Penalty u/s. 271(1)(c) — Addition made on the basis of ad hoc estimate — No clear finding that there was concealment of income or furnishing of inaccurate particulars of income — Penalty u/s. 271(1)(c) cannot be imposed.

45. Pr.CIT vs. Colo Colour Pvt. Ltd.

2025 (9) TMI 1041 (Bom.)

A. Y. 2011-12: Date of order 16/09/2025

S. 271(1)(c) of ITA 1961

Penalty u/s. 271(1)(c) — Addition made on the basis of ad hoc estimate — No clear finding that there was concealment of income or furnishing of inaccurate particulars of income — Penalty u/s. 271(1)(c) cannot be imposed.

The assessee was engaged in the business of operating a photo studio and trading in photographic material. The assessee filed its return of income declaring total income at ₹4,32,530. Subsequently, the case was re-opened and the assessment was completed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 assessing the total income at ₹12,32,570 after making an addition of ₹7,40,776 on account of bogus purchases on an estimate basis and addition of ₹59,262 was made towards unexplained commission expenditure on bogus purchases. The assessee did not file an appeal against the said order and agreed to the addition to buy peace and to avoid litigation.

Thereafter, penalty proceedings were initiated u/s. 271(1)(c) of the Act on the ground that the assessee had furnished inaccurate particulars of