TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 695
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act. 2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that in absence of any specific show cause notice having been issued, the levy of penalty was otherwise wholly illegal. 3. That furthermore that since no valid satisfaction was recorded in the order of assessment, penalty levied was otherwise too not in accordance with law. 4. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding penalty @ 50% of the amount of tax payable on addition of Rs. 5,43,930/- on account of difference in turnover as per audited books of account and service tax return in Form ST-3 4.1 That while upholding the aforesaid penalty the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the service tax return in Form ST-3 was filed based on unaudited books of accounts and therefore mistake done in reporting the turnover in service tax return was a bonafide mistake. 4.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the return of income under the Act was filed based on the audited financial statements, which had been dul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lty u/s. 270A(2)(a) of the Act, the penalty is accordingly calculated and imposed as under: - Particulars Amount (in Rs. ) Total amount of under-reported income Rs. 5,43,930/- Tax payable thereon Rs. 1,88,243/- Penalty @ 50% Rs. 94,122/- 9. Accordingly, penalty u/s. 270A of the Act amounting to Rs. 94,120/- (rounded off) is hereby imposed in this case on the under-reported income." 3.1 In appeal, the Ld. CIT(A) affirmed the penalty levied by the Assessing Officer, hence the instant appeal before us. 4. Learned counsel for the assessee has placed on record detailed written synopsis. In fact the Ld. counsel for the assessee reiterated the submissions made in the synopsis and prayed for deletion of the impugned penalty levied under Section 270A(2)(a) of the Act. For the sake of clarity the synopsis filed on behalf of the assessee is reproduced herein below: MAY IT PLEASE YOUR HONOURS 1 That instant appeal filed by appellant company arises from order of learned Commissioner of Income Tax Appeals dated 14.7.2025. 2 Sequence of Events is as under. Sr. No. Date Particulars (Page of Paper Book) i) 31.10.2017 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oneous in law and on facts. 5.1 The penalty was levied on Rs. 5,43,930/- being the difference in turnover reported between audited books of accounts and ST-3 returns, computed at 50% of tax payable. 5.2 This is a general ground and does not offer substantive rebuttal. Merits of levy are addressed under specific grounds. Ground is noted, no separate adjudication required. 6. Ground No. 2: In this ground the appellant that the mismatch was due to filing of ST-3 based on unaudited books, and income tax return was correctly filed based on audited statements. The mistake was bona fide and no concealment occurred. 6.1 As per Assessment Order the assessee admitted the discrepancy only during assessment. The error led to under-reported income of Rs. 5,43,930/-, which attracted penalty under Section 270A(2)(a). 6.2 Filing statutory returns based on unaudited records amounts to carelessness. The discrepancy remained unrectified until detection. While the ITR was filed on audited accounts, prior inaccurate disclosures constitute under-reporting. The assessee's explanation does not meet the threshold of bona fide compliance. Therefore, ground is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....023 dated 22.5.2023 Saltwater Studio LLP v. NFAC, Delhi vi) ITA No. 54 & 55/Pune/2023 dated 23.6.2023 Kishore Digambar Patil v. ITO vii) ITA No. 1054/Bang/2024 IIFL dated 27.9.2024 Samasta Finance Ltd. Vs. DCIT viii) ITA No. 1779/Bang/2024 dated 22.01.2025 Mr. Nateshan Sampath vs. DCIT IX) 214 ITD 426 (Ahmedabad- Trib.) dated 26.8.2025 Snehalkumar Bhogilal Trivedi vs. NFAC 8. Reliance is also placed on the following judicial pronouncements: A SECTION 271(1)(c) OF THE ACT SUPREME COURT i) 242 Taxman 180 (SC) CIT v. SSA'S Emerald Meadows SLP Dismissed [arising out of CIT v. SSA'S Emerald Meadows reported in 73 taxmann.com 241 (Kar)] ii) 282 Taxman 463 (SC) PCIT v. Goa Coastal Resorts and Recreation (P.) Ltd.SLP Dismissed [arising out of PCIT v. Goa Coastal Resorts and Recreation (P.) Ltd. reported in 272 Taxman 157 (Bom)] HIGH COURTS i) 432 ITR 84 (Del) Pr. CIT v. Sahara India Life Insurance Company Ltd. ii) 359 ITR 565 (Kar) CIT v. Manjunatha Cotton & Ginning Factory iii) 434 ITR 1 (Bom) (FB) Mohd. Farhan A. sheikh v. DCIT iv) ITA No. 1154/2014 (Bom) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. Therefore the Tribunal was justified in cancelling the penalty levied by the Assessing Officer and affirmed by the Commissioner of Income-tax (Appeals) in the facts and circumstances of the case. This reference is accordingly answered in the affirmative holding that the Tribunal was justified in doing so." xi) ITA No. 393/2015 Pr CIT vs. Prashant Shrivastava "11. It is not the Revenue's case that the explanation offered by the Assessee herein is false. At best it could be stated that the Assessee failed to substantiate the explanation he offered. The explanation was that the vouchers were not available. There was a dispute that the Assessee had with his accountant who appears to have misplaced the relevant vouchers. The question is whether such explanation can be said to be bona fide. It is one thing to say that the explanation about the dispute the Assessee had with his accountant, as a result of which the vouchers could not be pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Total 2,71,11,88,127 Reconciliation of Turnover of books with service tax return S. No. Particulars Amount A Turnover from Construction Business Services 2,71,11,88,127 B Trading in Securities 7,76,58,11,004 C Rori Sale Total Turnover 10,47,91,99,131 D Turnover as per ST 3 2,71,17,32,057 E Difference in ST 3 (A-D) 5,43,930 Note:- Turnover mistakenly shown more by Rs 5,43,930/- in the month of march Point 4 d. Copy of service tax return for the Assessment Year 2017-18 is enclosed herewith as Annexure 4 & 5 (pages 132-158 of Paper Book) Point 5: e. Copy of financial statement for the year under consideration is enclosed herewith as Annexure 4 & 5 (pages 1-62 of Paper Book) .... ii) Reply dated 06.11.2019 (pages 159-160 of Paper Book) ..... . During the year under consideration, Assessee was having total turnover of Rs. 10,47,91.99.131/-, We are attaching herewith all detailed documentary evidences of all different turnovers alongwith the reconciliation Reconciliation of Turnover of books with service ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted that appellant company had mistakenly incorrectly disclosed lower turnover by Rs 97,73,932/- in the month May 2016 therefore same amount reflected in the month of October 2016 to nullify its impact and paid service tax. It is also submitted that company had incorrectly disclosed higher turnover in the month of march by Rs 5,43,930/- in the service tax return filed by the appellant company, but the same cannot ipso facto be a basis to make addition more particularly when admittedly and undisputedly turnover as disclosed in the audited books of accounts has been accepted. The aggregate turnover as per audited books of accounts on account of construction business is Rs 2,71,11,88,127/- and not Rs 2,71,17,32,057/- as stated in service tax return. There is not a shred of evidences to dispute the turnover as declared in the audited books of accounts maintained and accepted in the order of assessment. 14. It is also submitted that the learned Assessing Officer has not pointed out any specific defect or discrepancy in the audited books of accounts maintained by the appellant company and were otherwise free from any qualification by the auditors. Infact, the details of prope....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... have found that the account books supported the claims for deductions, when the deductions were disallowed. by the ITO on the ground that detailed information regarding them was not available, justice was not done to the assessees. It was not possible for the assessees to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books. In a sense it may be a question of law as to what the meaning of "material" is and whether the auditors' reports were material. But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference. ii) 99 TTJ 394 (Rajkot) ITO vs. Girish M. Mehta 9. As per our considered view before rejecting the books of account, the Department has to prove that accounts are unreliable, incorrect or incomplete, the accounts regularly maintained in the course of business, duly audited under the provisions of L.T. Act and free from any qualification by the Auditors, should be taken as correct u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to substantiate his return and if he furnishes or produces necessary evidence, which in the normal course of things is known as books of account, bills. vouchers, etc. in support of his return, then in order to rebut the assessee's reliance/submissions when the return is substantiated by such books of account, it is the Revenue's duty to carry on proper investigation, verification from such books of account and must call for any other explanation of evidence, if so required. After production of books of account and submission of explanation by the assessee, if any asked for, with respect to the contents of the return and books of account, the revenue may accept the same or after pointing out the specific defect may reject the books of account and proceed to determine the assessee's income as per the provisions of section 145. Income-tax provisions nowhere either authorize the Assessing Officer or cast an obligation on the assessee to prove a negative result, i.e., to prove as to why he failed to make a profit at a particular rate. In disposing of an appeal from against any order under section 143(3)/144, the First Appellate Authority need not confine itself only to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inting Mills Private Limited v JCIT; v) 60 TTJ 27 (Indore) Prahladdas Hari Kishan vs. ACIT vi) 69 TTJ 685 (Patna) Income Tax Officer vs. Mangalam Chemicals vii) 52 TTJ 203 (Jaipur) ACIT vs. Rahmat Khan Chandan Khan & Party 16 It is also submitted that entries in service tax returns are determinative cannot be a conclusive basis to compute the income of an assessee. Reliance is placed on following judgments: i) ITA No. 589/2011 (Del) dated 30.09.2011 CIT vs. Arvind Kumar Jain ii) 82 ITR 363 (SC) Kedarnath Jute Mfg. Co. Ltd. ii) iii) 227 ITR 172 (SC) Tuticorn Alkali Chemicals and Fertilizers Ltd. vs. CIT iv) 285 ITR 221 (Mad) CIT vs. Idhayam Publications Ltd 17 It is submitted that it is a case of lack of inquiry. In this regard appellant company seeks to place reliance on following judgments: i) 361 ITR 10 (Del) CIT v. Gangeshwari Metal (P) Ltd. ii) 357 ITR 146 (Del) CIT vs. Fair Finvest Ltd iii) ITA No. 212/2012 dated 11.4.2012 (Del) CIT v. Goel Sons Golden Estate (P) Ltd. iv) 342 ITR 169 (Del) Nova Promoters & Finlease (P) Ltd v) ITA No. 645/2012 dated 13.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claim of assessee does not itself amounts to hold that assessee has furnished inaccurate particulars of income. It is thus submitted that in absence of furnishing of inaccurate particulars of income; no penalty is leviable on the assessor u/s. 271(1)(c) of the Act. Reliance is placed on the following judgments: i) 265 ITR 562 (SC) K.C. Builders v. ACIT ii) 291 ITR 519 (SC) Dilip N. Shroff vs. JCIT "43. The expression "conceal" is of great importance. According to Law Lexicon, the word "conceal" means: "to hide or keep secret. The word "conceal" is conceal are which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight, to prevent the discovery of, to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income tax authorities." In Webster's Dictionary, "inaccurate" has been defined as: "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." 44. It signifies a deliberate act or omission on the part of the assessee. Such deliberat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed: "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the assessee's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return." [Emphasis supplied] iv) 393 ITR 1 (Del) Pr. CIT v. Neeraj Jindal v) 348 ITR 306 (SC) Price Waterhouse Coopers (P) Ltd. v. CIT vi) 292 ITR 11 (SC) T.Ashok Pai v. CIT 16. The term 'inaccurate particulars' is not defined. Furnishing of an assessment of value of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncrease in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 22. "Concealment of income' and 'furnishing of inaccurate particulars' carry different connotations. Concealment refers to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. The question came for consideration of this Court yet again in K.C. Builders v. Asstt. СІТ [2004] 265 ITR 562, wherein it was held: "One of the amendments made to the abovementioned provisions is the omission of the word deliberately from the expression 'deliberately furnished inaccurate particulars of such income. It is implicit in the word 'concealed that there has been a deliberate act on the part of the assessee. The meaning of the word 'concealment as found in Shorter Oxford English Dictionary, third edition, Volume I, is as follows: "In law, the intentional suppression of truth or fact known, to the injury or prejudice of another. Mere omission from the return of an item of receipt does neither amount to concealment nor deliber....
X X X X Extracts X X X X
X X X X Extracts X X X X
....)(c), the conditions under Section 271(1)(c) must exist before levy of penalty. When particulars have been submitted and Revenue has not pinpointed any discrepancy or direct relation between the exempt income and expenditure incurred, then, in our considered view, it is difficult to presume that assessee has furnished inaccurate particulars of income. Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt .Ltd. (supra) has considered similar issue and held that in such a situation, assessee has not been found guilty for filing inaccurate particulars or for concealing the income. The relevant portion of Hon'ble Supreme Court's judgment is reproduced below:- 6. Considering all these facts of the case as well as the decision of Hon'ble Supreme Court, we set aside the orders of authorities below and allow the assessee's appeal. ITA No. 4190-4191/D/2013 dated 6.6.2014 Espire Infolabs (P) Ltd. vs. ITO "5. We have heard the arguments of learned DR and perused relevant material placed before us. From a perusal of the assessment order, we find that the Assessing Officer asked the assessee why the disallowance should not be made under S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is only question of interpretation of law of the relevant provisions of the Act as all the details for determination of long- term capital loss either for its acceptance or denial are already available on record before the Id AO in the income tax computation sheet itself. Hence, it cannot be construed as furnishing of inaccurate particulars of income by the assessee. At best, it could be construed only as an incorrect claim. Hence, no penalty could be levied on an incorrect claim. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Private Limited reported in 322 ITR 158 (SC) and Price Waterhouse Coopers (P) Ltd. Vs. CIT reported in 348 ITR 306 (SC). 12. In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we direct the id AO to delete the penalty levied u/s. 271(1)(c) of the Act. Accordingly, ground Nos. 1, 4, 6 and 7 raised by the assessee are hereby allowed." xi) 179 taxmann.com 421(Mumbai- Trib.) dated 13.10.2025 Bharatkumar Jaishinh vs. ITO (pages 1-5 of JPB) xiii) ITA No. 1285/Ahd/2025 dated 30.10.2025 Krunal Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pany be allowed." 4.1. The Ld. DR relied on the orders of the authorities below levying penalty under Section 270A of the Act. 5. We have heard the parties and perused the entire materials available on record. The first and foremost stand of the assessee is that notices issued under Section 274 read with Section 270A of the Act are vague and illegal as they do not speak about the specific charge in as much as under which clause of Section 270A(2) the assessee has under-reported its income neither the amount of alleged under-reporting of income has been determined in the notice. Conditions of Section 270A(3) to Section 270A(5) of the Act also remain un-complied with. Ld. counsel has relied upon various judgments of different Forums. After perusing different notices issued under Section 274 read with Section 270A of the Act dated 19.11.2019; 08.05.2020; 31.07.2021; 05.09.2021; 28.02.2022 and 23.02.2023, annexed to the paper book filed before us, it is noticed that in none of the notices specific charge, whatsoever has been mentioned against the assessee nor the amount of alleged under-reporting of income has been determined. Thus, the entire proceeding is found to have been vit....