DY COMMISSIONER OF INCOME TAX CIRCLE 3(3)(1), MUMBAI, MUMBAI vs. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA, MUMBAI

This appeal by the Revenue arises from the order dated 28.11.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for assessment year 2016–17, whereby the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 was deleted.

The learned Departmental Representative relied upon the assessment order and supported the levy of penalty. The learned Authorised Representative, on the other hand, submitted that the issue is squarely covered by the decision of the Coordinate Bench in assessee’s own case for assessment years 2014–15 and 2015–16, wherein identical penalty was deleted.

We have heard the rival submissions and perused the material available on record. It is observed that the impugned penalty has been levied on account of disallowance of amortisation of lease premium, which has been a recurring issue in assessee’s case.

We find that in assessee’s own case for earlier assessment years, the Coordinate Bench, while dealing with identical penalty under section 271(1)(c), has held that the issue relating to allowability of lease premium has been admitted by the Hon’ble Jurisdictional High Court as a substantial question of law, thereby rendering the issue debatable.

The Coordinate Bench, after considering the factual matrix and legal position, held that once a substantial question of law is admitted by the Hon’ble High Court, the issue cannot be said to be free from doubt and consequently, penalty for concealment or furnishing inaccurate particulars is not exigible.

Similar proposition has also been upheld by the Hon’ble Bombay High Court in CIT v. Nayan Builders and Developers, affirming that once an issue is admitted in quantum proceedings, penalty under section 271(1)(c) is not warranted.

Further, the Hon’ble Supreme Court in CIT v. Reliance Petroproducts (P) Ltd. has clearly held that mere making of a claim which is not sustainable in law would not amount to furnishing inaccurate particulars of income, in the absence of any finding that the details furnished are incorrect or false.

In the present case, there is no material on record to demonstrate that the particulars furnished by the assessee are either incorrect or false. The disallowance arises out of a difference of opinion on the nature of expenditure, which has already travelled up to the Hon’ble High Court and has been admitted as a substantial question of law.

In view of the binding judicial precedents and respectfully following the decision of the Coordinate Bench in assessee’s own case on identical facts, we find no infirmity in the order of the learned CIT(A) in deleting the penalty.

The grounds raised by the Revenue, including those relating to technical defect in notice and applicability of sections 292B and 292BB,

In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 24/04/2026.