SHREE PARSHWNATH COLOURANTS LLP,AHMEDABAD vs. THE ITO, WARD-1(1)(3), AHMEDABAD

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ITA 2690/AHD/2025Status: DisposedITAT Ahmedabad13 May 2026AY 2022-233 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of expenses related to debatable issues of capital vs. revenue expenditure or eligibility under Section 35D, and not a case of willful underreporting or misreporting of income. Therefore, the penalty was not sustainable.

What were the facts?

The assessee claimed loan processing, stamp duty, and preliminary expenses. The Assessing Officer disallowed these expenses, treating them as capital in nature or ineligible under Section 35D, and initiated penalty proceedings under Section 270A for underreporting income.

What were the issues?

Whether penalty under Section 270A is leviable when the disallowance of expenses arises from debatable issues and not from willful misreporting or underreporting of income.

Which sections of the Income-tax Act were involved?

Section 270A,Section 35D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: Shri Sanjay Garg & Smt. Annapurna Gupta

For Appellant: Shri Mehul K Patel, AR
Hearing: 20/04/2026Pronounced: 13/05/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ] ] Before Shri Sanjay Garg, Judicial Member And Smt. Annapurna Gupta, Accountant Member आयकर अपील सं /ITA No.2690/Ahd/2025 िनधा�रण वष� /Assessment Year : 2022-23 Shree Parshwnath Colourants ITO LLP, बनाम/ Ward-1(1)(3), v/s. B-404, Premium House, Nr. Ahmedabad Gandhigram Railway Station, Off: Ashram Road, Ahmedabad-380009 �थायी लेखा सं./PAN: ACXFS5815L (अपीलाथ�/ Appellant) (�� यथ�/ Respondent) Assessee by : Shri Mehul K Patel, AR Revenue by : Shri Rohit Aasudani, Sr. DR सुनवाई की तारीख/Date of Hearing : 20/04/2026 घोषणा की तारीख /Date of Pronouncement: 13/05/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 05/12/2025 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2022-2023.

2.

The assessee has raised the following grounds of appeal:

“1. That on facts, and in law, the learned NFAC has grievously erred in confirming the penalty of Rs. 9,75,489/- u/s 270A of the Act levied @ 50% of tax for under reporting of income, whereas the penalty was initiated on a different charge and that too without specifying the exact default and clause under which the penalty is initiated.

ITA No.2690/Ahd/2025 Shree Parshwnath Colourants LLP vs. ITO Asst.Year 2022-23 2 2. That on facts, and in law, the learned NFAC ought to have deleted the entire penalty of Rs. 9,75,489/- levied u/s 270A of the Act, as it relates only to disallowance of bona fide claim of expenses of loan processing & stamp charges and preliminary expenses, coupled with full and true disclosure in audited accounts. 3. That on facts, and in law, and on evidence on record, it ought to have been held that there is no under reporting of income within the meaning of section 270A of the Act, and hence the entire penalty ought to have been deleted. 4. The appellant craves liberty to add, alter, amend any ground of appeal.” 3. The assessee in this appeal has contested the confirmation of penalty levied by the Assessing Officer of Rs. 9,75,489/- u/s 270A of the Income Tax Act.

4.

At the outset, the Ld. Counsel for the assessee has brought our attention to the impugned assessment order by which the penalty proceedings were initiated. In the quantum assessment proceedings, the Assessing Officer had disallowed two type of expenditure claimed by the assessee. Firstly, relating to the loan processing charges of Rs. 17,89,500/- and stamp duty charges of Rs. 19,26,900/-. It is not the case of the Assessing Officer that the assessee had not incurred the said expenditure. However, the dispute before the Assessing Officer was that as to whether the said expenditure claimed was of capital in nature or a revenue expenditure. The Assessing Officer held that the said expenditure was of capital in nature. Second issue was relating to the preliminary expenses claimed of Rs. 26,36,734/-. The assessee claimed the said expenditure being 20% of total preliminary expenses of Rs. 1,31,83,670/- u/s. 35D of the Income Tax Act. Herein also, the Assessing Officer has not disputed the incurring of expenditure, but only the eligibility of the assessee’s claim of the said expenditure u/s 35D of the Income Tax Act. The Assessing Officer disallowed the aforesaid expenditure holding that the assessee could not furnish the requisite documents to justify the allowability of the same u/s.

ITA No.2690/Ahd/2025 Shree Parshwnath Colourants LLP vs. ITO Asst.Year 2022-23 3 35D of the Act. The above facts on the file shows that it is not a case of furnishing inaccurate particulars of income or under reporting of income or misreporting of income by the assessee. The issue was regarding the allowability of the same being capital or revenue in nature or being allowable u/s. 35D of the Income Tax Act, which were debatable issues, which have been decided against the assessee. However, there is no willful act on the part of the assessee in this case in under reporting or misreporting of income. Therefore, the impugned penalty levied by the Assessing Officer and further confirmed by the CIT(A), in our view is not sustainable and the same is accordingly ordered to be deleted.

5.

In the result, the appeal of the assessee stands allowed.

Order pronounced in the Open Court on 13/05/2026.

Sd/- Sd/- (Annapurna Gupta) (Sanjay Garg) Accountant Member Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 13/05/2025 TRUE COPY Tanmay, Sr. P.S. आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु� अपील ( ) / The CIT(A)-(NFAC) 5. िवभागीय �ितिनिध आयकर अपीलीय अिधकरण अहमदाबाद /DR,ITAT, Ahmedabad. , , 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad

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