INCOME TAX OFFICER , MUMBAI vs. KRUTI SANDEEP SHAH, MUMBAI

Thus, on the aforesaid information the reasons for reopening the proceedings u/s 147 of the Act were recorded by the Assessing Officer (AO) and consequently the case of the Assessee was reopened u/s 147 of the Act by issuing notice dated 24.03.2014 u/s 148 of the Act.

Thereafter though various opportunities were afforded to the Assessee by issuing various notices/letters by the AO, however, the Assessee did not respond to such notices/letters and therefore the AO passed the best judgment assessment order, on the basis of material available on record and ultimately held that purchases to the extent claimed to have been made from the parties, are not real purchases but merely accommodation entries in order to inflate the purchases/expenses, hence the same are disallowed.

The AO ultimately determined the entire bill entries taken qua bogus purchases amounting to Rs.34,20,545/- from the parties, as alleged non-genuine purchases being unexplained sources and consequently added the same to the total income of the Assessee. Ms. Kruti Sandeep Shah

The Assessee challenged the said disallowance by filling 1st appeal (quantum) before the then Ld. CIT(A)

In the meantime, the AO vide penalty order dated 28.01.2015 u/s 271(1)(c) of the Act, levied the penalty of Rs.11,62,640/- on account of alleged bogus purchases of Rs.34,20,545/- u/s 271(1)(c) of the Act.

Thereafter, the then Ld. CIT(A) has decided the Assessee’s quantum appeal challenging the addition made by the AO, and by quantum appeal’s order reduced the disallowance by treating 10% of such bogus purchase bills, as undisclosed income of the Assessee and/or affirmed the disallowance to the extent of 10% only.

As the quantum addition has been reduced to 10% and therefore the Ld. Commissioner by taking cognizance of the said fact and vide impugned order dated 23.01.2025 u/s 250 of the Act, directed the AO to reduce the quantum penalty, as per reduction of total income by giving effect to the order of the Ld. Commissioner in the quantum appeal in terms of section 275(1A) of the Act. Thus, in effect the Ld. Commissioner partly allowed the appeal of the Assessee.

The Revenue Department thus being aggrieved, has challenged the impugned order.

Though notice for the date of hearing was issued to the Assessee, however, the Assessee neither appeared nor filed any adjournment application and therefore, we are inclined to decide this appeal as ex-parte by hearing the Ld. DR and perusing the material available on record. Ms. Kruti Sandeep Shah

Having heard the Ld. DR and considering the aforesaid facts and circumstances and the orders passed by the authorities below, we observe that admittedly the quantum addition has already been reduced to 10% and therefore the Ld. Commissioner vide impugned order has correctly directed the AO to reduce the quantum of penalty, as per reduction of disallowance/addition by giving effect to the order of the Ld. Commissioner in quantum appeal in terms of section 275(1A) of the Act. Even otherwise, we could not find any contrary material and/or reason to controvert the findings of the Ld. Commissioner in restricting the penalty levied. Thus, the impugned order is liable to be affirmed, being not suffered from any impropriety, perversity and/or illegality, to the extent, as challenged by the Revenue Department.

Thus, the appeal filed by the Revenue Department stands dismissed. Order pronounced in the open court on 29.08.2025. (PRABHASH SHANKAR) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER