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Judgment
Per Renu Jauhri, Accountant Member:
This appeal by the assessee is directed against the order dated 30.10.2025 of the Commissioner of Income Tax (Appeals)-29, New Delhi-110055 [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the penalty order dated 28.03.2019 passed under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the ACIT, Circle-55(1), New Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2013-14.
Grounds of appeal filed by the Assessee are reproduced as under:
“1.Because the action of imposing penalty of Rs. 12,91,499/- u/s 271(1)(c) is being challenged on facts & law and liable to be quashed.
2.Because the action for levying the Penalty u/s 271(1)(c) is being challenged on facts & law since AO has not specified under which limb penalty is levied i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income.
3.Because the action is under challenge on facts & law for initiating the penalty u/s 271(1)(c) amounting Rs. 12,91,499/- while ignoring the 'material facts' containing 'material particulars'.
4.For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.”
Brief facts of the case are that the assessee had filed his return for A.Y. 2013-14 on 15.10.2013 declaring income of Rs. 1,00,97,801/- against which deduction of Rs. 1,10,000/- was claimed under Chapter VI-A of the Act. The assessee has shown income from Prop. business of M/s Amar Bharti and Rastriya Besahara Jan as well as M/s Sam Advertising. The case was selected for scrutiny. Assessment was completed at assessed income of Rs. 279,46,760/- after making disallowance out of various business expenses vide order u/s 143(3) of the Act dated 17.03.2016. Penalty proceedings u/s 271(1)(c) was also initiated therein subsequently, penalty of Rs. 12,91,499/- was levied u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income.
Aggrieved, the assessee preferred an appeal before Ld. CIT(A), who dismissed the same, vide order dated 30.10.2025. Further aggrieved, the assessee has filed the present appeal before the Tribunal.
Before us, Ld. AR has submitted that the AO had not specified the limb under which penalty was sought to be levied i.e. whether for concealment of particulars income or for furnishing inaccurate particulars of income. He has, therefore, argued that the penalty is liable to be deleted as the issue is covered by the decision of Hon’ble Supreme Court. In particular, he has placed reliance on the following decisions: -
CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC No. 11485/2016 dated 05.08.2016, wherein it was held that where the notice issued by the AO u/s 274 r.w.s. 271(1)(c) did not specify under which limb of section 271(1)(c), the penalty proceedings had been initiated, the same was bad in law.
CIT vs. Manjunath Cotton and Ginning Factory (2013) 359 ITR 565 (SC) Whereby a notice without specify the limb under which penalty was sought to be levied was bad in law.
Moreover, on merits also, Ld. AR has argued that the penalty was levied on estimated disallowance of 30% out of sales promotion and marketing expenses on account of being bogus expenses. He has submitted that penalty u/s 271(1)(c) of the Act levied on addition / disallowance made on estimate basis is not sustainable in view of several decisions of the coordinate benches.
Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities.
We have heard the rival submissions and perused the material available on record. We note that in the assessment order, after making estimated disallowance
of Rs. 1,50,89,306/- out of sales promotion expenses, Ld. AO has recorded as under:
“Penalty proceedings u/s 271(1)(c) are initiated separately for filing inaccurate particulars / concealment of income.”
Subsequently, in the show cause notice as well as the penalty order, AO has mentioned “furnishing of inaccurate particulars” as the reason for imposing the penalty and has invoked Explanation 1 to section 271(1)(c) of the Act. However, it is seen that the Explanation 1 to section 271(1)(c) of the Act is applicable to the cases of concealment of particulars of income and not to furnishing of inaccurate particulars of income. The same is reproduced below: -
“Failure to furnish returns, comply with notices, concealment of income, etc.
271.(1) If the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person—
(a)………….
(b)………….
(c)has concealed the particulars of his income or furnished inaccurate particulars of such income, or ………………
Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,—
(A)such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner to be false, or
(B)such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him,
then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.”
(emphasis supplied by us)
Under these facts and circumstances, we note that the AO while passing he assessment order mentioned both the limbs for initiating penalty proceedings. Subsequently, he levied penalty for furnishing inaccurate particulars of income by invoking the provisions of Explanation 1 to section 271(1)(c) which, however, does not deal with the cases of furnishing inaccurate particulars of income but explains the circumstances in which the assessee shall be deemed to have concealed the particulars of income. Accordingly, we hold that the penalty levied by the assessee u/s 271(1)(c) of the Act, vide order dated 28.03.2019 is bad in law and the same is hereby deleted.
In the result, appeal of the assessee is allowed.