Alex Energy Pvt Ltd Vs ACIT (ITAT Kolkata)
The appeal by Alex Energy Pvt Ltd was against the order of the CIT(A)-NFAC, Delhi, dated 22.11.2024, confirming a penalty of ₹1,03,825 imposed under Section 271(1)(c) of the Income Tax Act, 1961 for AY 2016-17. The assessee had filed its return declaring a total loss of ₹4,53,53,108, later revised on 17.10.2016. In scrutiny assessment under Section 143(3), completed on 25.12.2018, the Assessing Officer found that the assessee had claimed a long-term capital loss involving the sale of 33,70,667 shares of Futuregrow Spectrum Pvt. Ltd. for ₹3 crore. Based on the valuation certificate, the fair value was determined at ₹9 per share, resulting in a total consideration of ₹3,03,36,003.
The differential amount of ₹3,36,003 was consequently added back, and penalty proceedings under Section 271(1)(c) were initiated. The AO subsequently imposed a penalty of ₹1,03,825, being 100% of the tax sought to be evaded, after noting non-compliance during the penalty proceedings. The CIT(A) confirmed the penalty, observing that incorrect information concerning the long-term capital loss resulted in concealment of income and relying on Explanation (iv) to Section 271(1). Before the ITAT, the assessee submitted that the discrepancy arose solely from rounding off the share value, that the transactions themselves were not disputed, and that the assessee had a bona fide explanation for adopting the actual consideration.
The Tribunal observed that although the quantum addition had not been challenged, imposition of penalty was not automatic. It considered that the discrepancy arose from rounding off, the transactions of purchase and sale were not doubted, and the assessee had a bona fide explanation for the difference. The Tribunal held that Explanation 1(B) was not attracted and that the penalty was not liable to be imposed. It therefore set aside the CIT(A)’s order, quashed the penalty of ₹1,03,825 and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 22.11.2024.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the Ld. CIT Appeal (NFAC) Delhi has totally ignored the stand of the Judiciary in many cases on the similar or identical issues involved as compared to the present case and upheld the penalty of Rs 1,03,825/- made by the AO under section 271(1)(c) of the Income Tax Act, 1961.
2. For that the Ld. CIT Appeals has ignored the fact that the assessee has not evaded any tax and only rounded off the amount per share to the nearest absolute number of rupee which is a very common practice in all financial transactions including the orders issued by the Income Tax Department which are always rounded off to the nearest rupee and paise is ignored.
3. For that the Ld. CIT Appeals has ignored the fact that the addition made by the Ld. AO in his assessment order issued u/s 143(3) does not carry any tax impact and hence, there is no question of any concealment and/or furnishing of inaccurate particulars of such income and hence Section 271(1)(c) had been wrongly invoked and hence the appeal order should be quashed.
4. For that the Ld. AO did not consider the evidences, facts and circumstances submitted before him at the assessment stage and imposed the penalty by wrongly invoking Section 271(1)(c) of the Income Tax Act, 1961.
5. For that the orders of CIT Appeal NFAC and the AO are otherwise, bad in law, unjustified and against the Law of Natural Justice.
6. For that the assessee craves to add/alter/modify any of the above grounds at/before the time of hearing.”
3. Brief facts of the case are that the assessee had filed the return of income for AY 2016-17 on 07.10.2016, which was subsequently revised on 17.10.2016 declaring the total loss of ₹4,53,53,108/-. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act on 25.12.2018, assessing the total income of the assessee at a loss of ₹4,50,17,105/-. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. ‘AO’) observed that the assessee had claimed long-term capital loss which included the sale of 33,70,667 shares of M/s. Futuregrow Spectrum Pvt. Ltd. for a total consideration of ₹3,00,00,000/-. However, upon scrutinizing the valuation certificate, the Ld. AO found that the fair value per equity share was determined at ₹9/-, making the total sale consideration of ₹3,03,36,003/-. Consequently, the differential amount of ₹3,36,003/-was disallowed, which was added back to the total income of the assessee. Simultaneously, penalty proceedings were also initiated u/s 274 r.w.s. 271(1)(c) of the Act for concealment of income and furnishing inaccurate particulars of income. Due to non-compliance by the assessee during the penalty proceedings despite opportunities being provided, the Ld. AO concluded that the assessee had “concealed the inaccurate particulars of income” and passed an order u/s 271(1)(c) of the Act on 25.06.2019 imposing the penalty of ₹1,03,825/-, being 100% of the tax sought to be evaded, Aggrieved with the penalty order, the assessee filed an appeal before the Ld. CIT(A), who noted that furnishing of incorrect information regarding the long-term capital loss led to the concealment of income to the extent of ₹3,36,003/- and that the assessee had not filed any appeal against the quantum addition. Relying on Explanation (iv) to Section 271(1) of the Act, the Ld. CIT(A) concluded that the penalty was rightfully levied. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that no appeal was filed against the quantum addition. The assessee had purchased shares of another company which were subsequently sold on the basis of the Chartered Accountant’s report. The shares were purchased at the rate of approximately ₹16/- per share, were held for four years as the assessee was setting up a solar plant and they were subsequently sold. The Chartered Accountant valued the shares at the rate of ₹59 per share, which was rounded off to ₹9/-. The assessee had actually received a sum of ₹8.88. It was stated that the valuer had rounded off the amount and there was neither any concealment of income nor furnishing of any inaccurate particulars and the difference arose only on account of rounding off. He also submitted that since there was a reasonable cause of adopting the actual consideration and not the rounded off amount, therefore, the penalty was not liable to be imposed, even though the assessee had not disputed the addition by filing appeal against the quantum addition made in the assessment order.
6. The Ld. DR had no objection to the request of the Ld. AR.
7. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). Since the quantum addition had not been disputed as no appeal was filed, the penalty was imposed. However, the imposition of penalty is not automatic and in case the assessee 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 be deemed to represent the income in respect of which particulars have been considered as per Explanation 1 to sub-section (1) of section 271, the penalty is liable to be imposed. As contended by the Ld. AR that the discrepancy arose on account of rounding off error and the net result was a loss and the transactions of neither the purchases nor the sales were doubted, on facts the assessee had a bona fide explanation for the difference in income and was not liable for imposition of penalty. We note that since Explanation 1(B) is not attracted, a bona fide explanation was filed, the penalty was not liable to be imposed. Hence, the order of the Ld. CIT(A) confirming the penalty is hereby set aside and the penalty imposed is also quashed and the grounds of appeal are allowed.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 10th July, 2026.
