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.
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
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