M/S ROMIL DIAM,MUMBAI vs. DCIT, CIRCLE-19(3), MUMBAI

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ITA 3472/MUM/2025Status: DisposedITAT Mumbai10 November 2025AY 2014-15Bench: SHRI SANDEEP GOSAIN (Judicial Member), SHRI PRABHASH SHANKAR (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the case was squarely covered by a jurisdictional High Court order, making the penalty liable to be set aside. The AO was directed to delete the penalty.

What were the facts?

The assessee firm filed its return of income. Subsequent to a search in the case of an entry provider, the AO noticed the assessee had taken accommodation entries. An ad-hoc addition was made on account of alleged bogus purchases, which was upheld by the CIT(A) and sustained by the ITAT.

What were the issues?

Validity of penalty order when AO failed to strike off one limb (concealment/inaccurate particulars) in SCN and if penalty can be imposed on an estimated addition.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

Hearing: 17.09.2025Pronounced: 10.11.2025

आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeal has been preferred by the assessee pertaining to penalty order passed u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] as passed by the Learned Commissioner of Income-tax, (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] for the Assessment Year 2014- 15.

Mum 2025 A.Y. 2014-15 M/s Romil Diam Mumbai 2. The grounds of the appeals are as under:-

1.

(A.Y. 2014-15) 1. The CIT (A), Mumbai erred in upholding 100% of penalty on the ad-hoc addition made on account of alleged bogus purchases u/s 271(1)(c) of the Income-tax Act 1961.

3. In this case, the assessee firm filed return declaring total income of Rs 71,39,320/-.Consequent to a search in the case of Sri Bhanwarlal Jain, an entry provider, the AO noticed that the assessee had taken accommodation entry of Rs 1,38,94,670/- in respect of M/s Nice Diamonds. The AO added 5% of the said transaction as profit margin on the said transaction which was subsequently enhanced to 8% by the ld.CIT(A).Consequent to the order of hon’ble ITAT, the addition was restricted to 3% of the alleged bogus purchase. The AO accordingly, imposed penalty of Rs 2,14,673/- on account of the addition finally sustained. The ld.CIT(A) upheld the addition.

3.

In this regard, the ld.AR has raised a legal issue that the penalty order is invalid as the AO in the show cause notice u/s 274 of the Act did not strike off one of the two limbs i.e. either concealment of income or inaccurate particulars. Reliance was placed on various court decisions including that of hon’ble Bombay High Court on Md. Farhan A. Shaikh 125 taxmann.com 253 etc. On merits, it was contended that no penalty Mum 2025 A.Y. 2014-15 M/s Romil Diam Mumbai could be imposed on an estimated addition. Reliance was placed on Cola Colour P.Ltd (Appeal no/.48 of 2022) Bombay High Court.

4.

The ld.AR relied on the orders of authorities below.

5.

On careful consideration of the above facts we find that the case is squarely covered in favour of the assessee by the hon’ble jurisdictional High Court order in Cola Colour P.Ltd (supra) which is fully applicable to the facts of the case. Accordingly, we hold that the appellate is liable to be set aside. We order accordingly, with a direction to the AO to delete the penalty.

6.

In the result, above appeal of the assessee is allowed.

Order pronounced in the open court on 10.11.2025.

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