MANOHAR SINGH CHORADIYA,SURAT vs. ITO, WARD 3(3)(3), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT Before: Shri T. R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 470/SRT/2025 Assessment Year: 2008-09

Manohar Singh Choradiya, Vs I.T.O., C/o-Ketan H. Shah, Advocate, Ward 3(3)(3), 512, Times Square-I, Opp. Surat. Ram Baug Bungalow, Thaltej Shilaj Road, Thaltej, Ahmedabad-380059 (Gujarat) PAN: AAOPC 1738 M (Appellant) (Respondent)

Assessee Represented by : Shri Aman Shah, C.A. Revenue Represented by : Shri Mukesh Jain, CIT-DR. Date of hearing : 05/05/2026 Date of pronouncement : 21/07/2026 आदेश/ORDER PER: RATNESH NANDAN SAHAY, AM: 1. This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Surat [In short, ‘the ld. CIT(A)’] dated 30/08/2017 for the assessment year (AY) 2008-09 wherein the assessee has raised following grounds of appeal: "1. The AO erred in levying penalty u/s 271(1)(c) vide order dated 29-03- 2019 and the CIT(A) erred in confirming the penalty on the restricted amount following the quantum order of the Hon'ble ITAT to the extent of

2 ITA No. 470/Srt/2025 Manohar Singh Choradiya Vs ITO 6% of the total disputed purchase dated 11-03-2025. It is prayed to quash such penalty order as being illegal and contrary to the law. 2. The AO erred in initiating the penalty proceedings and eventually passing the order dated 29-03-2019, it is submitted that in such initiation notice, the AO had not mentioned as to under which limb of section 271(1)(c) such penalty was sought to be levied, whether for furnishing inaccurate particulars of income or concealing income and as per settled law, it is illegal and void ab initio. It be held as such. 3. The AO erred in levying penalty vide order dated 29-03-2019 and CIT(A) erred in confirming the same vide order dated 11-03-2025, in light of the fact that the assessee has neither furnished inaccurate particulars of income or concealed his income and in absence of same, the penalty cannot be levied. It be held as such and impugned order be quashed. 4. Without prejudice to other grounds, it is hereby submitted that penalty cannot be levied where quantum addition is based on estimation basis. This issue is settled in the favour of the assessee by the order of the Hon'ble Surat ITAT in the case of Ramprakash Vijayvergia in ITA no, 125/2024 wherein, on the same set of facts, regarding search at Bhanwaralal Jain Group and addition of bogus purchases, the Hon'ble Tribunal has stated that as it is a question of estimation of GP, there cannot be any levy of penalty. It be held so and the penalty may kindly be deleted. 5. The assessee craves leave to add, amend, alter or delete any/all grounds in the interest of justice. All the grounds may be read without prejudice with one another." 2. Facts of the case, in brief, are that the assessment for the A.Y. 2008-09 was passed under Section 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short, the Act) dated 28/03/2016 and a sum of ₹ 6,78,20,409/- was added to the total income of the assessee on account of bogus purchases. The penalty proceedings under Section 271(1)(c) of the Act was also initiated by the Assessing Officer for furnishing inaccurate particulars and concealment of income. In the penalty order passed under Section 271(1)(c) of the Act dated 29/03/2019 for the A.Y. 2008-09, the Assessing Officer

3 ITA No. 470/Srt/2025 Manohar Singh Choradiya Vs ITO imposed penalty of ₹ 1,15,11,600/- as a minimum penalty @ 100%. 3. Aggrieved by the penalty order, the assessee filed appeal before the ld. CIT(A), who decided the appeal vide impugned order dated 11/03/2025 restricted the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act on the ground given as under: "5.2 On perusal of record, it is noted the assessment in this case was completed u/s 143(3) r.w.s 147 of the I.T. Act, 1961 on 28.03.2016 at a total income of Rs. 6,79,55,389/- after making addition of Rs. 6,78,20,409/- on account of non genuine. purchases as accommodation entry. Penalty proceedings u/s 271(1)(c) of the Act was also initiated on the issue for furnishing inaccurate particulars of income. During the appellate proceedings, the appellate submitted his reply dated 201.02.2025 in which ITAT order dated 18.07.2022 in his own case u/s 143(3) for same assessment year i.e. 2008-09 has been furnished. It is noted from the order of the Hon'ble ITAT that disallowance restricted by the CIT(A) is at 12.5% of the disputed purchase shown from the entry provider. The Hon'ble ITAT considered 12.5% addition of total purchases at the higher side keeping in view of the profit margin in the industry. The Hon'ble ITAT further observed that in this case the appellant has shown extremely low G.P. yet the disallowance at the rate of 12.5% is on higher side. This combination in similar cases, wherein the purchases are shown from Bhanwarlal Jain have been restricted the addition to the extent of 6% of disputed purchases. Therefore, in the present case also, the addition was

4 ITA No. 470/Srt/2025 Manohar Singh Choradiya Vs ITO restricted to 6% of the disputed purchases by the Hon'ble ITAT. As a result, the quantum of addition as restricted by the Hon'ble ITAT in its order dated 18.07.2022 i.e. 6% of total bogus purchase. Since, the Hon'ble ITAT has restricted the addition to 6% of total non-genuine purchases, the penalty should be imposed on the same restricted amount." 4. Further aggrieved by the order of the ld. CIT(A), the assessee is in appeal before this Tribunal. 5. During the course of hearing before us, it was submitted by the appellant's counsel that on similar issue, the ITAT, Surat Bench, Surat while deciding the appeal in the case of Shri Ramprakash Vijayvergia Vs ITO in ITA No. 125/Srt/2024 for the A.Y. 2012-13 order dated 16/04/2024 and in ITA No. 1062 & 1068/Srt/2024 in the case of ITO Vs Borda Brothers for the A.Y. 2007-08 order dated 08/04/2025 have deleted the imposition of penalty under Section 271(1)(c) of the Act on similar set of facts. Further the appellant's counsel also submitted that the decision of the Hon'ble High Court of Bombay in Income Tax Appeal No. 48 of 2022 in the case of Pr.CIT Vs Colo Colour Pvt. Ltd. vide its order pronounced on 16th September, 2025 has held that the penalty could not have been imposed under Section 271(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,

5 ITA No. 470/Srt/2025 Manohar Singh Choradiya Vs ITO hence, no penalty under Section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. Thus, the penalty imposed by the Assessing Officer and confirmed by the ld. CIT(A) cannot be sustained and therefore, we delete the same. 6. In the result, this appeal of the assessee is allowed. Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 21/07/2026.

Sd/- Sd/- (T. R. SENTHIL KUMAR) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Dated 21/07/2026 *Ranjan आदेश�ȧĤǓ�ͧ �ͪ �\ Ē ȯͪ��/ Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT 6. Guard file. By order/आदेशसे,

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