DILIP N. THAKKAR HUF,MUMBAI vs. ITO-27(1)(1), NAVI MUMBAI

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ITA 7321/MUM/2026Status: DisposedITAT Mumbai12 October 2026AY 2009-104 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 penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, is unsustainable. The Tribunal noted that the addition on account of alleged bogus purchases was ultimately restricted to 3% purely on an estimation basis. Following the Supreme Court's decision in CIT v. Reliance Petroproducts Pvt. Ltd., which stated that mere disallowance does not attract penalty unless concealment or inaccurate particulars are satisfied, and the jurisdictional Bombay High Court's decisions in Pr. CIT-6 v. Colo Colour Pvt. Ltd. and Pr. CIT-17 v. Anil Bajaria, which held that penalty cannot be sustained on estimated additions without material establishing concealment or inaccurate particulars, the Tribunal found the penalty to be unsupportable. Consequently, the Tribunal set aside the impugned order and directed the Assessing Officer to delete the penalty of Rs. 2,26,119/-.

What were the facts?

The assessee, Dilip N. Thakkar HUF, filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2009-10. The Assessing Officer had made additions of Rs. 32,79,247/- for alleged bogus purchases and disallowed 15% of expenses. The CIT(A) restricted the bogus purchase addition to 12.5% (Rs. 10,48,442/-) and sustained the ad hoc disallowance. The ITAT, in a prior order, further restricted the bogus purchase addition to 3% and sustained the ad hoc disallowance. Subsequently, the Assessing Officer levied a penalty of Rs. 2,26,119/- under Section 271(1)(c) based on the Rs. 10,48,442/- addition, which was affirmed by the CIT(A) in the impugned order dated 11.05.2026.

What were the issues?

1. Whether the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, is sustainable when the addition on account of alleged bogus purchases was restricted to 3% purely on an estimation basis. Assessee's contentions: The assessee argued that the penalty under Section 271(1)(c) cannot be sustained merely on estimated additions relating to alleged bogus purchases, especially in the absence of material establishing concealment of income or furnishing of inaccurate particulars. The assessee relied on the Supreme Court decision in CIT v. Reliance Petroproducts Pvt. Ltd. and the Bombay High Court decisions in Pr. CIT-6 v. Colo Colour Pvt. Ltd. and Pr. CIT-17 v. Anil Bajaria. Revenue's contentions: The judgment does not record any specific contentions made by the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SMT RATNA DASGUPTA

Pronounced: 12.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER And SMT RATNA DASGUPTA, ACCOUNTANT MEMBER ITA No. 7321/Mum/2026 Assessment Year: 2009-10 Dilip N. Thakkar HUF ITO 27(1)(1), 14/16, 7 Om Gopal Krishna IT-Office, Vasi Railway Station Society, Golibar Road, Jagdusha Vs. Building, Navi Mumbai, Nagar, Ghatkopar West S.O, Mumbai 400703 Mumbai-400086 PAN – AAEHD0489E (Assessee/Appellant) (Revenue/Respondent) Present for: Ruchi M Rathod, Ld. AR & Assessee represented by: Prachi aria Patra, Ld. AR Revenue represented by: Soni Mathews (Sr. DR)

Date of conclusion of hearing: 12.10.2026 Date of pronouncement: 12.10.2026

O R D E R Per : Narender Kumar Choudhry, Judicial Member

This appeal has been preferred by the ASSESSEE against the order dated 11.05.2026, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short, “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short, “the Act”), for A.Y. 2009-10.

2.

In the instant case, the Assessing Officer, vide assessment order dated 22.03.2015, made additions of Rs.32,79,247/- and Rs.76,490/- on account of alleged bogus purchases and disallowance of expenses being 15% of the expenses, respectively.

ITA No. 7321/M/2026 2 Dilip N. Thakkar, HUF

3.

The then Ld. CIT(A), vide quantum appellate order dated 16.11.2017, restricted the addition on account of alleged bogus purchases to 12.5%, amounting to Rs.10,48,442/-, while sustaining the ad hoc disallowance of petty cash expenses made by the Assessing Officer.

4.

On further appeal, the Tribunal, vide order dated 22.04.2019 in ITA No.7441/Mum/2017, further restricted the addition on account of alleged bogus purchases to 3%, while sustaining the ad hoc disallowance of petty cash expenses.

5.

Meanwhile, the Assessing Officer, vide penalty order dated 27.03.2019, levied penalty of Rs.2,26,119/- u/s 271(1)(c) of the Act, being 100% of the tax sought to be evaded on the addition of Rs.10,48,442/-, which was subsequently affirmed by the Ld. Commissioner vide impugned order dated 11.05.2026.

6.

Thus, the Assessee being aggrieved, is in appeal before us.

7.

Having heard the parties and perused the material available on record, we observe that the addition on account of alleged bogus purchases was ultimately restricted by the Tribunal to 3% purely on an estimation basis. The Hon'ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC), has held that mere disallowance of a claim does not, by itself, attract penalty u/s 271(1)(c), unless the statutory ingredients of concealment of income or furnishing of inaccurate particulars are satisfied. Further, the Hon'ble jurisdictional Bombay High Court in Pr. CIT-6 v. Colo Colour Pvt. Ltd., [2025] 178 taxmann.com 458 (Bom.), ITA No.48 of 2022, decided on 16.09.2025, has held that penalty u/s 271(1)(c) cannot be sustained merely on estimated additions relating to alleged bogus purchases in the absence of material establishing concealment of income or furnishing of inaccurate

ITA No. 7321/M/2026 3 Dilip N. Thakkar, HUF

particulars thereof. The aforesaid judgment has subsequently been followed by the Hon'ble jurisdictional High Court in Pr. CIT-17 v. Anil Bajaria, ITA No.128 of 2024, decided on 12.11.2025, wherein deletion of penalty arising from an estimated addition on account of alleged bogus purchases, was upheld.

8.

In the instant case, admittedly, the addition on account of alleged bogus purchases has ultimately been sustained at 3% purely on an estimation basis, without any independent material brought to our notice establishing concealment of income or furnishing of inaccurate particulars thereof. Therefore, considering the peculiar facts and circumstances of the case and respectfully following the aforesaid judgments of the Hon'ble Supreme Court and the Hon'ble jurisdictional High Court, particularly Colo Colour Pvt. Ltd. and Anil Bajaria (supra), we hold that the penalty levied u/s 271(1)(c) is unsustainable. Consequently, we set aside the impugned order and direct the Assessing Officer to delete the penalty of Rs.2,26,119/-.

9.

In the result, the appeal filed by the Assessee stands allowed.

Order pronounced in the open court on 12.10.2026.

Sd/- Sd/- (SMT RATNA DASGUPTA) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Divya R. Nandgaonkar, Stenographer

ITA No. 7321/M/2026 4 Dilip N. Thakkar, HUF

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asst. Registrar, ITAT, Mumbai.

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