S. 271(1)(c) : Penalty-Bogus purchases-Addition on estimation-Rejection of books oaf account-Penalty not leviable. [S. 145(3), 147, 148, 260A]
The assessee, engaged in operating a photo studio, had filed return for AY 2011–12. In reassessment, the AO, relying on Sales Tax Department information, treated purchases from alleged hawala parties as non-genuine, rejected books u/s 145(3), and estimated profit at 12.5% with further addition of 1% towards commission, though assessee had produced purchase invoices, challans, bank statements and stock records. Penalty u/s 271(1)(c) was levied for concealment. CIT(A) deleted the penalty holding that the addition was based on ad-hoc estimation and not on conclusive evidence of concealment, which was affirmed by the Tribunal. Dismissing Revenue’s appeal, the High Court held that penalty cannot be levied where income is determined only on estimation. The AO had accepted sales and only estimated profit element; penalty proceedings are distinct from assessment and in absence of cogent evidence of concealment, levy of penalty is unwarranted. (ITA No. 48 of 2022; dt. 16/09/2025) (A.Y. 2011–12)
PCIT v. Colo Colour Pvt. Ltd. (Bom)(HC) www.itatonline.org.
[Hon’ble Shri Justice G. S. Kulkarni
and Hon’ble Ms Justice Aarti A. Sathe]