ITAT Surat: No Section 271(1)(c) Penalty on an Estimated Bogus-Purchase Addition

In Sharad Jain Vs ITO (ITA No. 159/Srt/2026, order dated 13/07/2026, Assessment Year 2007-08), the Surat Bench of the Income Tax Appellate Tribunal allowed the assessee's appeal and directed deletion of a penalty of Rs. 37,30,939/- levied under Section 271(1)(c) of the Income-tax Act, 1961. The penalty rested on an addition that had been made, and reduced twice, on an estimation basis.

Facts

The assessee, an individual, is engaged in the diamond business. His return for AY 2007-08, filed under Section 139, was assessed. The assessment was reopened under Section 147 on information gathered in a search on the "Bhanwar Lal Jain Group", which allegedly provided accommodation through non-genuine bills, with the assessee identified as a beneficiary.

The Assessing Officer (AO) treated purchases of Rs. 8,93,53,079/- as bogus and added Rs. 2,23,38,270/-, equal to 25% of those purchases.