MANGAL SINGH RATHORE,MUMBAI vs. ASSISTANT COMISSIONER OF INCOME TAX CIRCLE 32(2), MUMBAI

This appeal by assessee is directed against the order of ld. CIT(A)/NFAC, Delhi dated 30.07.2025 in confirming penalty of Rs. 10,00,000/-, levied under section 271(1)(c) dated 23.03.2018 for A.Y. 2009-10.

Rival submissions of both the parties have been heard and record perused. The ld. AR of the assessee submits that assessment was completed under section 144 r.w.s. 147 on 27.03.2015. The assessing officer while passing the assessment order made addition on account of disallowances of non-genuine purchases / bogus purchases by taking view that assessee is beneficiary of purchases shown from hawala operators. The assessing officer made addition @ 12.5% of aggregate purchases Rs. 2.26 crores, shown from various alleged tainted parties. The assessing officer levied on the penalty of Rs. 10,00,000/- vide order dated 23.03.2018. On further appeal before ld. CIT(A) the order of penalty was sustained. The ld. AR of the assessee submits that it is settled position in the law that no penalty under section 271(1)(c) is leviable on the addition/disallowances made or sustained on estimation basis. To support his submission, the ld. AR relied upon the decision the following decision:  PCIT vs Colo Colour Private Limited in Tax Appeal No. 48 of 2022 (Bombay High Court

On the other hand, learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of lower authorities.

We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that there is no dispute that addition in the quantum assessment was made at adhoc basis @ 12.5% of the impugned purchases. We find that it is settled position under the income tax proceedings that no penalty under section 271(1)(c) is leviable when the addition is made on estimation/adhoc basis. Similar view was taken in the case laws relied by ld. AR of the assessee. Similar view was taken by this combination in Khodiyar dated 26.08.2025. Thus, respectfully following such decisions of penalty levied by assessing officer and confirmed by ld. CIT(A) is deleted. In the result, grounds of appeal of assessee are allowed.

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