JB MANGHARAM FOODS PVT LTD,MUMBAI vs. DCIT, CIRCLE 4(2)(1), MUMBAI

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ITA 8748/MUM/2025Status: DisposedITAT Mumbai11 June 2026AY 2018-194 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the omission was an inadvertent human error and not a deliberate misrepresentation or suppression of facts. Following the Supreme Court's decision in Price Waterhouse Coopers, the penalty was deleted.

What were the facts?

The assessee failed to offer to tax a disallowance of Rs. 33,62,599/- towards provision for gratuity, as reported in the tax audit report. This omission was accepted by the assessee during assessment proceedings, leading to a penalty under Section 270A.

What were the issues?

Whether an inadvertent omission to offer a disallowance to tax, as reported in the tax audit report, constitutes misrepresentation or suppression of facts warranting penalty under Section 270A.

Which sections of the Income-tax Act were involved?

Section 270A,Section 40A(7)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: HON’BLE SHRI PAWAN SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI PHYSICAL HEARING BEFORE HON’BLE SHRI PAWAN SINGH, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No.8748/MUM/2025 (निर्धारणवर्ा / Assessment Year: 2018-19) JB Mangharam Foods Pvt. Ltd. DCIT-Circle 4(2)(1) Matru Ashish CHS, Plot No. SC-5, Aaykar Bhawan, Mumbai, बिधम/ Vs. Unit No. 18, Gorai, 2 Borivali West, Maharashtra - 400020 Mumbai, Maharashtra – 400091 स्थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACJ-1657-R (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Sh. Ronak Doshi a/w Ms. Vrushti Galani – Ld. ARs प्रत्यथीकीओरसे/Respondent by : Sh.Harendra Verma (Addl. CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 10-06-2026 घोषणाकीतारीख /Date of Pronouncement 11-06-2026 : आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 27.10.2025 confirming impugned penalty u/s 270A for Rs.22,23,550/- as levied by Ld. AO vide order dated 23.03.2022.

2.

The Ld. AR made various arguments and made out a case of bona-fide belief. To support the same, reference has been made to the decision of Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 25 Taxmann.com 400 (SC). The Ld. Sr. DR referred to the orders of lower authorities and justified levy of penalty. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 3. The vital facts leading to impugned penalty are that an assessment was framed against the assessee on 22.02.2021. During the course of assessment proceedings, Ld. AO perused the tax audit report as submitted by the assessee and observed that Tax Auditor reported disallowance u/s 40A(7) towards provision for payment of gratuity for Rs.33,62,599/-. However, the same was not offered by the assessee to tax in its Income Tax Return form. The assessee accepted the same during assessment proceedings. Consequently, impugned penalty got triggered by Ld. AO in the assessment order for mis-reporting of income and show-caused the assessee in the course of penalty proceedings. 4. The assessee assailed the impugned penalty, inter-alia, on the ground that the assessee inadvertently fail to add back the same in the return of income. Once this mistake was pointed out by Ld. AO, the assessee filed the revised computation and requested Ld. AO to treat the income revised to that extent. The refund was already granted to the assessee u/s 143(1) and the additional demand arising out of assessment order was satisfied instantly within the due period as

granted to the assessee. The same would prove that it was always intended to disallow the provision for gratuity and it was only due to an advertent human error that the same was mistakenly left out while filing the return of income. However, the explanation stood rejected by Ld. AO and the assessee was visited with impugned penalty. The Ld. CIT(A) endorsed the action of Ld. AO on the ground that the assessee’s case fall within the ambit of Sec.270A(9) which provide for penalty on account of misrepresentation or suppression of fact. Aggrieved, the assessee in further appeal before us. 5. It is trite law that imposition of penalty is not automatic in nature but the levy of penalty is eclipsed by reasonable cause. Each and every default would not entail penalty. The fact of the present case would clearly show that the provision of gratuity was reported by Tax Auditor as not allowable and the same has also not been disputed by the assessee. Upon being pointed out during the course of assessment proceedings, the assessee accepted the mistake and filed revised computation to income. The assessee was granted refund u/s 143(1) and new tax demand arising out of assessment order was forthwith settled by the assessee. In the digital regime of tax filing, the assessee is required to upload the tax audit report along with return of income and the disallowances as reported therein would be taken into account even while processing the return of income u/s 143(1). In other words, the assessee could not avoid rigors of adverse reporting in Tax Audit Report and CPC could make this adjustment even u/s 143(1). In such a scenario, the conclusion that there was deliberate

suppression or misrepresentation of facts by the assessee could not be accepted. The ratio of decision of Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 25 taxmann.com 400 (SC)would apply. The facts in that case were identical to the facts of the present case. On identical facts and circumstances, Hon’ble Supreme Court deleted the penalty on the ground that bona-fide and inadvertent errors do not call for levy of penalty. Respectfully following the same, we delete the impugned penalty. We order so. 6. The appeal stand allowed. Order pronounced on 11th June, 2026

Sd/- Sd/- (PAWAN SINGH) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER ANKIT, PS Dated: 11-06-2026 आदेश की प्रनिनलनप अग्रेनर्ि /Copy of the Order forwarded to : 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3. आयकरआयुक्त/CIT 4. ववभागीयप्रवतवनवि/DR 5. गार्डफाईल/GF

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