TaxTMI 
TaxTMI 
2026 (7) TMI 1149
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..../2025 for Assessment Year 2015-16. ITA No. 7325/Del/2025 [Assessment Year 2015-16] 4. Brief facts of the case are that the assessee has filed its return of income on 30.11.2015, declaring loss at INR 35,78,80,223/-. The return was revised on 30.03.2017 reducing the loss at INR 35,61,69,137/-. The book profit was disclosed at INR 20,14,60,260/- and paid the taxes thereon. The assessment was completed at a loss of INR 34,71,93,906/- and the book profit was assessed at INR 21,04,30,770/-. 5. Against the said order, assessee preferred an appeal before Ld. CIT(A) and matter travelled upto the Tribunal and addition of INR 32,38,000/- made on account of M2M loss stood deleted by the coordinate bench of Tribunal however, disallowance made towards late payment of employees contribution towards of PF of INR 4,715/- was confirmed and no appeal was preferred by the assessee on the disallowance made of CSR expenses of INR 57,32,516/-. Thereafter, the AO proceeded with pending penalty proceedings and imposed the penalty u/s. 271(1)(c) of the Act of INR 19,85,542/- on the disallowance made of CSR expenses and late payment of employee's contribution to PF by holding that assessee has furn....
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....AO should record his satisfaction that the assessee has either concealed the income or furnished inaccurate particulars of his income. From the perusal of both the notices issued u/s. 274(1) r.w.s. 271(1)(c) of the Act as reproduced above, it could be seen that AO has not specifically pointed out as to whether the assessee has concealed the particulars of income or furnished the inaccurate particulars of income. Therefore, the penalty proceedings initiated without recording the satisfaction is liable to be quashed. The Hon'ble Apex Court in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248 (SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) as decided by Hon'ble High Court of Karnataka is reproduced below:- "2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate....
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....not a valid notice sufficient to impose penalty u/s. 271(1)(c) of the Act. 12. The penalty provisions of section 271(1)(c) of the Act are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported in (2013) 359 ITR 565 observed that for the levy of penalty u/s. 271(1)(c) it has to be made clear as to under which limb it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assess....
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....added to the book profits. Thereafter, the AO proceeded with pending penalty proceedings initiated u/s. 271(1)(c) of the Act and levied the penalty of INR 6,03,880/- for late payment of employee's contribution of PF and for disallowance of delayed payment of TDS. In first appeal, Ld. CIT(A) has dismissed the appeal of the assessee. 17. Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo. Since all the grounds of appeal are with respect to levy of penalty u/s. 271(1)(c) of the Act thus they are taken together for consideration. 18. Heard the parties at length and perused the material available on records. As regards to disallowance under Section 36(1)(va) for delay in depositing employees Provident Fund, the same cannot be sustained as the issue at the time of assessment proceedings was concluded was a debatable issue and certain decisions of Hon'ble High Courts were in favour of the assessee. Therefore, this cannot be treated as concealment of income or furnishing of inaccurate particulars of income. Penalty under section 271(1)(c) is levied in the case of either concealment of income ....
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.... profit and therefore, it could not be said that it was a wilful attempt made by the assessee to evade any tax. Further assessee is entitled to MAT credit of the tax paid on book profits in subsequent years and thus there was no loss to assessee by not adding this meagre amount to the book profits. In this regard, we place reliance to the Hon'ble Apex Court decision in the case of CIT vs. Reliance Petro Products Ltd. reported in 322 ITR 158 (SC). In this case vide order dated 17.3.2010, the Hon'ble Apex Court held that the law laid down in the case of Dilip Sheroff reported in 291 ITR 519 (SC) as to the meaning of word 'concealment' and 'inaccurate' continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff (supra) where it was held that Mens rea was an essential requirement of penalty u/s. 271(1)(c). The Hon'ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the AO for any reason, the assessee will invite the penalty u/s. 271(1)(c). This is clearly not the intendment of legislature. 20. In this regard w....
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....o the deduction claimed u/s. 35(2AB) were filed and the approval was granted by DSIR however, the said approval was granted after the due date of filing of return and the assessee has claimed the deduction u/s. 35(2AB) as per the claim made before DSIR. Since the approval was granted by DSIR on 09.07.2018, i.e. much after the filing of return of income for the impugned year, same has resulted into claim of excess deduction by the assessee. Ld. AR thus submits that the claim of excess deduction was not malafide and was beyond the control of the assessee and thus the assessee not under reported its income and, therefore, no penalty is to be levied us/ 270A. in this regard reliance is placed on the decision of Co-ordinate Bench of Delhi Tribunal in the case of Akums Drugs and Pharmaceuticals Ltd. vs DCIT reported in (2025) 175 taxmann.com 135 (ITAT Delhi). 26. Ld. AR further submits that neither in the assessment order nor in the penalty order, the AO has specified as to under which clause of sub-section (2) of section 270A of the Act, the penalty proceedings were initiated. He thus prayed that the penalty so levied u/s. 270A of eh Act be deleted. 27. On the other hand, Ld. Sr. ....
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....TR as well as before the authorities below on merit. Itis not a case of the AO that the assessee has made false claim or suppressed the facts relating to the above claims of the expenditure. Since the assessee has disclosed all the facts before the authorities below, the disallowances under section 35(2AB) of the Act would not par-se lead to an inference that the assessee has under reported its income. On the disallowance under section 35(2AB) of the Act, imposition of penalty is not automatic. The Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322/322 ITR 158 (SC) held that "A glance at the provisions of section 271(1)(c) of the Act, suggest that in order to be covered by it, there has to be concealment of particulars of the income of the assessee. For penalty purposes, we do not see much difference in interpretation under section 270A and section 271(1)(c) of the Act. Further, the AO has not established a case that the assessee has furnished inaccurate particulars of its income. 7. Where no information given in the ITR is found to be incorrect or inaccurate, the assessee cannot be held guilty of under reported income. I....
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.... than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into i....
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....d; (b) in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under-reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed. (4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter referred to as "preceding year") and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to cover such receipt, deposit or investment. (5) The amount referred to in sub-section (4) shall be deemed to be amount of income underreported for the preceding year in the following order- (a) the preceding year immediately before the year in which the receipt, deposit or investment appears, being the first preceding year; and ....
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....ely:- (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply. (10) The tax payable in respect of the under-reported income shall be- (a)where no return of income has been furnished or where return has been furnished for the first time under section 148 and the income has been assessed for the first time, the amount of tax calculated on the under-reported income as increased by the maximum amount not chargeable to tax as if it were the total income; (b)where the total income determined under clause (a) of sub-section (1) of section 143 or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported i....
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.... very initiation in this case. Further the order of penalty did neither mention the circumstance or incidence nor make a mention of alleged action in reaching the final imposition. 33. The Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte Ltd Vs. ACIT reported in (2022)443 ITR 186 (Delhi) has dealt the issue of satisfaction recorded at the time of levying the penalty u/s. 270A of the Act, wherein, the Hon'ble Court has held as follows: "6. Having perused the impugned order dated 09 March, 2022 to contend that the Petitioner is not entitled to the benefit of immunity under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreport....
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.... me that you have concealed the particulars of income or furnished inaccurate particulars of such income. You are hereby requested to appear before me either personally or through a duly authorised representative at 11:00 AM on 12/01/2018 and show cause why an order imposing a penalty on you should not be made under section 271[1)(c) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)(c) of the Income Tax Act, 1961. ASHISH SINHA CIRCLE 24(2), DELHI Note: If digitally signed, the date of digital signature may be taken as date of document. C R BUILDING_ITO, I P ESTATE, NEW DELHI, DELHI, Delhi, 110002 Email: [email protected]. Document 2 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT National Faceless Assessment Centre Delhi To. SUBROS LIMITED LGF, WORLD TRADE CENTRE, BARAKHAMBA LANE CONNAUGHT PLACE CENTRAL DELHI 110001, Delhi India PAN: AABCS3910P Assessment Year: 2015-16 Date 13/10/2021 DIN : ITBA/PNL/F/271(1....