Growell Consultants Private Limited Vs National Faceless Appeal Centre (NFAC)/ITO (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal against the order dated 26.02.2026 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2012-13, sustaining a penalty of Rs.1,90,344/- under Section 271(1)(c) of the Income-tax Act, 1961. The assessee had filed its return on 30.09.2012 declaring a loss of Rs.9,51,374/-. Subsequently, the assessment was reopened and reassessment was completed under sections 143(3) read with 147 on 02.12.2019. The Assessing Officer assessed total income at Rs.60,090/- after making an addition of Rs.6,16,000/- by treating the licence/rental income under the head “Income from House Property” instead of “Profits and Gains of Business or Profession”, under which it had been offered by the assessee. Penalty proceedings under Section 271(1)(c) were thereafter initiated and the penalty was sustained by the CIT(A). Before the Tribunal, the assessee submitted that the entire licence fee was duly recorded in its books of account, reflected in the audited financial statements and disclosed in the return of income. It was argued that the dispute was only regarding the appropriate head of income under which the disclosed receipt was taxable. The Tribunal found that there was no suppression of the receipt of Rs.6,16,000/- and no furnishing of factually false particulars. Relying on the Supreme Court’s decision in CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC), the Tribunal held that an unsustainable claim in law, by itself, does not amount to furnishing inaccurate particulars where the underlying facts are correctly disclosed. Accordingly, the mere change in the head of income could not, on the facts of the case, justify penalty under Section 271(1)(c). As the Revenue had not established that the particulars furnished were false, inaccurate or suppressed, the Tribunal set aside the CIT(A)’s order, cancelled the penalty of Rs.1,90,344/-, and allowed the assessee’s appeal.
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The Mumbai ITAT held that the mere assessment of a fully disclosed receipt under a different head of income does not amount to concealment of income or furnishing of inaccurate particulars warranting penalty under Section 271(1)(c).
The assessee had disclosed licence/rental income of ₹6.16 lakh under the head “Profits and Gains of Business or Profession.” During reassessment, the AO treated the same receipt as “Income from House Property” and subsequently levied a penalty of ₹1,90,344 under Section 271(1)(c). The CIT(A) upheld the penalty, observing that the correct tax treatment was detected only during reassessment proceedings.
The Tribunal found that the entire receipt was duly recorded in the books of account, reflected in the audited financial statements and disclosed in the return of income. There was no suppression of the receipt or furnishing of any false factual particulars. The dispute related only to the legal characterisation of the disclosed income under the appropriate head.
Relying on the Supreme Court’s decision in CIT v. Reliance Petroproducts Pvt. Ltd., the Tribunal reiterated that making an unsustainable legal claim, by itself, does not constitute furnishing of inaccurate particulars where the underlying facts are correctly disclosed.
The Revenue had not produced any material demonstrating that the particulars furnished by the assessee were false, inaccurate or suppressed. Therefore, the mere rejection of the assessee’s claim that the licence fee was taxable as business income could not justify penalty under Section 271(1)(c).
The Tribunal accordingly cancelled the penalty of ₹1,90,344 and allowed the assessee’s appeal.
List of Cases Discussed / Relied Upon
- CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC) — relied upon for the principle that an unsustainable claim in law, by itself, does not amount to furnishing inaccurate particulars where the particulars furnished by the assessee are neither false nor inaccurate.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 26.02.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, “the learned CIT(A)”], for Assessment Year 2012-13, whereby penalty of Rs.1,90,344/- levied under section 271(1)(c) of the Income-tax Act, 1961 [in short, “the Act”] has been sustained. The sole ground raised by the assessee is reproduced as under:
1. On the facts and circumstances of the case and in law, confirming the penalty of Rs.1,90,344 under Section 271(1)(c) of the Act for furnishing inaccurate particular of income.
2. The appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.
2. Briefly stated, the assessee filed its return of income on 30.09.2012 declaring a loss of Rs.9,51,374/-. The assessee is engaged in financial activities, dealing in securities and rendering professional and advisory services. Pursuant to reopening of the assessment, the reassessment was completed under section 143(3) read with section 147 of the Act on 02.12.2019, wherein the Assessing Officer assessed the total income at Rs.60,090/- making an addition of Rs.6,16,000/- by assessing the licence/rental income under the head “Income from House Property” instead of “Profits and Gains of Business or Profession”, under which head it had been offered by the assessee. Penalty proceedings under section 271(1)(c) were consequently initiated. Thereafter, the Assessing Officer issued show-cause notice to the assessee and levied penalty. The learned CIT(A) sustained the penalty principally on the ground that the impugned income had not been offered under the head ultimately adopted by the Assessing Officer and that the addition had been detected during reassessment proceedings. The learned CIT(A) upheld the penalty order, observing as under:
“6.1.2 In this case the addition was not disclosed by assessee suo-moto but detected during proceedings u/s 143(3) read with section 147 of the I.T. Act, 1961. It is clear that these particulars were not furnished income in the return as per the provisions of the Act during filing of return, but were detected by the Assessing officer after action u/s 143(3) read with section 147 of the I.T. Act, 1961 by the department during the assessment proceedings. These grounds of appeal raised by the assessee are unsubstantiated and vague. The order has been passed as per procedure prescribed in the Act and the order passed by Assessing Officer is justified and ample opportunities were provided during assessment and penalty proceedings to substantiate its claim but appellant failed to do so, hence the ground raised is hereby dismissed being devoid on merit. The appellant has not furnished any evidences to substantiate his claim. Further, it is noted that the appellant’s quantum appeal has been dismissed vide order ITBA/NFAC/S/250/2023-24/1062457845(1) dated 12/03/2024. The case laws quoted by the assesse has been parused and found not applicable as the facts are distinguishable.
“6.1.3 In view of above, I am of the considered opinion that the Assessing Officer has properly reached the conclusion that the appellant has concealed the particulars of his income and has rightly imposed penalty u/s 271(1)(c) of the IT Act of Rs. 1,90,344/-.”
3. Before us, the learned counsel submitted that there was no concealment of income or furnishing of inaccurate particulars. The entire licence fee was duly recorded in the books, reflected in the audited financial statements and disclosed in the return. According to him, the only dispute was the appropriate ‘head of income’ under which the admittedly disclosed receipt was assessable. It was submitted that the assessee had bona fide treated the receipt as business income on the basis of commercial exploitation of its leasehold rights. Reliance was placed, inter alia, on the decision of the Hon’ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC).
4. We have considered the rival submissions and perused the material available on record. The assessment record does not suggest that the assessee had suppressed the receipt of Rs.6,16,000/- or furnished any factually false particulars thereof. The receipt was disclosed; the dispute arose only because the Assessing Officer considered it assessable under a different head of income. Thus, the controversy is one of legal characterisation of an admittedly disclosed receipt, and not of concealment of income or falsification of particulars.
5. The Hon’ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd., (Supra) has held that making an unsustainable claim in law, by itself, does not amount to furnishing inaccurate particulars where the particulars furnished by the assessee are neither false nor inaccurate. The mere fact that a claim made by the assessee is not accepted in assessment cannot, without more, attract penalty under section 271(1)(c).
6. Applying the aforesaid principle, the mere change in the head under which the disclosed licence fee is assessed cannot, in the facts of the present case, be equated with furnishing inaccurate particulars of income. The Revenue has not brought on record any material to establish that the particulars furnished by the assessee regarding the receipt were false, inaccurate or suppressed. The fact that the assessee’s legal claim regarding its taxability under the head “Profits and Gains of Business or Profession” was not accepted does not, by itself, satisfy the statutory requirement for levy of penalty under section 271(1)(c).
7. We, therefore, find that the penalty imposed under section 271(1)(c) is not sustainable. The order of the learned CIT(A) is set aside and the penalty of Rs.1,90,344/- is accordingly cancelled. The sole effective ground raised by the assessee is accordingly allowed.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 24/08/2026.
