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Facts
The revenue appealed against the order of the NFAC which deleted a penalty imposed by the AO under section 271(1)(c) of the Act. The penalty was levied on an addition of Rs.1,35,719/- made on account of bogus purchases. The assessee was absent during the hearing, and the appeal was decided ex-parte.
Held
The Tribunal held that a penalty levied on an estimated addition is not sustainable in law. This position is well-settled and has been consistently held by the ITAT Mumbai Benches. The present case was squarely covered by a previous decision of a coordinate bench.
Key Issues
Whether the penalty levied under section 271(1)(c) on an estimated addition is sustainable in law.
Sections Cited
271(1)(c), 250
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Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKAR
O R D E R
Per : Shri Anikesh Banerjee, JM:
The instant appeal of the revenue filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter called, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2007-08, date of order 10/06/2025. The impugned order emanated from the order of the Income-tax Officer, Ward 19(3)(4), Mumbai (for brevity, the “Ld. AO”), passed under section 271(1)(c) of the Act, date 26/03/2019.
Spark Diamonds 2. When the appeal was called for hearing none was present on behalf of the assessee. No adjournment petition was filed. After considering the merit of the case, we proceed to dispose of the appeal exparte qua for assessee, after hearing the Ld. DR.
We heard the submission of the Ld.DR and considered the documents available on the record. During the impugned assessment year, the addition was confirmed amount to Rs.1,35,719/- being 6% on the bogus purchases of Rs.22,61,986/-. Accordingly, the Ld.AO Levied penalty amount of Rs.41,940/- being 100% of the tax sought to be evaded for furnishing inaccurate particulars of income of Rs.1,35,719/-. The aggrieved assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) considered the assessee’s submission and respectfully relied on the order of the co-ordinate bench of ITAT, Mumbai in the case of Ajay Loknath Lohia vs ITO 25(2)(1), Mumbai in date of pronouncement 25/10/2018 where the penalty on estimated addition was duly deleted.
The Ld. DR supported the impugned penalty order; however, he was unable to cite any contrary judicial precedent to rebut the findings recorded by the Ld. CIT(A).
In our considered opinion, we observe that the penalty of Rs.41,937/- was levied on the basis of an estimated addition. It is a well-settled legal position, as consistently held by the ITAT, Mumbai Benches, that penalty levied on estimated additions is not sustainable in law. The issue is squarely covered by the decision of the Coordinate Bench of the ITAT, Mumbai, in the case of Ajay Loknath Lohia (supra). In view of the above, we find no infirmity in the