ASSISTANT COMMISSIONER OF INCOME TAX, DELHI vs. BORGWARNER MORSE TEC LLC, US

ITITA 5/DEL/2025Status: DisposedITAT Delhi10 July 2026AY 2015-1612 pages
AI SummaryDismissed

What were the facts?

The assessee, Borgwarner Morse Tec LLC, a US-based company, filed its Income Tax Return for Assessment Year 2015-16 on 28.11.2015, declaring taxable income of Rs. 1,87,36,04,771/-. The return declared income from transfer of shares and claimed credit for TDS. During scrutiny assessment, the assessee offered additional income of Rs. 8,51,39,358/- as Royalty/FTS, which was not initially disclosed. The Assessing Officer (AO) made an addition of this amount and initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The AO imposed a minimum penalty of Rs. 96,46,289/-. The assessee appealed to the CIT(A), which deleted the penalty. The Revenue has appealed this deletion to the ITAT.

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) and dismissed the appeal of the Revenue. The Tribunal noted that the AO levied the penalty under Section 271(1)(c) for Royalty/FTS income of Rs. 8,51,39,358/- offered during assessment, as it was not declared in the return. The CIT(A) deleted the penalty, accepting the assessee's explanation that the omission was inadvertent and bona fide, with no intention to evade tax, as the entire tax liability was discharged by TDS, and credit for which was not claimed. The CIT(A) found that this negated any deliberate attempt to seek undue refund and substantiated the assessee's explanation. The Tribunal observed that the Revenue failed to bring on record any facts in the assessment or penalty proceedings to support its claim that the disclosure was made only after detection by the AO. Furthermore, the Tribunal noted that the AO's penalty order did not pass a speaking order to establish the charge of furnishing inaccurate particulars. The Tribunal found no fault with the CIT(A)'s findings and upheld its reliance on the decisions in Aditya Malla vs. ITO and Price Waterhouse Coopers (P.) Ltd. vs. CIT to conclude that the assessee's conduct did not establish a deliberate furnishing of inaccurate particulars. Therefore, the penalty deletion was upheld.

What were the issues?

1. Whether the CIT(A) was justified in deleting the penalty of Rs. 96,46,289/- levied under Section 271(1)(c) of the Income Tax Act, 1961, despite the admitted failure of the assessee to disclose royalty/FTS income of Rs. 8,51,39,358/- in its return of income, which was disclosed only upon detection during assessment proceedings? (Question of law and fact, concerning Section 271(1)(c)). 2. Whether the non-disclosure of substantial royalty/FTS income in the return of income constitutes 'furnishing of inaccurate particulars of income' within the meaning of Section 271(1)(c) read with Explanation I thereto, irrespective of whether tax was deducted at source on such income or not? (Question of law, concerning Section 271(1)(c) and Explanation I). 3. Whether the CIT(A) erred in accepting the assessee's plea of 'bona fide omission' merely on the ground that TDS was deducted and credit not claimed, ignoring that the assessee is a multinational corporate entity with professional assistance and full knowledge of its transactions, and the omission involved a significant sum of Rs. 8.51 crore? (Question of law and fact, concerning Section 271(1)(c)). 4. Whether the reliance placed by the CIT(A) on the decision of the ITAT in Aditya Malla vs. ITO and the Supreme Court's decision in Price Waterhouse Coopers (P.) Ltd. vs. CIT is legally sustainable, when the facts of the present case are materially distinguishable as there was no prior disclosure of the omitted income in the return, tax audit report, or accounts, and the disclosure was made only after detection by the AO? (Question of law, concerning Section 271(1)(c)). 5. Whether on the facts of the case, the deletion of penalty is sustainable when the omission is not a mere clerical or computational error, but complete non-reporting of royalty/FTS income, thereby attracting penalty under Section 271(1)(c)? (Question of law and fact, concerning Section 271(1)(c)). Assessee's contentions: The CIT(A) accepted the assessee's explanation that the omission to include the receipts of Rs. 8,51,39,358/- in the ITR was inadvertent and bona fide, with no intention to evade tax, as the entire tax liability was discharged by TDS, and credit for which was not even claimed. The CIT(A) noted that this negates any deliberate attempt to seek undue refund and substantiates the appellant's explanation. The CIT(A) relied on Aditya Malla vs. ITO and Price Waterhouse Coopers (P.) Ltd. vs. CIT. Revenue's contentions: The Revenue argued that the penalty deletion was unjustified despite the admitted failure to disclose royalty/FTS income, which was disclosed only upon detection. The Revenue contended that non-disclosure constitutes furnishing inaccurate particulars, irrespective of TDS. It argued that the CIT(A) erred in accepting 'bona fide omission' for a multinational entity and that the cited precedents were distinguishable due to the lack of prior disclosure in the return, tax audit report, or accounts, with disclosure made only after AO's detection. The omission was a complete non-reporting, attracting penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 250,Section 143(2),Section 142(1),Section 112(1)(c),Section 274,Section 274(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH, D: NEW DELHI

Before: SHRI VIKAS AWASTHY & SHRI BRAJESH KUMAR SINGH

For Respondent: Shri Vikram Singh Sharma, Sr (DR)
Hearing: 20.04.2026Pronounced: 10.07.2026

PER BRAJESH KUMAR SINGH, AM.

This appeal is directed against the order dated 10.07.2025 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for the A.Y. 2015-16, arising out of penalty order u/s 271(1)(c) of the Act dated 01.04.2022. None appeared for the respondent assessee and the appeal was heard after hearing the ld Sr DR for the appellant revenue.

IT(IT)A No. 5/Del/2025 .

2.

Brief facts of the case: The appellant is a company incorporated in United States of America and during the year was engaged in developing engineered components and systems for power train to improve fuel economy emissions and performance. It

The order continues below.

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