ITO, MUMBAI vs. MICRO PLANTAE LIMITED , MUMBAI

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ITA 2483/MUM/2026Status: DisposedITAT Mumbai13 July 202610 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s deletion of the penalty, finding that the disallowances were routine business expenses disclosed in the books and return, and that the Assessing Officer failed to establish concealment or furnishing of inaccurate particulars with specific charges.

What were the facts?

Following a search action, the Assessing Officer disallowed certain expenses and depreciation. Subsequently, penalty proceedings under Section 271(1)(c) were initiated against the assessee.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable for disallowance of routine business expenses and depreciation claims when the assessee has disclosed them and the AO has not specified the charge of concealment or inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 132,Section 133A,Section 153C,Section 143(3),Section 274,Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH; MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARATHA NAUTIYAL

Hearing: 01.07.2026Pronounced: 13.07.2026

Heard together (2 matters)

C.O. No. 182/Mum/2026
ITA Nos. 2409/Mum/2026

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARATHA NAUTIYAL, JUDICIAL MEMBER ITA No. 2409/Mum/2026 (Assessment Year: 2008-09)

Income Tax Officer Micro Plantae Limited Room No.567, AaykarBhawan, 4, 2nd Floor Unity House 8 Mumbai, Maharashtra, 400020 vs. Mama Parmanand Marg Opera House Mumbai, Mumbai, Maharashtra, 400004.

PAN: AAACM3686P (Appellant) (Respondent) C.O. No. 182/Mum/2026 (Arising out of ITA No. 2409/Mum/2026) (Assessment Year: 2008-09)

Micro Plantae Limited Income Tax Officer 4, 2nd Floor Unity House 8 Room No.567, AaykarBhawan, Mama Parmanand Marg Opera vs. Mumbai, Maharashtra, 400020. House Mumbai, Mumbai, Maharashtra, 400004.

PAN: AAACM3686P (Appellant) (Respondent)

For Assessee : Shri Dharmesh Shah & Mitali M. Parekh For Revenue : Shri Sandeep Lakra CIT DR Date of Hearing : 01.07.2026 Date of Pronouncement : 13.07.2026 ITA Nos. 2483 & 2484/Mum/2026 (Assessment Year: 2009-10 & 2010-11)

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited Income Tax Officer Micro Plantae Limited Room No.567, AaykarBhawan, 4, 2nd Floor Unity House 8 Mumbai, Maharashtra, 400020 vs. Mama Parmanand Marg Opera House Mumbai, Mumbai, Maharashtra, 400004.

PAN: AAACM3686P (Appellant) (Respondent) C.O. Nos. 183 & 184/Mum/2026 (Arising out of ITA Nos. 2483 & 2484/Mum/2026) (Assessment Year: 2009-10 & 2010-11)

Micro Plantae Limited Income Tax Officer 4, 2nd Floor Unity House 8 Room No.567, AaykarBhawan, Mama Parmanand Marg Opera vs. Mumbai, Maharashtra, 400020. House Mumbai, Mumbai, Maharashtra, 400004.

PAN: AAACM3686P (Appellant) (Respondent)

For Assessee : Shri Dharmesh Shah & Mitali M. Parekh For Revenue : Shri Sandeep Lakra CIT DR Date of Hearing : 02.07.2026 Date of Pronouncement : 13.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

These are three appeals filed by the Revenue and cross objections filed by the Assessee against the respective orders of the Learned Commissioner of Income Tax (Appeals) 51, Mumbai [‘Ld.CIT(A)’], dated 16.12.2025, pertaining to Assessment Years (AY) 2008-09 to 2010-11,

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited wherein he has deleted the levy of penalty u/s. 271(1)(c) amounting to Rs. 6,31,549/- for A.Y. 2008-09, amounting to Rs. 8,27,100/- for A.Y. 2009-10 and amounting to Rs. 6,81,160/- for A.Y. 2010-11.

2.

These cases were heard on 01.07.2026 and thereafter, on 02.07.2026 and since common issues are involved, all these cases are being disposed off by way of this consolidated order.

3.

For the purposes of present discussion, the case for A.Y. 2008-09 is taken as a lead case. Briefly, the facts of the case are that a search and seizure action u/s. 132 and survey action u/s. 133A was carried out on 24.09.2009 in case of Temptation Foods Group, wherein the business and residential premises of the assessee were also covered. Thereafter, proceedings u/s. 153C were initiated against the assessee and notice u/s. 153C was issued on 23.03.2010. Thereafter, the assessee filed its return of income on 18.11.2011, declaring loss of Rs. 20,43,849/-. The Assessing Officer thereafter completed the assessment proceedings u/s. 143(3) r.w.s. 153C by the order dated 21.12.2011, wherein an amount of Rs. 20,37,849/- in respect of expenses and depreciation was disallowed. Separately, an amount of Rs. 6,000/- written off by the assessee was also disallowed and the assessed income was determined at Nil against the returned loss of Rs. 20,43,849/-. Simultaneously, penalty proceedings u/s. 271(1)(c) were initiated and notice u/s. 274 r.w.s. 271 was issued on 21.12.2011.

4.

Thereafter, during the course of penalty proceedings, a fresh show cause dated 10.02.2012 was issued to the assessee and thereafter, considering the submissions of the assessee but not finding the same acceptable, the Assessing Officer held that the assessee has committed

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited default within the meaning of Section 271(1)(c) and penalty amounting to Rs. 6,31,549/- being 100% of tax sought to be evaded was levied.

5.

The assessee, thereafter carried the matter in appeal before the ld. CIT(A) and thereafter, before the Tribunal against the ex-parte order passed by the ld. CIT(A) and the Coordinate Bench remanded the matter back to the file of ld. CIT(A) vide its order dated 19.03.2019 in ITA No. 6436/Mum/2014 and in the second round of appellate proceedings, by the impugned order, the ld. CIT(A) has deleted the levy of the penalty and the relevant findings of the ld. CIT(A) reads as under: “6.2 On careful consideration of the facts and submissions, I find that the disallowances on which penalty has been levied relate only to routine business expenses duly recorded in the books of account and disclosed in the return of income. The expenses disallowed by the AO and depreciation claims were neither concealed nor withheld from the Department and they formed part of the audited financial statements and were claimed in the bona fide belief that they were allowable. The mere inability of the appellant to substantiate these claims to the satisfaction of the AO cannot, in the absence of any material indicating falsity or deliberate misstatement, be equated with furnishing of inaccurate particulars of income. It is a settled position of law that assessment proceedings and penalty proceedings are independent and distinct, and therefore, additions or disallowances made in the assessment order do not automatically result in the imposition of penalty under section 271(1)(c) of the Act. Penalty under the said provision can be levied only where the assessee is found to have either concealed particulars of income or furnished inaccurate particulars of income. Merely because a claim made by the assessee is not accepted by the Department, or is found to be inadmissible in law, it does not ipso facto amount to concealment or furnishing of inaccurate particulars within the meaning of section 271(1)(c). In determining whether penalty is attracted, it is necessary to examine whether the assessee has disclosed full and true details relating to the claim in or along with the return of income, whether the information so furnished is incorrect or false, whether the assessee has offered any explanation in support of the claim and whether such explanation has been found to be false, and finally, whether the explanation offered is bona fide. Only when these conditions indicating deliberate concealment or inaccuracy are satisfied can penalty be levied; otherwise, mere disallowance of a claim cannot justify penal action. In view of the fact that the claims were routine business claims made in the normal course and no element of concealment or deliberate inaccuracy has been established, the penalty imposed is not sustainable even

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited though the appellant has not challenged these disallowances in the appeal for want of tax effect.” 6. During the course of hearing, the ld. DR relied on the order passed by the Assessing Officer. It was submitted that the ld. CIT(A) was not justified in deleting the levy of penalty, where the assessee has accepted the addition made during the assessment and not contesting the matter against the addition so made in the assessment order. It was submitted that by not contesting the matter implies that the assessee has furnished inaccurate particulars of income regarding claim of operative and other expenses and claim of depreciation and therefore, the penalty was rightly levied by the Assessing Officer u/s. 271(1)(c) of the Act and which has been wrongly deleted by the ld. CIT(A).

7.

In his submissions, the ld. AR submitted that firstly, similar additions were made by the Assessing Officer in the earlier assessment year 2007-08, wherein the operating expenses as well as the claim of depreciation was disallowed and the Assessing Officer has gone ahead and levied the penalty. It was submitted that the assessee carried the matter before the Tribunal and the Coordinate Bench has since deleted the levy of penalty. In this regard, our reference was drawn to the findings of the Coordinate Bench in ITA No. 2926/Mum/2025 pertaining to A.Y. 2007-08, wherein the Coordinate Bench has held that in absence of any incrementing material found during the course of search to prove that claim of the expenses are not genuine or not for the purposes of business such ad-hoc disallowance of expenses were outside the purview of assessment u/s. 153C r.w.s. 143(3) of the Act being a case of unabated assessment. Further, the Coordinate Bench has held that these expenses have been duly shown in the profit &loss account and declared in the return of income and such details and information furnished along with the return has neither been found to be incorrect or false nor explanation of the assessee has been found to

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited be incorrect or false and nowhere the Assessing Officer has stated as to how these disallowances are justified on the facts and circumstance of the case and has simply made ad-hoc disallowances. It was accordingly held by the Coordinate Bench that no penalty can be levied on such ad- hoc disallowances as firstly, it does not tantamount to furnishing inaccurate particulars of income and secondly, the addition itself was beyond the scope of assessment u/s. 153C of the Act and accordingly, penalty so deleted by the ld. CIT(A) was confirmed by the Coordinate Bench and the appeal of the Revenue was dismissed.

8.

It was submitted that the said order of the Coordinate Bench has since been followed by the Coordinate Bench in its subsequent order dated 25.05.2026 though pertaining to A.Y. 2006-07 and it was submitted that similar finding has been recorded by the Coordinate Bench in the said order.

9.

It was further fairly submitted by the ld. AR that unlike the earlier two assessment years, the years under consideration are not unabated assessment years as the search has happened on 24.09.2009 and there was time for filing the return of income for the years under consideration. At the same time, it was submitted that the findings of the Coordinate Bench, wherein it has been held that mere ad-hoc disallowance of the expenses does not tantamount to furnishing of inaccurate particulars of income continue to apply for the years under consideration, as the expenses under consideration have been newly shown in the profit &loss account and claimed in the return of income and there is no finding recorded by the Assessing Officer that the details so furnished have been found to be incorrect or false or explanation of the assessee has been found to be incorrect or false.

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited 10. It was further submitted that looking at the nature of the expenses which are rent, rates and taxes, appeal fees, professional fees, audit fees and provident fund charges, these are routine operative expenses and which have to be necessarily incurred by the assessee company even if no revenues have been earned during the year. It was submitted that it was not a case of complete shutdown of the assessee business and it was more a case where there were no revenues for the year under consideration. In this regard, our reference was drawn to the financial statements, wherein, the auditors have approved the financial statements based on the going concern principle and further, reference was drawn to the balance sheet of the assessee company which carries substantial fixed and current assets and it was accordingly submitted that it is not a case where there is a complete shutdown of the assessee business and merely because there is no revenue for the year under consideration, the disallowance of routine business expenditure cannot be disallowed. It was submitted that merely on account of low tax effect, the assessee has not filed any appeal against the quantum addition, at the same time, merely the fact that no appeal has been filed cannot be a basis for levy of penalty and that too, for furnishing of inaccurate particulars of income. Regarding claim of depreciation, it was submitted that the same is a statutory claim in respect of assets forming part of block of assets and even where the assessee had not claimed it at first place, under the provisions of Section 32 of the Act, the Assessing Officer ought to have allowed the depreciation and it was therefore submitted that the Assessing Officer in the instant case, without appreciating the legal provisions has disallowed the depreciation claim of the assessee.

11.

Further, our reference was drawn to the assessment order, wherein the penalty has been initiated for inaccurate particulars of

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited income or inaccurate concealment of income and the show cause notice dated 21.12.2011, wherein, again the Assessing Officer has not stated the specific charge against the assessee in terms of whether it is a case of furnishing inaccurate particulars of income or concealing the particulars of income. Further, our reference was drawn to the penalty order, wherein in paragraph no. 5, the Assessing Officer states that the assessee is liable for penalty, for filing inaccurate particulars of income and thereafter, in paragraph no. 6, the Assessing Officer states that the case of the assessee comes within the purview of concealment of income and thereafter, he has levied the penalty. It was accordingly submitted that right from the initiation of the penalty proceedings to the passing of the penalty order, there is no specific charge against the assessee and the penalty has therefore, not been levied against the specific charge against the assessee. Further, reliance was placed on the decision of the Hon'ble Bombay High Court in case of Mohd. Farhan A. Shaikh v. DCIT in Tax Appeal No. 51 of 2012, dated 11.03.2021.

12.

We have heard the rival contentions and pursued the material available on record. We find that the financial statements of the assessee have been prepared on going concern basis and the auditors have certified the same meaning thereby that the assessee has not shut down its business and the same stand corroborated by the fixed and current assets in its balance sheet and corresponding shareholder and loan funds and in light of the same, where there are no operating revenues and the assessee has incurred certain costs, it cannot be held that the costs have not been incurred for the purposes of business. It is a settled legal proposition that for claiming of expenses, it is not necessary that there has to be corresponding revenues in the particular year. Having said that, in the instant case, where the AO has disallowed these expenses in the quantum proceedings and given the

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited quantum involved, the assessee has not challenged the same, the same doesn’t by default lead to levy of penalty. The levy of penalty has to be governed by the provisions of section 271(1)(c) and has to be strictly construed and it is only upon satisfaction of conditions therein, the penalty can be levied. In the instant case, we find that the Assessing officer right from initiation to final levy of penalty has not specified a specific charge against the assessee in terms of furnishing of inaccurate particulars of income or for concealment of income. The Assessing officer has inter-changeably used these charges and thus shows lack of application of mind whereas the Courts have held from time to time that each of these charges carries a specific meaning and connotation and needs to be satisfied in a particular case, before the penalty is fastened on the assessee. Further, we find that the assessee has duly disclosed the nature and quantum of these expenses in its financial statements, the assets have been duly shown as part of block of assets and the expenses and depreciation have thereafter been claimed in the return of income and the assessee has the necessary factual and legal basis for claiming these expenses and therefore, mere disallowance of these expenses cannot be held to lead to furnishing of inaccurate particulars of income. The Coordinate Benches have recorded similar findings in the earlier years and which supports the case of the assessee. In light of the aforesaid discussion and in the entirety of facts and circumstances of the case, we upheld the findings of the ld CIT(A) wherein he has rightly deleted the penalty u/s 271(1)(c) of the Act.

13.

Both parties fairly submitted that the facts and circumstances of the case are similar in other two assessment years 2009-10 and 2010- 11 and therefore, we upheld the findings of the ld CIT(A) in these two years as well wherein he has rightly deleted the penalty u/s 271(1)(c) of the Act.

ITA Nos. 2409/Mum/2026 &Ors. & C.O. No. 182/Mum/2026 &Ors. A.Y. 2008-09 to 2010-11 Micro Plantae Limited

14.

In light of above, the cross-objections filed by the assessee for the respective assessment years have become academic and dismissed as infructuous.

15.

In the result, the appeals filed by the Revenue and cross- objections filed by the assessee are dismissed.

Order pronounced on 13.07.2026

Sd/- Sd/- SIDDHARATHA NAUTIYAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 13.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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