appellant produced invoices and bank statements evidencing genuine payments through account-payee cheques. No evidence was brought to establish that the purchases were bogus.

The AO erred in relying on non-service of notices u/s 133(6) as a basis for alleging bogus purchases, without conducting any further verification, field inquiry, or cross-examination.

Penalty cannot be levied on estimated additions, as held consistently by various High Courts and Tribunals. The CIT(A) failed to consider binding precedents prohibiting penalty in such cases

The penalty order is invalid for lack of clear, specific satisfaction regarding concealment in the assessment order, contrary to judicial requirements.

The CIT(A) erred in confirming the penalty by mechanically relying on general observations regarding hawala cases without demonstrating any specific concealment by the Appellant.” Assessment Year 2010-2011 & 2011-2012

We have heard the both the sides and have perused the material on record in relation to the above grounds raised by the Assessee. We find that the Learned CIT(A) has disposed off the appeal preferred by the Assessee without dealing with the submissions filed by the Assessee during the appellate proceedings. Therefore, the Impugned Order dated 28/11/2025 passed by the Learned CIT(A) cannot be sustained and the same is set aside with the directions to Learned CIT(A) to adjudicate the appeal preferred by the Assessee afresh after granting Assessee a reasonable opportunity of being heard and after taking into consideration the submissions filed by the Assessee including the judgment of the Hon’ble Bombay High Court in the case of The Principal Commissioner of Income Tax-6 Vs. Colo Colour Pvt. Ltd. [ITA No.48 of 2022, dated 16/09/2025] and the decision of the Tribunal in the case of Coach Builders [ITA No.7993/Mum/2025, Assessment Year 2009-2010, dated 18/02/2026]. In terms of aforesaid, Ground No.1 raised by the Assessee is treated as allowed for statistical purposes while all the other grounds raised by the Assessee are dismissed as having being infructuous since we have set aside the impugned order with the aforesaid directions.

In result, in terms of paragraph 15 above, the appeal preferred by the Assessee is treated as allowed for statistical purposes.

In conclusion, ITA No.76/MUM/2026 (Assessment Year 2010-2011) is allowed while ITA No. 75/MUM/2026 [Assessment Year 2011-2012] is treated as allowed for statistical purposes.

""थ"/ The Respondent. 3. आयकरआयु"/ The CIT "धान आयकर आयु"/ Pr.CIT 4. 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, मुंबई/ DR, ITAT, Mumbai 6. गाड" फाईल / Guard file.