MONJI VISHRAM PHARMACEUTICALS PVT. LTD.,MUMBAI vs. DCIT 4(2)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 653/Mum/2026 (Assessment Year: 2017-18) Monji Vishram NFAC/DCIT 4(2)(1) Pharmaceuticals Pvt. Room No. 669, Ltd. Vs. Aayakar Bhavan, 306, Sheikh Memon Maharshi Karve Marg, Street, Kalbadevi HO, Mumbai-400 020 Mumbai-400 002 PAN/GIR No. AACM0651Q (Applicant) (Respondent) Assessee by Shri Vimal Punmiya, Ld. AR Revenue by Shree Kumar C., Ld. DR Date of Hearing 23.06.2026 Date of Pronouncement 08.07.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal by the assessee is directed against the order dated 12.11.2025 passed by the learned CIT(A)/NFAC, Delhi, under section 250 of the Income Tax Act, 1961, for A.Y. 2017-18. The appeal before the learned CIT(A) arose from the penalty order dated 16.03.2022 passed under section 270A of the Act by the

2 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. Assessment Unit, National Faceless Assessment Centre, whereby penalty of Rs.69,67,468/- was levied. The learned CIT(A), while partly allowing the appeal of the assessee, restricted the penalty to Rs.17,41,867/-, being 50% of the tax payable on under- reported income. 2. The assessee has raised the following grounds of appeal before us: 1. On the facts and circumstances of the case and in law, The Ld. CIT(A) erred in confirming the penalty of Rs.17,41,867 under section 270A of the Act, being 50 percent of the tax payable on under reported 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. Facts in Brief 3. The assessee, a private limited company, filed its original return of income for A.Y. 2017-18 on 28.11.2017 declaring loss of Rs.1,59,430/- and thereafter revised the return on 07.04.2018 declaring loss of Rs.1,06,36,724/-. The assessment was completed by the Assessing Officer under section 143(3) of the Act vide order dated 25.12.2019. The case was selected for scrutiny under CASS and notices under sections 143(2) and 142(1) were issued, in response to which the assessee filed submissions. 4. During assessment proceedings, the Assessing Officer noticed that the assessee was a partner holding 50% share in M/s Monji Vishram & Co. and had shown capital investment of

3 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. Rs.1,10,74,052/- in the said firm. Since the assessee was earning exempt share of profit from the firm, the Assessing Officer invoked section 14A read with Rule 8D and made disallowance of Rs.59,360/-. 5. The Assessing Officer further noticed that in Schedule BP of the return, the assessee had reduced Rs.1,04,77,294/-, being share of profit from the firm, as exempt income credited to the Profit and Loss Account. However, in the audited Profit and Loss Account, the share of profit from M/s Monji Vishram & Co. was shown at Nil under “Revenue from Operations”. On being called upon, the assessee explained that while preparing Schedule BP, the exempt share of profit was inadvertently deducted though the same had not been credited to the Profit and Loss Account. The assessee stated that the error was clerical and unintentional and accepted that the current year loss required recomputation. 6. The Assessing Officer did not accept the returned loss and recomputed the same by adding back the exempt share of profit of Rs.1,04,77,294/- and the disallowance under section 14A of Rs.59,360/- to the returned loss of Rs.1,06,36,724/-. Consequently, the loss was determined at Rs.1,00,070/- as against Rs.1,06,36,724/- claimed in the revised return. Penalty proceedings under section 270A were also initiated for under- reporting of income in consequence of misreporting. 7. Thereafter, the National Faceless Assessment Centre passed penalty order dated 16.03.2022 under section 270A of the Act. In

4 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. the penalty proceedings, the assessee reiterated that the share of profit of Rs.1,04,77,294/- was duly disclosed as exempt income under section 10(2A) in Schedule EI and was also reflected in the balance sheet under “Reserves & Surplus”. It was explained that the error occurred only in Schedule BP, where the exempt income was inadvertently deducted again, resulting in inflated loss. The assessee also submitted that the lapse was committed by the clerical staff of the CA firm and placed on record an affidavit of the proprietor of the CA firm. 8. The Assessing Officer rejected the explanation on the ground that the mistake had resulted in substantial increase in loss to the benefit of the assessee and that the assessee had repeated the same error even in the revised return. The Assessing Officer treated the reduction of loss, including the disallowance under section 14A, as under-reported income in consequence of misreporting, quantified under-reported income at Rs.1,05,36,654/- and levied penalty of Rs.69,67,468/- being 200% of tax payable thereon. 9. In appeal, the learned CIT(A), vide order dated 12.11.2025 passed under section 250 of the Act, accepted that the assessee had admitted the error during assessment proceedings and had also stated that the excess loss claimed in the revised return was not adjusted in any subsequent year. However, the learned CIT(A) held that the case fell within section 270A(2)(g), since the assessment had the effect of reducing the loss claimed by the assessee. The learned CIT(A), therefore, sustained the levy of

5 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. penalty under section 270A, but restricted it to 50% of the tax payable on under-reported income. Accordingly, the penalty was reduced from Rs.69,67,468/- to Rs.17,41,867/-. 10. The learned Authorised Representative (AR) reiterated the facts and submitted that all primary facts were disclosed in the return itself and there was no suppression or non-disclosure of any material particulars. The AR invited ur attention to the copy of income tax return placed in the paper book. 11. The learned AR submitted that the error occurred only while preparing and electronically filing the return of income, particularly while filling Schedule BP. The exempt share of profit was mistakenly reduced once again while computing business income, resulting in inflated loss being reflected in the return. It was submitted that the mistake was purely clerical, inadvertent and computational in nature. The assessee explained the mistake during assessment proceedings and accepted the recomputation of income. It was further submitted that the assessee had not derived any undue benefit and the excess loss was neither set off nor carried forward to any subsequent year. 12. The learned AR also invited our attention to the affidavit of the Chartered Accountant, wherein it was stated that the error was committed by a junior staff member handling return filing work. It was submitted that this affidavit supports the bona fide explanation of the assessee. The Assessing Officer has not

6 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. brought any material to show that the affidavit is false or that the explanation offered by the assessee is incorrect. 13. The learned AR submitted that penalty provisions, being penal in nature, are to be strictly construed. Mere reduction of loss in assessment would not automatically warrant penalty under section 270A. It was submitted that where the explanation is bona fide and all material facts have been disclosed, the case falls within the exception under section 270A(6)(a). It was further submitted that the Assessing Officer mechanically invoked the provisions of misreporting without establishing any deliberate concealment, suppression of income or furnishing of inaccurate particulars. 14. The learned AR relied upon the decision of the Co-ordinate Bench in S. Saroja v. Deputy Commissioner of Income-tax [2023] 157 taxmann.com 760 (Chennai-Trib.). In that case, the accountant had, by inadvertent error, reported annual letting value of house property at Rs.5.40 lakhs instead of Rs.8.40 lakhs and penalty under section 270A was levied. The Tribunal deleted the penalty. 15. Reliance was also placed on the decision of the Co-ordinate Bench in Kavita Jasjit Singh v. Commissioner of Income-tax (Appeals) [2023] 157 taxmann.com 756 (Mumbai-Trib.), wherein penalty under section 270A was deleted when the assessee suo motu furnished revised computation during

7 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. assessment proceedings and offered interest on income-tax refund to tax. 16. The learned AR further relied upon the decision of the Co- ordinate Bench in Deputy Commissioner of Income-tax v. Sasan Power Ltd. [2023] 157 taxmann.com 763 (Mumbai- Trib.), wherein the assessee had erroneously not reduced insurance claim from block of assets while computing depreciation, resulting in excess claim of depreciation. The Tribunal upheld deletion of penalty under section 270A on the ground that the excess claim was a bona fide mistake. 17. The learned AR submitted that the ratio of the above decisions clearly supports the assessee’s case. The addition in the present case did not arise on account of any undisclosed income, false entry, bogus claim or suppression of facts. It arose only because an exempt income, already disclosed in Schedule EI, was inadvertently deducted again in Schedule BP. It was accordingly submitted that the penalty sustained by the learned CIT(A) may be deleted. 18. The learned Departmental Representative (DR) supported the orders of the lower authorities. It was submitted that this is not a case where the error occurred only in the original return. The assessee had filed a revised return also and the same error was repeated in the revised return. According to the learned DR, once the assessee had an opportunity to revisit the return and

8 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. revise the same, repetition of the error in the revised return could not be treated as a mere clerical or inadvertent mistake. 19. The learned DR further submitted that the incorrect claim resulted in substantial enhancement of loss claimed by the assessee. But for scrutiny assessment, the inflated loss would have remained on record. It was submitted that the Assessing Officer had rightly invoked section 270A. It was also submitted that the learned CIT(A) had already granted substantial relief by reducing the penalty from 200% to 50% of the tax payable on under-reported income. The learned DR accordingly submitted that the order of the learned CIT(A) does not call for interference. 20. We have considered the rival submissions and perused the material available on record. The short issue for our consideration is whether penalty under section 270A of the Act can be sustained on the facts of the present case, where the returned loss was reduced in assessment on account of an error in Schedule BP of the return. 21. There is no dispute that the assessee is a partner in M/s Monji Vishram & Co. and earned share of profit of Rs.1,04,77,294/- from the said firm. There is also no dispute that share of profit from partnership firm is exempt under section 10(2A) of the Act. The assessee’s case is that the said share of profit was duly disclosed as exempt income in Schedule EI of the return and was also reflected in the balance sheet under “Reserves & Surplus”. The Revenue has not brought any material

9 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. to controvert this factual position. The error arose because the share of profit, though not credited to the Profit and Loss Account, was deducted in Schedule BP as income credited to the Profit and Loss Account which is exempt. Thus, the same exempt income was effectively reduced while computing business income, resulting in inflation of loss. The assessee explained the mistake during assessment proceedings and accepted the recomputation. The assessee also placed on record affidavit of the Chartered Accountant stating that the error occurred due to mistake by junior staff handling return filing work. 22. It is true that the assessee filed a revised return and the same error was repeated. This aspect has been strongly emphasized by the learned Departmental Representative. However, in our view, repetition of the error in the revised return, by itself, is not conclusive to hold that the assessee either misreported income or furnished inaccurate particulars. The nature of the error, the disclosure of the exempt income in Schedule EI, the reflection of the said amount in the balance sheet, the immediate acceptance of recomputation during assessment proceedings and the affidavit of the Chartered Accountant are relevant circumstances which cannot be ignored. 23. Section 270A is not intended to visit every adjustment or every reduction of loss with penalty. Section 270A(2)(g) may describe a situation where assessment has the effect of reducing the loss or converting such loss into income. However, even in a case of under-reporting, sub-section (6) carves out exceptions,

10 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. inter alia, where the assessee offers an explanation and the authority is satisfied that the explanation is bona fide and all material facts have been disclosed to substantiate the explanation. In the present case, the primary facts relating to the share of profit were disclosed in the return itself. The source of exempt income, the amount of exempt income and the treatment thereof in Schedule EI were available on record. The error is in the manner of filling Schedule BP and not in suppressing the income. 24. We also find that the Assessing Officer levied penalty at 200% by treating the case as under-reporting in consequence of misreporting. The learned CIT(A) did not approve the levy at 200% and restricted the penalty to 50% by treating it as a case covered by section 270A(2)(g). This itself shows that the element of misreporting, as contemplated under section 270A(9), was not sustained by the learned CIT(A). Once the element of misreporting is excluded, the further question is whether, on the facts of the case, even penalty for under-reporting can be sustained. In our considered view, in the facts noted above, the answer has to be in the negative. 25. The decision of the Co-ordinate Bench in S. Saroja supports the assessee’s case. There also the error continued in the revised return and was explained as a mistake of the accountant. The Tribunal held that such inadvertent error could not be considered as under-reporting of income for levy of penalty under section 270A. The ratio is directly applicable to the present

11 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. case, where the affidavit of the Chartered Accountant has been placed on record and the error is also in return preparation. The relevant observations read as under:

“During penalty proceedings, the assessee explained before the AO that said mistake is on account of inadvertent error committed by an Accountant. We find that, if you go through income on which the AO levied penalty u/s. 270A of the Act, on annual value of house property, the Accountant who filed return of income has committed inadvertent error and reported only ALV of Rs. 5,40,000/- instead of Rs. 8,40,000/- and in our considered view said mistake cannot be considered as under reporting of income for levying of penalty u/s. 270A of the Act.” (para 5) 26. The decision of the Co-ordinate Bench in Kavita Jasjit Singh also supports the principle that where the explanation is bona fide and there is no material brought by the Revenue to controvert the assessee’s explanation, penalty under section 270A cannot be sustained merely because an addition has been made in assessment. Similarly, in Sasan Power Ltd., the Co-ordinate Bench upheld deletion of penalty where excess claim arose out of bona fide mistake and the assessee’s explanation was not considered by the Assessing Officer in proper perspective.

12 ITA No. 653/Mum/2026 Monji Vishram Pharmaceuticals Pvt. Ltd. explanation is false. In such circumstances, the case cannot be treated as fit for levy of penalty under section 270A.

Order pronounced in the open court on 08.07.2026.

Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 08/07/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. 2. प्रत्यर्थी / The Respondent. संबंधित आयकर आयुक्त / The CIT(A) 3. 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण, मुम्बई / DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai