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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the Revenue is directed against the order dated 20.01.2026 of the Ld. Commissioner of Income Tax, (Appeal), Delhi-23, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the penalty dated 14.01.2025 passed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by Asstt./Deputy Commissioner of Income Tax, Central Circle-1, New Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2012-13.
The Revenue has raised the following grounds of appeal:
“ 1. The Ld. CIT (A) is not correct in law and on facts. 2. On the facts and in the circumstances of the case and in law, the decision of Ld. CIT(A) is not justified in deleting the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 amounting to Rs.7,57,06,680/- by holding that the disallowance arose from a bona fide claim on a debatable issue, despite the fact that the assessee had claimed deduction of loss arising from write-off of capital assets as revenue expenditure contrary to the provisions of the Act.
3.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that penalty under section 271(1)(c) was not leviable merely because the claim was disclosed in the return of income, ignoring that the assessee had furnished inaccurate particulars of income by claiming an inadmissible deduction which resulted in reduction of taxable income.
4.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the disallowance of Rs.21,87,54,857/- relating to write-off of fixed assets was clearly capital in nature and the assessee's claim of treating the same as revenue expenditure was not in accordance with the statutory provisions governing depreciation and block of assets.
5.On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the issue involved a debatable legal controversy, without appreciating that the claim made by the assessee was contrary to the explicit provisions of the Act and therefore amounted to furnishing inaccurate particulars of income within the meaning of section 271(1)(c).
6.Tax The appellant craves leave to add, alter, amend or withdraw any ground of appeal at or before the time of hearing of the appeal.”
Vide application u/s 27 dated 03.08.2026, the assessee has submitted as under:
"That the assessing officer erred on facts and in law in levying penalty for "concealment of particulars of income' in the penalty order passed under section 271(1)(c) of the Act, not appreciating that in the assessment order, the assessing officer had recorded satisfaction for initiating penalty for furnishing "inaccurate particulars of income."
Brief facts are that the assessee company filed its return for A.Y. 2016-17 on 15.04.2017 u/s 139(4) of the Act, declaring loss of Rs. 1,47,36,74,419/-. The case was selected for scrutiny and assessment was completed vide order u/s 143(3) of the Act dated 28.12.2019 at assessed income of Rs. 4,37,29,28,930/- after making various disallowances. Penalty proceedings u/s 271(1)(c) of the Act were also initiated.
Aggrieved, the assessee filed an appeal before the CIT(A), who allowed part relief to the assessee vide order dated 31.01.2024. Further aggrieved, the assessee as well as the Revenue filed appeals before the Tribunal.
Meanwhile, based on the two additions confirmed by the CIT(A) regarding disallowance of expenses u/s 37 and addition made u/s 43B, the AO sought to impose penalty for concealment of income by furnishing inaccurate particulars of income to the extent of Rs. 21,87,54,857/- comprising the above additions. After giving an opportunity of being heard to the assessee, the AO vide order u/s 271(1)(c) of the Act dated 14.01.2025 imposed penalty of Rs. 7,57,06,680/- computed @ 100% of tax sought to be evaded.
Aggrieved, the assessee preferred an appeal before the CIT(A). After considering the assessee’s submission, the CIT(A) vide order dated 23.01.26 has deleted the penalty with the following observations:
“7.1I found that, the disallowance in question arises from a bona fide debatable legal controversy and fully disclosed claim made by the Appellant on a demonstrably debatable issue of law concerning the allowability of deduction in respect of fixed assets written off, and all primary facts and particulars relevant to such claim were accurately furnished in the return of income and in the course of assessment proceedings.
7.2In such circumstances, the mere fact that the claim has not been accepted in the quantum proceedings cannot, by itself, justify imposition of penalty under section 271(1)(c) of the Act, particularly when there is no material to suggest concealment of income or furnishing of inaccurate particulars, and the issue itself is the subject of divergent judicial views.
7.3Having regard to the above discussion and the legal position emanating from the judicial precedents relied upon in the written submissions, the Additional Ground of Appeal No.1 is allowed, and it is held that no penalty is leviable on the Appellant under section 271(1)(c) of the Act in respect of the impugned disallowance.”
Aggrieved by the order of the CIT(A), Revenue has filed appeal before the Tribunal.
Before us, Ld. DR has argued that deductions claimed by the assessee were contrary to the provisions of the Act and it had claimed these deductions by furnishing inaccurate particulars of income. He has, therefore, submitted that the penalty was rightly levied and the CIT(A) was not justified in deleting the same.
On the other hand, Ld. AR has pointed out the disallowance made u/s 37 of the Act was related to a debatable issue and all the relevant facts had been disclosed by the assessee. Hence, it cannot be said that the assessee had furnished inaccurate particulars of its income. He further argued that the Ld. CIT(A) had correctly appreciated the facts and circumstances while deleting the penalty and his order deserves to be upheld.
We have heard the rival submissions and perused the material available on record. We note that the impugned disallowances related to the disallowance of deduction claimed at Rs. 21,87,54,857/- on account of fixed assets written off which was treated as a capital expenditure and hence not deductible u/s 37 of the Act. The AO held that these are capital assets on which only claim of depreciation is allowable as part of block of assets and the entire amount cannot be claimed as expenditure u/s 37 of the Act.
We are of the considered view that the addition cannot be regarded as concealment of income by furnishing inaccurate particulars of income as the assessee had disclosed all the relevant facts while claiming the deduction which was a bonafide action. Simply because the claim was disallowed by the AO and confirmed by CIT(A) does not imply that the assessee had concealed the income by furnishing inaccurate particulars of its income. Hence, we find no infirmity in the order of the CIT(A) deleting the penalty and, therefore, no interference is called for. Accordingly, appeal of the Revenue is hereby dismissed.
In the result, appeal of the Revenue is dismissed.