INCOME TAX OFFICER- 15(1)(1), MUMBAI, MUMBAI vs. FARAKKA-RAIGANJ HIGHWAYS PRIVATE LIMITED , MUMBAI

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ITA 9306/MUM/2025Status: DisposedITAT Mumbai10 July 2026AY 2022-239 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 held that a bona fide mistake, voluntarily disclosed and explained, cannot be construed as 'misreporting of income'. The Assessing Officer also failed to provide an opportunity for a virtual hearing, violating principles of natural justice.

What were the facts?

The assessee claimed a deduction for periodic maintenance which was already claimed in a prior year by the erstwhile promoter, leading to a double deduction. The assessee voluntarily disclosed this error before scrutiny and decided not to press the claim.

What were the issues?

Whether a penalty under Section 270A is leviable when the assessee voluntarily discloses a bona fide error and whether principles of natural justice were violated by denial of a virtual hearing.

Which sections of the Income-tax Act were involved?

Section 270A,Section 143(3),Section 144B,Section 139(8A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE NARENDER KUMAR CHOUDHRY & HON’BLE JAGADISH

For Appellant: Shri Ajay Vohra & Shri Saksham
For Respondent: Shri Kishor Dhule, Ld. CIT D.R
Pronounced: 10.07.2026

आदेश / ORDER

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER:

This appeal has been preferred by the Revenue against the impugned order dated 09-10-2025 impugned herein passed by the Ld. Commissioner of Income-tax (Appeals) {in short "Ld.

Commissioner"} u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the Assessment Year 2022-23 {in short ‘AY} 2022-23, whereby the Ld. Commissioner deleted the penalty of ₹26,44,81,320/- levied by the Assessing Officer, vide penalty order dated 04.09.2024 passed under section 270A of the Act.

2.

Brief facts, relevant for adjudication of the present appeal, are that the Assessee company had filed its return of income for the year under consideration. During the course of assessment proceedings, the Assessing Officer noticed that the Assessee had claimed deduction towards provision for periodic maintenance amounting to ₹45,41,23,147/-. The Assessing Officer further observed that the said deduction had already been claimed in the year of creation of the provision by the erstwhile promoter and, therefore, the deduction claimed during the year resulted in a double deduction. Accordingly, the Assessing Officer disallowed the said claim while completing the assessment under section 143(3) read with section 144B of the Act and thereafter initiated penalty proceedings under section 270A of the Act alleging under-reporting of income in consequence of misreporting.

3.

Pursuant thereto, the AO vide penalty order dated 04.09.2024 ultimately levied penalty of ₹26,44,81,320/- under section 270A of the Act.

4.

Thus, the Assessee being aggrieved by the said penalty order, preferred the first appeal before the Ld. Commissioner.

5.

The Assessee, inter alia, contended before the Ld. Commissioner as under:

"That the deduction had been claimed due to a bona fide and inadvertent error. It was further submitted that before the issuance of notice under section 143(2), the Assessee itself had informed the Jurisdictional Assessing Officer by way of a written communication that the deduction had already been claimed in earlier years by the previous promoter and, therefore, the Assessee had voluntarily decided to forgo the claim in order to avoid double deduction. It was also contended that all material facts were fully disclosed before the Assessing Officer and there was neither suppression of facts nor any misrepresentation. The Assessee further explained that it was not legally eligible to file an updated return under section 139(8A) of the Act, as the return originally filed was a loss return. It was also argued that despite a specific request, no opportunity of virtual hearing was granted by the AO before passing the penalty order."

6.

After considering the material available on record and the submissions advanced on behalf of the Assessee, the Ld. Commissioner, inter alia, recorded the following findings:

"The Assessee had voluntarily disclosed the error even before the scrutiny proceedings commenced and had itself decided not to press the claim. The Assessing Officer himself had acknowledged this factual position in the assessment order. The conduct of the Assessee clearly demonstrated a bona fide mistake and not an intention to evade tax. Further, there was neither suppression of facts nor any misrepresentation so as to attract the provisions of section 270A(9) of the Act. The Assessing Officer had also failed to provide an opportunity of personal hearing through virtual conference despite a specific request, thereby violating the principles of natural justice."

7.

The Ld. Commissioner accordingly, deleted the penalty and while doing so, placed reliance inter alia, upon the following judicial precedents:

(i) CIT v. Gujarat State Electricity Corporation Ltd. [(2023) 144 taxmann.com 165 (Guj.)]; (ii) CIT v. First Data India (P.) Ltd. [(2016) 384 ITR 260 (Bom.)]; and (iii) Chambal Fertilizers & Chemicals Ltd. v. PCIT [(2024) 158 taxmann.com 184 (Raj.)].

8.

Before us, the Ld. Departmental Representative strongly supported the penalty order passed by the Assessing Officer and submitted that the Assessee had admittedly claimed an incorrect deduction in the return of income and, therefore, the case was squarely covered by the provisions relating to misreporting of income under section 270A of the Act. Thus, the Ld. Commissioner erred in deleting the penalty under consideration.

9.

Per contra, Mr. Ajay Vohra, Ld. Sr. Advocate/Ld. Counsel for the Assessee reiterated the submissions advanced before the lower authorities and strongly supported the impugned order passed by the Ld. Commissioner. The Ld. Counsel further submitted that the Assessee had voluntarily disclosed the mistake much before commencement of scrutiny proceedings; all the primary facts were fully disclosed before the Assessing Officer; no material was unearthed by the Department; there was neither concealment nor suppression of any material fact; and therefore, the ingredients necessary for invoking section 270A(9) of the Act were completely absent. Thus the penalty has rightly been deleted by the Ld. Commissioner and therefore impugned order deservers no interference.

10.

We have heard the parties and considered the rival submissions and perused the material available on record. Admittedly, there is no dispute that the Assessee itself informed the Assessing Officer regarding the erroneous claim even before issuance of notice under section 143(2) of the Act. The Assessing Officer has himself acknowledged the said factual position in the assessment order. Thus, the impugned addition was not the outcome of any investigation or detection by the Revenue but was founded upon the voluntary disclosure made by the Assessee. It is also an admitted position that all the primary facts relating to the claim were fully disclosed before the Assessing Officer. The Revenue has failed to bring any material on record to demonstrate that the Assessee had suppressed any material fact or deliberately furnished inaccurate particulars of income so as to attract the provisions of section 270A(9) of the Act. In our considered opinion, a bona fide mistake, voluntarily disclosed and duly explained, cannot ipso facto be construed as "misreporting of income" within the meaning of section 270A(9) of the Act.

11.

We further find considerable force in the findings recorded by the Ld. Commissioner that the Assessee was not legally eligible to file an updated return under section 139(8A) of the Act since the original return filed was a loss return. Consequently, the reasoning adopted by the Assessing Officer for levying penalty on the premise that the Assessee ought to have filed an updated return under section 139(8A) of the Act is legally unsustainable. We also find that the categorical finding recorded by the Ld. Commissioner regarding denial of an opportunity of personal hearing through virtual mode has remained uncontroverted before us. The Revenue has failed to place any material on record to rebut the said finding. Thus, the violation of the principles of natural justice, as recorded by the Ld. Commissioner, also stands established.

12.

We further observe that the conclusions arrived at by the Ld. Commissioner stand fortified by the judicial precedents relied upon in the impugned order, particularly CIT v. Gujarat State Electricity Corporation Ltd. (supra), CIT v. First Data India (P.) Ltd. (supra) and Chambal Fertilizers & Chemicals Ltd. v. PCIT (supra).

13.

We also observe that the Hon'ble Jurisdictional High Court in Principal Commissioner of Income-tax vs. Pinstorm Technology P. Ltd. [(2024) 158 taxmann.com 511 (Bom.)] has dealt with an identical controversy, wherein the assessee had failed to disallow certain expenses while filing the return despite the same having been duly reflected in the tax audit report. The Hon'ble High Court upheld the deletion of penalty by accepting the explanation that the omission occurred due to a bona fide mistake while uploading the return and that there was no intention either to conceal income or to furnish inaccurate particulars. The Hon'ble High Court thus held that penalty under section 271(1)(c) of the Act was not leviable in the peculiar facts of the case.

14.

We further observe that the Hon'ble Coordinate Bench of the Tribunal in Stepathlon Lifestyle Pvt. Ltd. vs. Deputy Commissioner of Income-tax [(2025) 181 taxmann.com 4 (Mum.- Trib.)], while dealing with an identical controversy, deleted the penalty by observing and holding as under:-

“6. We have carefully perused the records and heard the rival submissions. The Id.AR has repeatedly submitted that the disallowance could not be made in the return on account of inadvertent mistake on part of the Tax Auditors. We notice that there was no intention of the assessee to either conceal the income nor had the intention to give inaccurate particulars. Further, it had declared the said amount in profit and loss schedule of Income Tax Return. The only omission on its part was that it did not specifically disallow while making the computation of income. We feel that in the present case, the penalty has been levied by the AO on the inadvertent error or bona fide mistake. It is a trite law that no penalty can be levied on bona fide and Inadvertent mistake of the assessee. Reliance is placed on the decision of Hon'ble Apex Court in the case of Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 25 taxmann.com 400/348 ITR 306/211 Taxman 40 wherein it was held that no penalty can be levied where there was a genuine omission on the part of the assessee where the entire details for making the addition/disallowance was very much available in the return of income filed and entire tax payment pursuant to the said disallowance made in the assessment had been duly paid.

6.1 In the instant case, we do not find any merit therein as the penalty has been levied solely on account of disallowance made in the assessment without establishing any concealment of income on the part of the assessee. The AO has not appreciated the fact that the assessment and the penalty proceedings are two separate proceedings. The findings given in the assessment proceedings cannot be conclusive in the penalty proceedings. Merely, because certain amounts had been disallowed and added to the total income of the assessee and no further appeal had been preferred against this action, such income will not ipso facto amount to concealment of income attracting penalty u/s 271(1)(c) of the Act. The authorities below have not taken due note of the fact that the assessee had duly disclosed the impugned sum in the books of account and the TAR. In the present case, in our considered opinion, the assessee has definitely committed a mistake of not disallowing the impugned sums and the information is very much available in the audited accounts and tax audit report. However, in our considered opinion, even after disallowance, it cannot be considered a concealment or filing of inaccurate particulars of income but the same has to be accepted as a bona fide mistake. Therefore, the judgment of Hon'ble Apex Court rendered in Price Water House Coopers (supra), is squarely applicable.

6.2 In the above case also, the assessee had claimed deductions of certain sums including a provision as an expenditure but they had not disallowed the same by adding to the total income while filing the return of income. When the AO levied penalty, the Hon'ble Supreme Court held that here the particulars filed by assessee were not inaccurate or there was no question of concealment of income. If we apply the case of Price water House Coopers Pvt. Ltd., in this case also the assessee had claimed certain expenses which were found not allowable, but failed to add it to the total income in the computation. This is identical to the facts of Price Water House Coopers Pvt. Ltd. case of Supreme Court. Hence applying the above case, this has to be treated as bona fide and inadvertent error. In such a case Supreme Court held that penalty cannot believed u/s 271(1) (c) of the Act.

6.3 Further, contents of Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. All that happened in present case is that through bonafide and inadvertent error failed to add impugned sums to its total income. This can only be described as a human error. The assessee should have been careful which cannot be doubted, but absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee is not justified.

6.4 The hon'ble Supreme Court in another decision in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322/322 ITR 158 (SC) also settled the law that quantum and penalty are distinct proceedings wherein each and every disallowance/addition made in case of the former and does not automatically attract the latter penal provision.

6.5 In view of the above discussion, we set aside the impugned appellate order and direct the AO to delete the penalty levied u/s 271(1)(c) of the Act. Thus, the ground no.3 of appeal filed by the assessee stands allowed.”

15.

The reliance placed by the Ld. Counsel upon the decision of the Hon'ble Coordinate Bench of the Tribunal, Delhi in Jaypee Cement Corporation Ltd. vs. ACIT [(2023) 157 taxmann.com 757 (Delhi- Trib.)] is also well founded. In the said case, the assessee had voluntarily withdrawn the excess claim of deduction under section 32AC of the Act during the assessment proceedings before any query was raised by the Assessing Officer and, accordingly, the penalty levied under section 270A of the Act came to be deleted.

16.

We have also considered the decision relied upon by the Ld. DR in Gunmala Jain v. ITO [(2026) 182 taxmann.com 451 (Jaipur- Trib.)]. However, the said decision is clearly distinguishable on facts. In that case, the Assessee had withdrawn the claim without furnishing any plausible explanation except stating that the withdrawal was made for peace of mind. In the present case, however, the Assessee voluntarily disclosed the erroneous claim even before commencement of the scrutiny proceedings and satisfactorily explained the circumstances leading to such claim. The explanation furnished by the Assessee has duly been supported by the material available on record and has rightly been accepted by the Ld. Commissioner.

17.

Thus, considering the peculiar facts and circumstances in totality, particularly the voluntary disclosure made by the Assessee before commencement of the scrutiny proceedings, complete disclosure of all primary facts, absence of suppression or misrepresentation, the violation of the principles of natural justice, and respectfully following the judicial precedents referred to hereinabove, we do not find any infirmity or perversity in the well-reasoned order passed by the Ld. Commissioner deleting the penalty levied under section 270A of the Act. Accordingly, the grounds raised by the Revenue, being devoid of merit, are rejected.

18.

In the result, the Revenue's appeal is dismissed. Order pronounced in the open court on 10.07.2026. Sd/- Sd/- JAGADISH NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER ACCOUNTANT MEMBER

(Tarun Kushwaha) Sr. Private Secretary

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.

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