BHARAT EXPLOSISIVE LIMITED,LALITPUR vs. DY.CIT, CIRCLE-6, JHANSI

ITA 433/AGR/2026Status: DisposedITAT Agra12 October 2026AY 2006-0719 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the levy of penalty under Section 271(1)(c) of the Act was not tenable. The Tribunal noted that the deposits of Rs. 53,82,000/-, on which the penalty was levied, were accepted by the assessee from the public at large under the Companies (Acceptance of Deposits) Rules, 1975, which was not disputed by the AO. While the amounts were added under Section 68 due to the failure to confirm the depositors' identity and creditworthiness, there was no other information on record from external sources or AO's inquiry to suggest that the assessee had introduced its undisclosed income through these fixed deposits. The Tribunal also considered the assessee's submission that some deposits were renewals of old deposits not relating to the assessment year under consideration, and that complete details of depositors were furnished. The Tribunal placed reliance on the decision of the Hon'ble Apex Court in CIT Vs Reliance Petroproducts (P) Ltd., wherein it was held that penalty under Section 271(1)(c) was not leviable on similar facts. Accordingly, the levy of penalty of Rs. 16,50,000/- by the AO under Section 271(1)(c) was deleted. Ground no. 1 of the appeal was allowed, and other grounds were left academic.

What were the facts?

The assessee, Bharat Explosives Limited, is appealing an order from the NFAC (Commissioner of Income Tax) for Assessment Year 2006-07. The Assessing Officer (AO) added Rs. 56,35,000/- to the assessee's income under Section 68 of the Income Tax Act, 1961, as these amounts, claimed as borrowings through Fixed Deposits (FDRs), remained unconfirmed and the creditworthiness of depositors could not be established. Penalty proceedings under Section 271(1)(c) were initiated. The CIT(A) granted partial relief, confirming the balance addition. The Tribunal, in a prior appeal, confirmed an addition of Rs. 23,98,000/- and set aside Rs. 29,84,000/- for verification of renewal of old deposits. The AO re-added Rs. 29,84,000/- as the assessee failed to prove renewal. Subsequently, a penalty of Rs. 16,50,000/- was levied on FDRs amounting to Rs. 53,82,000/-. The Tribunal, in a previous order, restored the matter to the CIT(A) to decide the jurisdictional ground regarding the AO's satisfaction for initiating penalty proceedings. The present appeal challenges the CIT(A)'s dismissal of the assessee's appeal.

What were the issues?

1. Whether the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, is valid in the absence of a specifically recorded satisfaction by the Assessing Officer. Assessee's contentions: - The penalty was levied without jurisdiction as the AO did not record the requisite satisfaction. - The assessee had placed on record complete facts and evidence regarding the FDRs, including applications, renewed and cancelled FDRs, and evidence of the mode of receipt and repayment by account payee cheques. The issue of acceptable proof was debatable. - Some deposits were renewals of old deposits not relating to the assessment year under consideration. - The deposits were accepted as per the Companies (Acceptance of Deposits) Rules, 1975, and the AO did not dispute this. - There was no external information or AO inquiry suggesting the introduction of undisclosed income through these FDRs. Revenue's contentions: - The AO initiated penalty proceedings vide the assessment order dated 24.12.2008 for the addition of Rs. 56,35,000/- made on account of unexplained cash credits under Section 68. - Section 271 does not mandate recording of satisfaction in specific terms; satisfaction can be inferred from the AO's overt acts and actions. - The assessee understood the import and purport of the penalty notice and participated in the proceedings, making the levy valid (relied on Sundaram Finance Ltd vs ACIT).

Which sections of the Income-tax Act were involved?

Section 68,Section 271(1)(c),Section 250,Section 143(3),Section 254

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA(DB

Before: SUNIL KUMAR SINGHBRAJESH KUMAR SINGH

For Appellant: Shri R.M. Mehta, CA
Hearing: 23.07.2026Pronounced: 12.10.2026

PER:BRAJESH KUMAR SINGH, A.M.

This appeal is directed against the impugned order dated 17.03.2026 passed in appeal No CIT (Appeal) 2, Agra/10591/2018-19 by the NFAC (hereinafter referred to as the Commissioner of Income Tax), u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2006-07, wherein ld. CIT (A) has dismissed assessee’s appeal.

2.

The assessee is a public limited company and during the year had filed a return of income at nil and had a net loss as profit as per profit & loss account amounting to Rs.7,96,26,000/-. During the year, the AO noted that the assessee had claimed borrowings of money through FDRs and total FDRs were shown at Rs.2,64,34,000/-. Confirmations were called from the a

The order continues below.

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