ITO Vs Micro Plantae Limited (ITAT Mumbai)
No Penalty on Routine Disallowances in U/s 153C Proceedings Without Incriminating Material-Mumbai ITAT Deletes Penalty u/s 271(1)(c)
The Mumbai ITAT upheld deletion of penalty levied u/s 271(1)(c), holding that routine disallowances made in a 153C assessment without any incriminating material found during search cannot automatically lead to penalty for concealment or furnishing inaccurate particulars. The Tribunal observed that the additions relating to society charges and depreciation were merely based on examination of books and earlier assessment records and not on any seized incriminating documents.
The assessee company was subjected to proceedings u/s 153C pursuant to search action in the case of Temptation Foods Group. During assessment, the AO disallowed society charges of ₹1.96 lakh and depreciation of ₹29.65 lakh mainly on the ground that supporting evidences were not furnished and similar depreciation had been disallowed in earlier years. Based on these additions, penalty of ₹9.76 lakh u/s 271(1)(c) was levied for alleged furnishing of inaccurate particulars.
Before the CIT(A) and the Tribunal, the assessee contended that the disallowances were not based on any incriminating material found during search and all details relating to expenses and depreciation were already disclosed in the books of account and audited financial statements. It was further argued that merely because a claim is disallowed, penalty cannot automatically follow.
The ITAT noted that the assessment year involved was an unabated assessment year, and the assessment order nowhere referred to any seized material proving that the expenditure claims were bogus or false. The Tribunal observed that the society charges and depreciation claims were routine business claims fully reflected in the return and books of account and therefore could not amount to concealment or furnishing of inaccurate particulars merely because the AO disallowed them.
The Tribunal heavily relied upon its own earlier decision in assessee’s case for AY 2007-08, wherein similar penalty arising from ad hoc disallowances in 153C proceedings had already been deleted. Reiterating that additions beyond the permissible scope of Section 153C in absence of incriminating material cannot form the basis for penalty, the ITAT held that no independent material existed to establish deliberate concealment by the assessee.
Accordingly, the ITAT dismissed the Revenue’s appeal and confirmed deletion of penalty, while treating the assessee’s cross-objections challenging validity of Section 153C proceedings as academic in nature.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
In this bunch of matters, the Revenue has preferred the present appeal against the order dated 16.12.2025 passed by the learned Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter referred to as “the CIT(A)”] under section 250 r.w.s. 254 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for A.Y. 2006-07 arising out of penalty order passed under section 271(1)(c) of the Act dated 26.06.2012 by the ACIT, Central Circle-13, Mumbai[hereinafter referred to as “Assessing Officer or AO”]. The assessee has also filed Cross Objection challenging the validity of initiation of proceedings under section 153C of the Act and consequential penalty proceedings under section 271(1)(c) of the Act.
