ACIT CC 7(3), MUMBAI vs. TATA PROJECTS LIMITED, MUMBAI

ITA 3401/MUM/2026Status: DisposedITAT Mumbai23 September 2026AY 2013-147 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against the order of the CIT(A) deleting the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was levied on additions made by the Assessing Officer (AO) for Assessment Year 2013-14. The additions were ₹3,78,15,218/- under Section 43B for outstanding sales tax/work contract tax liability, and ₹2,48,79,305/- for undeclared dividend income from foreign subsidiaries. The assessee, Tata Projects Limited, had filed its return and a revised return. The assessment was initially completed, then set aside by the PCIT, and a fresh assessment order was passed under Section 143(3) r.w.s. 263, leading to the additions and subsequent penalty proceedings. The CIT(A) deleted the penalty, leading to the present appeal by the Revenue and a cross-objection by the assessee.

What did the Tribunal hold?

The Tribunal upheld the decision of the CIT(A) in deleting the penalty under Section 271(1)(c) on both counts. Regarding the Section 43B addition, the Tribunal held that Section 43B applies to deductions "otherwise allowable." Since the assessee followed an "exclusive method" of accounting and did not route the statutory taxes through the Profit and Loss Account, no deduction was claimed against profits. The disclosure in Form 3CD was transparent, and the assessee had sufficient ITC. The claim was based on a plausible legal interpretation backed by judicial decisions. The Tribunal cited CIT vs. Reliance Petroproducts Pvt. Ltd. to state that making an unsustainable legal claim does not amount to furnishing inaccurate particulars if primary facts are disclosed. Therefore, penalty was not warranted. Concerning the dividend income, the Tribunal noted that the dividend was disclosed in "Schedule SI" and tax was offered under Section 115BBD. The omission from the summary computation was an inadvertent reporting mismatch, not a deliberate suppression. The assessee's suo moto Section 154 application prior to detection by the AO demonstrated no intention to evade tax. The Tribunal concluded that the charge of "tax sought to be evaded" did not hold good, and thus the penalty could not be sustained. The CIT(A)'s deletion of the penalty was affirmed.

What were the issues?

1. Whether the CIT(A) erred in deleting the penalty under Section 271(1)(c) on the addition of ₹3,78,15,218/- made under Section 43B concerning outstanding sales tax/work contract tax liability, which was claimed as a deduction though the assessee was allegedly not eligible. - Revenue's contention: The addition under Section 43B was sustained, indicating the assessee furnished inaccurate particulars of income. - Assessee's contention: The assessee disclosed unremitted statutory tax liability and had sufficient Input Tax Credit (ITC) to set off against it. The assessee followed an "exclusive method" of accounting, not routing these taxes through the Profit and Loss Account, thus Section 43B was not attracted. The claim was based on bona fide legal interpretation and judicial precedents like National Standard Duncan Ltd. and Merck Ltd. 2. Whether the CIT(A) erred in deleting the penalty under Section 271(1)(c) on the addition of ₹2,48,79,305/- representing dividend income not declared in the computation of income. - Revenue's contention: The failure to declare dividend income constitutes concealment and furnishing of inaccurate particulars of income. - Assessee's contention: The foreign dividend income was disclosed in "Schedule SI" of the ITR and offered to tax at 15% under Section 115BBD. An omission from the main summary column was due to a technical/formatting nuance. The assessee suo moto filed a rectification application under Section 154 before any detection by the AO. The crucial factor for penalty is "tax sought to be evaded," which was absent as the income was disclosed and tax was offered.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 43B,Section 143(3),Section 263,Section 115BBD,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Respondent: Smt. Sujatha Iyyanger, Sr. DR
Pronounced: 23.09.2026

Heard together (2 matters)

ITA 3401/MUM/2026
CO 220/MUM/2026

Read from the judgment's own cause title. This page is filed under one of them.

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the R

The order continues below.

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