TaxTMI 
TaxTMI 
2026 (9) TMI 1517
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....T(A) deleting penalty levied under Section 270A of the Act. Since the present three appeals preferred by the Revenue pertaining to the Assessment Years 2014-2015, 2015-2016, and 2016-2017 involved identical issues arising from common factual matrix the same were heard together and are, therefore, being disposed off by way of the present common order. With the consent of both the sides we would first take up appeal pertaining to Assessment Year 2014-2015 as the lead matter. ITA No.7064/Mum/2025 [Assessment Year 2014-2015] 2. The Revenue has preferred the appeal against the Order, dated 18/08/2025, passed by the Learned CIT(A) partly allowing the appeal against the Penalty Order, dated 29/03/2024, passed under Section 271(1)(c) of the Act for the Assessment Year 2014-2015. 3. The Revenue is aggrieved by the fact that the Learned CIT(A) has deleted the penalty of INR.1,76,120/- levied by the Assessing Officer under Section 271(1)(c) of the Act and has raised following grounds of appeal for the Assessment Year 2014-2015: "1. The Ld. CIT(A) erred in deleting the penalty of Rs. 1,76,120/- u/s. 271(1)(c) of the Act being 100% of alleged tax sought to be evaded on esti....
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....ly cash has been received back as against the payment made towards purchases per the statement of Director Shri Jainendra P. Shah 2,59,07,668 Total 13,00,68,426 The Learned CIT(A) deleted the addition made by the Assessing Officer in respect of alleged bogus purchases of INR.8,78,99,519/- (at serial number 1. in table above) and INR.1,62,61,239 (at serial number 2. in table above). As regards the addition of INR.2,59,07,668/- (at serial number 3. in table above), the Learned CIT(A) restricted the disallowance to INR.5,18,153/- [@2% of INR.2,59,07,668/-] and deleted the remaining addition of INR.2,53,89,514/-. 8. Being aggrieved, both, the Assessee as well as Revenue, filed appeal before the before the Tribunal [ITA 2275/Mum/2022 and 2626/Mum/2022]. Vide Common Order dated 26/05/2023, (disposing off Cross-Appeals pertaining to Assessment Years 2014- 2015 to 2020-2021), the Tribunal dismissed the aforesaid cross-appeals for the Assessment Year 2014-2015. Thus, out of total addition of INR.13,00,68,426/- made by the Assessing Officer on account of alleged bogus purchases for the Assessment Year 2014- 2015 only the addition to the extent of INR.5,18,153/- got s....
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....to the extent of 2% in respect of the purchases made by it which was subsequently confirmed by the ITAT. Therefore, the assessee mentioned that since the disallowance has been made on estimated basis, it does not justify penalty u/s. 271(1)(c) of the Act. The assessee has also relied on the following case laws: "Dev Engineers vs DCIT [ITA No 6002/Mum/2024] dated 20/02/2025 ACIT vs Chetan Pravin Chitalia [ITA No 2100/Mum/2025] dated 16/05/2025 ITO vs Tisya Jewels [ITA 869/Mum/2025] dated 27/06/2025." 7.3 I found that CIT(A) has estimated disallowance of Rs. 5,18,153/- which is 2% of the purchases made by the assessee from various parties and the ITAT has confirmed the order of the CIT(A). Further, I found that ITAT, Mumbai in the case of Dev Engineers vs. DCIT [ITA No.6002/Mum/2024] dated 20.02.2025 has deleted the penalty levied u/s. 271(1)(c) of the Act in respect of the addition made on estimated basis. The relevant portion of the Mumbai, ITAT is reproduced as under: "5.2. It is a fact on record as noted both by ld. Assessing Officer and ld. CIT(A), tabulated above that additions sustained are purely on estimate basis. The issue before us is no longer res integr....
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....s passed determining the total income of the assessee at Rs. 481,660,720 against the returned income of Rs. 430,976,130 wherein two additions/disallowances were made, (1) disallowance of bogus purchases of Rs. 130,068,426/- and (2) addition under section 68 on account of unexplained cash credit of Rs. 20,616,167/-. 14. In similar manner, following additions or disallowances were made for other assessment years:- serial number Assessment year Addition on account of alleged bogus purchases Addition on account of alleged cash credit under section 68 of the act 1 2015 - 16 20,17,69,283 33,33,334 2 2016 - 17 15,80,15,644 6,10,000 3 2017 - 18 7,30,88,524 6,08,334 4 2018 - 19 8,85,94,455 5,20,833 5 2019 - 20 12,52,40,878 17,80,590 under section 69C of the act being alleged unexplained expenditure 6 2020 - 21 11,58,20,929 Nil 15. Assessee preferred appeal before the learned CIT-A. The learned CIT-A passed a consolidated order for assessment year 2014-15 to 2020-21. 16. Appellate proceedings before the learned CIT - A resulted into the appellate order wherein:- i. xx xx ....
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....ed in those loose seats. The learned CIT-A also rejected the argument of the assessee that though the period mentioned therein was 11/11/2018 to 21/11/2018 but the fact remains that the purchases were made by the appellant also during assessment year 2014 - 15 from the five parties. Therefore, the purchases made from these parties were not considered as genuine to the extent of inflated expenses and action of the learned assessing officer was upheld. i) With respect to the above parties, the learned CIT - A noted that when there are non genuine purchases, only to the extent of cash received back the purchases could be treated as non genuine. With respect to the balance parties, there has been no evidence about the extent of inflated purchases. It was also not on record that the above parties have not supplied the goods. Therefore, purchases are made but bills are inflated to the extent cash is received back by the cashier. The assessee has made a total purchase of Rs. 2,59,07,668/- from the above five parties therefore, the disallowance of purchase amounting to 2% of Rs. 2,59,07,668/- in respect of purchases made from them was upheld and balance disallowance was deleted. ....
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....disallowed the purchases completely. The claim of the assessee is that the disallowance was made on the basis of the statement of Mr. JP Shah who did not state that the payments made towards purchases were received back by the assessee. It is lose sheets, which suggests so for FY 2018- 19. However, the learned assessing officer has ignored the statement that the transaction of receiving the cash happened once only and that too in assessment year 2018-19. For this proposition assessee relied upon the decision of the honourable Gujarat High Court in 252 ITR 417, 270 TTJ 70 65 TTJ 327 and 56 TTJ 460. The learned CIT - A with respect to these parties where statement of the director of the assessee recorded under section 132(4) during the search proceedings in which he has stated that loose sheet seized from his resident by assessee from vendors of the assessee, remain unchallenged. The amount mentioned in the loose sheet was cash received from the vendor to whom assessee has paid through cheques. The difference on account of over booking of expenses was returned in cash to the cashier at different sites. The cashier in turn handed over the cash to the director. Therefore, the statement....
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....e our reasons also. In view of our finding for assessment year 2014-15, we uphold the order of the learned CIT-A in deleting the disallowance of purchase expenses to the extent deleted by him, deleting the disallowance of interest expenditure paid on loans added under section 68 of the income tax act. In the result, for all these years appeals filed by the AO as well as the assessee are dismissed. 35. In the result all 14 appeals filed in case of Relcon Infra projects Limited by the assessee and the learned assessing officer for assessment year 2014-15 to 2020-21 are dismissed." (Emphasis Supplied) 15. On perusal of above extract of the decision of the Tribunal in quantum proceedings for the Assessment Year 2014-2015, we find that the Co-ordinate Bench of the Tribunal had held that: (a) The lower authorities had concluded that even though the statement of Shri Jainendera P Shah pertained to transactions for the financial year 2018-2019 relevant to the Assessment Year 2019-2020, the activities of inflation of the expenses must have continued in other periods (including the previous year relevant to the Assessment Year 2014-2015). It was beyond the human proba....
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....italia [ITA No 2100/Mum/2025, dated 16/05/2025] the Tribunal had deleted the penalty levied under Section 271(1)(c) of the Act in respect of additions made in respect of alleged bogus purchases on the ground that the said additions were made on estimate basis holding as under: "7. We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the parties. Though the revenue has raised 10 grounds of appeal, they are either inter-connected or are general in nature. Hence, the grounds are decided together in terms of the discussion made hereafter. The reassessment order was passed u/s 143(3) r.w.s. 147 of the Act by disallowing 100% of the purchases of Rs. 1,01,43,657/- from M/s Reliance Steel Traders and M/s CR Enterprises. The disallowance was restricted to 12.5% of the impugned purchase by CIT(A) and ITAT. Thus, it is clear that the additions all through have been made on estimation basis. The penalty u/s 271(1)(c) of the Act has been levied on the estimated addition by the AO, which has been deleted by the CIT(A). The ld. AR has argued that different ITATs, Hon'ble Supreme Court and High Courts have....
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....e evaded on estimation disallowance made of Rs. 6,81,952/- (2% of Rs. 3,40,97,530/-) on bogus purchases made by the assessee in the assessment order by holding that the assessee has concealed the particulars of income." 24. The Revenue has raised following grounds of appeal in ITA No.7066/Mum/2025 [Assessment Year 2016-2017] : "1. The Ld. CIT(A) erred in deleting the penalty of Rs. 3,25,519/- u/s. 271(1)(c) of the Act being 100% of alleged tax sought to be evaded on estimation disallowance made of Rs. 9,40,590/- 2% on bogus purchases made by the assessee in the assessment order by holding that the assessee has concealed the particulars of income." 25. During the course of hearing both the sides adopted the submissions made in respect of appeal for the Assessment Year 2014-2015 and agreed that our finding/adjudication on the grounds raised in appeal for the Assessment Year 2014-2015 shall apply mutatis mutandis to grounds raised in appeal for the Assessment Year 2015-2016 and 2016-2017. Accordingly, keeping in view identical facts and circumstances, and adopting the reasoning given while adjudicating appeal for the Assessment Year 2014-2015 [ITA No.7064/Mum/2025] here....
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....erms of Section 270A of the Act. Relying upon the Common Order, dated 26/05/2023, passed by the Tribunal in Cross- Appeals in quantum proceedings for the Assessment Year 2014-2015 to 2020-2021 the Learned Departmental Representative submitted that the Tribunal had confirmed the order of the Learned CIT(A) sustaining the addition to the extent of INR.7,76,720/- being 2% of the alleged bogus purchases of INR.3,88,35,977/- made from identified parties. Therefore, it was beyond doubt that the Assessee had under reported its income. The Assessing Officer had recorded that the claim of expenditure to the extent of INR.7,76,720/- was not supported by any evidence and therefore it was establish beyond doubt that the Assessee had under reported income in consequence of misreporting income in terms of Section 270A(1)(9)(c) of the Act. 31. Per contra the Learned Authorized Representative for the Assessee reiterated the stand taken for the Assessment Year 2014-2015. It was submitted that for the Assessment Year 2017-2018 the addition was made on estimate basis, therefore, no penalty under Section 270A of the Act could be levied on the Assessee in view of the decision of Pune Bench of the Tr....
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....time it cannot be said that the Assessee had offered explanation which was bonafide and the Assessee had disclosed all material facts to substantiate the explanation so offered. To the contrary the contention of the Assessee that the purchases were not inflated was rejected by the Tribunal in the quantum proceedings. However, in absence of any material regarding the extent of inflation, the addition was made on estimate basis at 2% of alleged bogus purchases. Therefore, the benefit of Section 270A(6) of the Act cannot be extended to the Assessee in the facts and circumstances of the present case. Accordingly, we reject the contention of the Assessee that no penalty under Section 270A of the Act could have been levied upon the Assessee in terms of Section 270A(6) of the Act in the present case. Having concluded as aforesaid, we do find merit in the contention advanced on behalf the Assessee that the case before us in not one in which deduction was claimed by the Assessee without any material. We note that in the quantum proceedings the Assessee had placed before the Assessing Officer the following document/details to substantiate the purchases - (a) sample invoices showing the vehic....
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....1. In view of the above discussion, it is clearly explained that the assessee has claimed bogus purchase to inflate the expenses and to reduce the taxable income. Thus, bogus purchase expenses of Rs. 7,30,88,524/-, claimed as purchase from the bogus parties, as discussed above in FY 2016-2017 relevant to Assessment Year 2017-18 is hereby disallowed and is added to the total income of the assessee in Assessment Year 2017- 18 as bogus expense. Penalty proceedings under Section 270A of the Income Tax Act 1961 are hereby initiated on this issue for concealing the particulars of the income and for furnishing inaccurate particulars of the taxable income." (Emphasis supplied) 36. Thus, the penalty proceedings were initiated for 'concealing the particulars of income and for furnishing inaccurate particulars of taxable income'. Though, Section 270A of the Act was mentioned there was no reference to under-reporting or misreporting of income. In the subsequent notice dated 18/01/2022 and 10/11/2023 issued under Section 274 read with 270A of the Act, the Assessing Officer confronted the Assessee with the charge of under-reporting of income in consequence of misreporting. It reply it was con....
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....5 [Assessment Year 2018-2019] : "1. The Ld. CIT(A) erred in deleting the penalty of Rs. 5,37,613/- u/s. 270A of the Act being 200% of alleged tax sought to be evade on estimated disallowance made of Rs. 7,76,720/- 2% on bogus purchases made by the assessee in the assessment order by holding that the assessee had under reported income in consequence of misreporting of income." Identical grounds have been raised by the Revenue for the Assessment Year 2019-2020 and 2020-2021. 41. During the course of hearing both the sides substantially adopted the submissions made in respect of appeal for the Assessment Year 2017-2018 and agreed that our finding/adjudication on the common contentions raised in appeal for the Assessment Year 2017-2018 shall apply mutatis mutandis to contentions raised in appeal for the Assessment Year 2018-2019, 2019-2020 and 2020-2021. Accordingly, keeping in view identical facts and circumstances, and adopting the reasoning given while adjudicating appeal for the Assessment Year 2017-2018 [ITA No.7067/Mum/2025] hereinabove, we concur with the conclusion reached by the Learned CIT(A) that the penalty levied by the Assessing Officer under Section 270A(9....
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....he Assessing Officer in respect of alleged bogus purchases made from suppliers/vendors (in relation to which incriminating documents relating to overbooking of expenses as well as receipt/return of cash was found during search), the Learned CIT(A) restricted the disallowance to INR.5,89,107/- [@2% of INR.2,94,55,536/-] and deleted the remaining addition of INR.2,53,89,514/-. 42.3. Being aggrieved, both, the Assessee as well as Revenue, filed appeal before the before the Tribunal [ITA 2275/Mum/2022 and 2626/Mum/2022]. Vide Common Order, dated 26/05/2023, (disposing off Cross-Appeals pertaining to Assessment Years 2014- 2015 to 2020-2021), the Tribunal dismissed the aforesaid cross-appeals for the Assessment Year 2019-2020. Thus, For the Assessment Year 2019-2020, addition of INR.70,80,590/- made by the Assessing Officer under Section 69C of the Act and addition made by the Assessing Officer on account of alleged bogus purchases for the Assessment Year 2019-2020 only to the extent of INR.5,89,107/- got sustained. 42.4. The appeal under consideration preferred by the Revenue pertains to penalty levied under Section 270A of the Act vide Penalty Order, dated 29/03/2024 in relation....