KALBURGI CEMENT PRIVATE LIMITED,HYDERABAD vs. DCIT, CIRCLE-2(1), HYDERABAD

आयकर अपीलीय अिधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri Ravish Sood, Judicial Member आ.अपी.सं /ITA No.2067/Hyd/2025 (िनधा�रण वष�/Assessment Year:2016-17) Kalburgi Cement Private Vs. Deputy Commissioner Limited, of Income Tax, Hyderabad. Circle-2(1), PAN: AACCV8513G Hyderabad. (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri M V Prasad, CA राज� व �ारा/Revenue by: Dr. Sachin Kumar, Sr. AR सुनवाई की तारीख/Date of Hearing: 13/05/2026 घोषणा की तारीख/Date of 20/05/2026 Pronouncement: आदेश / ORDER PER RAVISH SOOD, J.M.

The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 29/09/2025, which in turn arises from the penalty order passed by the Assessing Officer (for short, “AO”) under Section 271(1)(c) of the Income Tax Act, 1961 (for short, “Act”) dated 11/01/2022 for A.Y. 2016-17. The assessee

2 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT company has assailed the impugned order on the following grounds of appeal:

“1. On the facts and circumstances of the case, the Penalty order passed by Assessing Officer which is confirmed by Learned CIT(A) is not justified according to law and facts. 2. On the facts and circumstance of the case, Learned CIT(A) is not justified in confirming the penalty U/s 271(1)(c) of Rs.79,68,500/-. 3. On the facts and circumstance of the case, Levy of penalty by Assessing Officer, which is confirmed by Learned CIT (A) is bad in law as no satisfaction has been drawn in the Assessment order for furnishing inaccurate particulars of income or for concealment of income. 4. On the facts and circumstance of the case, Learned CIT(A) is not justified in confirming the penalty without observing the fact that disallowance of expenditure does not attract levy of penalty. 5. On the facts and circumstance of the case, Learned CIT (A) has not observed the fact that levy of penalty by passing the order is barred by limitation. 6. On the facts and circumstances of the case, Learned CIT(A) has not appreciated the fact that mere acceptance of additions in the Assessment proceedings does not lead to the levy of a penalty. 7. On the facts and circumstance of the case, Learned CIT(A) has not appreciated the fact that the Assessing Officer has not brought on record on what circumstances the appellant is prone to furnished inaccurate particulars of income. 8. Any other ground or grounds that may be urged at the time of hearing of the appeal.” 2. Succinctly stated, the assessee company, which is engaged in the business of manufacturing and sale of cement, had filed its return of income for AY 2016-17 on 28/11/2016, declaring a loss of Rs. 170,64,07,015/-. Thereafter, the AO framed the assessment vide his order passed under Section 143(3) of the Act dated 19.12.2018,

3 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT determining the loss at Rs. 167,12,11,932/- after, inter alia, making certain additions/disallowances, viz. (i). disallowance of provision for mine restoration expenses: Rs. 45,97,870/-; and (ii). Disallowance of excess depreciation/additional depreciation on railway sidings/bridges: Rs. 1,84,27,214/-.

4 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT 7. Shri MV Prasad, CA, the Ld. Authorized Representative (for short, “AR”) for the assessee company, at the threshold of hearing, submitted that the penalty imposed by the AO under Section 271(1)(c) is wholly unsustainable both on facts and in law. It was submitted that all particulars relating to the claim of mine restoration expenses, as well as the claim of additional depreciation on railway sidings, were fully and truly disclosed by the assessee company in its return of income, tax audit report, and accompanying statements. Elaborating further on his contention, the Ld. AR submitted that merely because the respective claims were disallowed by the AO, the same would not automatically warrant the levy of a penalty under Section 271(1)(c) of the Act.

5 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT had specifically explained the statutory framework governing mine closure obligations and the basis of provisioning made in the books of account. It was submitted that the provision was made on a scientific and technical basis, taking into account the mineable area, estimated restoration cost, total reserves, and excavation carried out during the year. The Ld. AR further relied upon the order of the Hyderabad Bench of the Tribunal in Bharathi Cement Corporation Limited, Hyderabad Vs. DCIT, Hyderabad, ITA Nos. 1010 to 1012/Hyd/2017, dated 27/06/2018, wherein an identical claim of mine closure expenses made by the assessee was accepted by the Tribunal after considering the judgments in Udaipur Mineral Development Syndicate (P) Ltd. Vs. DCIT & Anr. (2003) 261 ITR 706 (Raj) and Bharat Earth Movers Ltd. Vs. CIT (2000) 245 ITR 428 (SC). Therefore, according to the Ld. AR, the claim made by the assessee company was not only bona fide but was fully supported by judicial precedents. It was submitted that once the assessee’s claim is supported by judicial precedents and all facts are duly disclosed, the levy of penalty under Section 271(1)(c) is wholly untenable.

6 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT The Ld. AR pressed into service the judgment of the Hon’ble High Court of Calcutta in CIT Vs. Birla Jute & Industries Ltd. (2003) 133 Taxman 337 (Calcutta), wherein the Hon’ble High Court had held that railway sidings formed part of the plant eligible for depreciation benefits. Apart from that, the Ld. AR relied upon the judgment of the Hon’ble High Court of Delhi in Karan Raghav Exports (P) Ltd. Vs. CIT (2012) 21 taxmann.com 8 (Delhi) for the proposition that mere disallowance of depreciation claim cannot lead to levy of penalty under Section 271(1)(c) of the Act. The Ld. AR further placed heavy reliance on the landmark judgment of the Hon’ble Supreme Court in CIT, Ahmedabad Vs. Reliance Petroproducts (P) Ltd., (2010) 189 Taxman 322 (SC), wherein it was held that mere making of a claim which is not sustainable in law would not amount to furnishing inaccurate particulars of income.

7 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT section 271(1)(c) of the Act. The Ld. DR submitted that the assessee company itself had accepted the disallowances relating to, viz. (i) mine restoration expenses; and (ii) excess depreciation on railway sidings/bridges, and had consciously chosen not to challenge the said additions/disallowances before the appellate authorities. According to the Ld. DR, such conduct on the part of the assessee company clearly demonstrates that the claims were untenable and legally unsustainable, and that the assessee company itself was aware that the claimed deductions were not allowable under law. It was contended that once the assessee company had accepted the additions and allowed the assessment order to attain finality on the subject issues, it was no longer open for it to contend in penalty proceedings that the claims were bona fide or that there was no furnishing of inaccurate particulars.

8 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT under section 271(1)(c) is a civil liability and that wilful concealment is not an essential ingredient for attracting the said provision. The Ld. DR accordingly submitted that the penalty had rightly been levied and sustained by the lower authorities and therefore no interference was called for.

9 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT MCDR Rules, every mining lease holder is obligated to undertake progressive and final mine closure measures and to furnish financial assurance for restoration activities. Apart from that, the assessee company had also explained the scientific basis adopted for estimating the mine restoration liability and provisioning thereof in its books of account, following the mercantile system of accounting.

“Considering the clause in the agreement, i.e., as far as possible, the lessee shall restore the surface land so used to its original condition, the moment the assessee digs pits, he is bound under the agreement to fill those pits, and the liability does accrue on the date on which the pits are dug. Therefore, in our view, the Tribunal has committed an error in disallowing the claim of the assessee in the year in hand… the assessee is following mercantile system of accounting. It can claim the expenses incurred as soon as it digs the pits.”

10 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT We further find that the ITAT, Hyderabad, in Bharathi Cement Corporation Limited, Hyderabad Vs. DCIT, Hyderabad, ITA Nos. 1010 to 1012/Hyd/2017, dated 27/06/2018, while dealing with an identical issue relating to mine restoration expenses, had accepted the assessee’s claim after considering the judgments in Udaipur Mineral Development Syndicate (P) Ltd. Vs. DCIT & Anr. (2003) 261 ITR 706 (Raj)., Bharat Earth Movers Ltd. Vs. CIT (2000) 245 ITR 428 (SC), and NMDC Ltd., Hyderabad Vs. JCIT Range 16, Hyderabad, ITA Nos. 714 & 885 of 2012, dated 28/02/2014. In our view, as the claim made by the assessee company was clearly supported by judicial precedents, the same cannot, by any stretch of imagination, be regarded as a false or mala fide claim. Further, we find that the Hon’ble Supreme Court in CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC), has categorically held that merely because a claim made by the assessee is not accepted or is not acceptable to the Revenue, the same by itself would not attract penalty under Section 271(1)(c). The Hon’ble Apex Court observed that where there is no finding that the details supplied by the assessee are incorrect, erroneous, or false, there would be no question of imposing a penalty for furnishing inaccurate particulars of income.

11 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT 17. In the backdrop of our aforesaid observations, we are of the firm conviction that, in the present case, there is no allegation by the Revenue authorities that the assessee company had concealed any material fact or furnished false particulars, and the entire basis of the penalty is only that the assessee’s claim was disallowed. In our considered view, once the claim itself is supported by judicial precedents and all material particulars are fully disclosed, imposition of a penalty under Section 271(1)(c) is wholly unsustainable.

12 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT judicial precedents, the same cannot be treated as furnishing of inaccurate particulars of income.

13 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT Supreme Court was primarily concerned with the nature and scope of penalty proceedings under section 271(1)(c) and whether mens rea or wilful concealment is an essential requirement for imposition of penalty. The Hon’ble Apex Court held that the penalty under section 271(1)(c) is a civil liability and wilful concealment is not an essential ingredient for attracting civil liability under the said provision. However, the Hon’ble Supreme Court nowhere held that a penalty is automatic in every case of disallowance or addition made during assessment proceedings. The judgment also does not lay down the proposition that every incorrect claim or every disallowance necessarily leads to the furnishing of inaccurate particulars of income.

14 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT 23. In the present case, it is not the allegation of the Revenue that the assessee had concealed any material facts or furnished false particulars. The claims relating to mine restoration expenses and depreciation on railway sidings/bridges were duly disclosed in the return of income, computation statement, audited financial statements, and tax audit report. The claims were based on judicial precedents and legal interpretation. In fact, as the aforesaid claim of the assessee company is supported by a catena of judicial pronouncements, therefore, it cannot be said that the claims were ex facie bogus, false, or mala fide.

15 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT cannot be construed as an admission of concealment or furnishing of inaccurate particulars. In our view, a mere agreement to additions or the non-filing of an appeal does not automatically justify the levy of a penalty. In the present case, the Revenue has failed to bring any material on record to establish that the claims made by the assessee company were false to its knowledge or that the assessee company had deliberately furnished inaccurate particulars. In our view, what has been disallowed by the AO is only a legal claim made by the assessee company on disclosed facts. Therefore, in our considered opinion, the ratio laid down in CIT Vs. Reliance Petroproducts Pvt. Ltd. (supra) squarely applies to the facts of the present case, whereas the judgment in CIT Vs. Atul Mohan Bindal (supra), relied upon by the Ld. DR is distinguishable on facts and does not advance his case.

16 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT 26. As we have quashed the penalty on merits of the case, we refrain from adverting to the challenge thrown by the Ld. AR to the validity of the jurisdiction assumed by the AO for imposing the impugned penalty in the absence of a valid recording of satisfaction in the assessment order, as well as the plea relating to limitation under Section 275 of the Act, which, thus, are left open.

Order pronounced in the open court on 20th May, 2026.

Sd/- Sd/- (MANJUNATHA G.) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 20th May, 2026. *OKK / SPS Copy to: S.No Addresses 1 Kalburgi cement Private Limited D. No. 8-2-626, Reliance Majestic Building, 10, Khairatabad, Hyderabad, Telangana-500034 2 The Deputy Commissioner of Income Tax, Circle-2(1), Room. No.514, 5th Floor, Signature Towers, Opposite Botanical Gardens, Serlingampally, Hyderabad, Telangana-500084 3 The Pr. CIT, Hyderabad

17 ITA No.2067/Hyd/2025 Kalburgi Cement Private Limited vs. DCIT 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order Digitally signed by KAMALA KAMALA KUMAR KUMAR ORUGANTI ORUGANTI Date: 2026.05.21 14:16:24 +05'30' Sr. Private Secretary, ITAT, Hyderabad.