T V ALEYAS ENGINEERS PRIVATE LIMITED,INDIA vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2, MANGALORE, INDIA

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld.CIT(A)-2, Panaji dated 29.12.2025 vide DIN: ITBA/APL/M/250/2025-26/1084154263(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2012-13.

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ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 5 of 15 search u/s 132 of the Act was conducted in the case of M/s. Plama Developers Ltd. on 09.01.2013 and several documents relating to various unaccounted investments and transactions were found and seized. From the documents seized during the search at the premises of M/s. Plama Developers Ltd., several documents relating to transactions with the assessee was also found and seized. It was shown that the assessee was habitual defaulter in filing income tax returns and no IT returns for the relevant AY relating to JV was seen filed. Hence, after recording reasons, the notice u/s 153C of the Act was issued to the assessee on 24.03.2014. In response to notice, the assessee company filed its return of income on 17.03.2015 by declaring a total income of Rs.42,00,610/- after setting off against current business loss of Rs.59,59,595/- and brought forward loss of Rs.10,82,062/-. No self-assessment tax was paid. Subsequently, the assessment was completed u/s 153C r.w.s. 143(3) of the Act on 30.03.2015 disallowing the business loss of Rs.59,59,595/- and brought forward loss and bringing to tax an amount of Rs.1,12,42,267/- being income from house property of Rs.60,59,260/- and income from other sources of Rs.1,12,42,267/-. The AO on or before the completion of the assessment proceedings had also initiated the penalty proceedings u/s 271(1)(c) of the Act separately.

3.1 While passing the penalty order, the AO in paragraph 4 of the order had categorically observed that the assessee had not declared the correct particulars of income for the subject assessment year and if it was not for the search, the same would have remained undisclosed for the subject assessment year. Considering, this aspect which amounts to concealment of income/furnishing inaccurate particulars of income, penalty proceedings u/s 271(1)(c) of the Act was initiated separately vide notice dated 30.03.2015. The AO after considering the reply/objection/details of

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 6 of 15 the assessee as well as based on the material available on record, the AO concluded the penalty proceedings u/s. 271(1)(c) of the Act as under:- • The claims made during the proceedings u/s. 271 about the non existence of concealment of Income and mere additions to income not amounting to concealment is totally unacceptable as the submission / reasons of the assessee are neither on strong footing nor true to facts. • The assessee has been a habitual defaulter in filing the return of income. It was only after the notice u/s. 153C was issued to the assessee that a return of income for AY 2009-10 was filed as late as on 08.09.2014. As reflected in the assessment order, the amount of Rs. 23,77,677/- being wrong claim of business loss amounting to Rs. 15,62,305/- and wrong claim of depreciation amounting to Rs. 8,15,372/- as confirmed by CIT(A) is treated as inaccurate particulars of income furnished by the assessee. • The assessee admitted the income from house property of Rs. 60,59,260/- and interest income of Rs. 1,12,42,267/- only after the initiation of proceedings u/s. 153C of the Act as the assessee failed to declare the same. Hence, the amount of Rs. 1,73,01,527/- (Rs.60,59,260/- + Rs.1,12,42,267/-) was treated as concealment of income which in the natural course has been evaded by the assessee. • The assessee failed to file the original return of income and also did not furnish correct particulars of the Income filed in response to notice u/s. 153C of the Act. • Even during the assessment proceedings, the assessee was resorting to delaying tactics and failed to produce proper books of account, audit reports, confirmation of loans given / received, confirmation of advances / deposits given / received

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 7 of 15 etc. inspite of several reminders and thus, there was not a true and correct disclosure of the income of the assessee.

3.2 Considering the above, the AO held that the assessee company had furnished inaccurate particulars of Income to the extent of Rs. 23,77,677/- being the wrong claim of business loss and concealed income of Rs. 1,73,01,527/-. The assessee has failed to prove that the claim is bonafide and accordingly, the AO held that the penalty is leviable on account of concealed income and furnishing inaccurate particulars of income total amounting to Rs. 1,96,79,204/- (Rs. 23,77,677/- + Rs. 1,73,01,527/-). Further as per the provisions of section 271(1)(c) of the Act, the minimum penalty leviable works out to Rs. 66,88,961/- and the maximum penalty would be Rs. 2,00,66,883/- and considering the facts and circumstances of the case, the AO levied a penalty of Rs. 66,89,000 only.

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 8 of 15 neither disclosed the full particulars of income in the original return nor furnished correct details during the assessment proceedings. The ld. CIT(A) noted that the assessee admitted the income only after the issue of notice u/s. 153C of the Act and such post detection disclosure does not absolve the assessee from the rigors of section 271(1)(C) of the Act. The explanation offered by the assessee has not been substantiated with credible evidence and therefore, fails the test prescribed under explanation 1 to section 271(1)(C) of the Act. In view of the above, the ld. CIT(A), Panaji was satisfied that this is a fit case for levy of penalty u/s. 271(1)(C) of the Act and the AO has correctly levied the penalty after considering the relief granted in quantum proceedings and restricting the penalty only to the income finally confirmed.

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 9 of 15 particulars of income is applicable should be specified at each stage of the penalty proceedings. The ld. AR of the assessee highly relied on the judgments of the Hon’ble jurisdictional High Court of Karnataka in the case of CIT & Anr. v. Manjunatha Cotton & Ginning Factory reported in (Karn-HC) (2013) 359 ITR 565 and in the case of CIT, Bangalore v. SSA’S Emerald Meadows reported in [2016] 73 taxmann.com 241 (Karnataka).

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(i) Initiation of penalty proceedings in the assessment order;

(ii) Providing the assessee an opportunity of being heard as per section 274 of the Act;

(iii) Recording of reasons as to why it is a fit case for the levy of penalty and passing of the order levying penalty.

On perusal of the assessment order, we observed that during the course of the assessment proceedings, the AO had given categorical findings that the assessee was resorting to delaying tactics and failed to produce proper books of account, audit reports, confirmation of loans given / received, confirmation of advances / deposits given / received etc. The assessee provided only some Photostat copies of certain pages of audit report for certain years to claim its points of arguments which in the opinion of the AO were not a true and correct disclosure of the income of the assessee. We also observed that the AO on or before the completion of the assessment proceedings had initiated the penalty proceedings u/s. 271(1)(c) of the Act. Further, section 271(1B) of the Act was inserted to 271 by the Finance Act, 2008 w.r.e.f. 01.04.1989 to provide that an order of assessment / reassessment shall be deemed to constitute satisfaction of the assessing officer for initiation of the penalty proceedings u/s. 271(1)(c) of the Act. Even the Hon’ble Supreme Court in the case of MAK Data (P). Ltd. v. CIT (2013) 38 Taxmann.com 448/358 ITR 593 had held that in terms of section 271(1)(c) of the Act, the assessing officer had to satisfy whether penalty proceedings be initiated or not during the course of assessment proceedings and he is not required, to record his satisfaction in a particular manner or reduce it to writing.

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 11 of 15 9.1 Now coming to the contention of the ld. AR of the assessee that the AO erred in levying the penalty u/s. 271(1)(c) of the Act without specifying the penalty was proposed to be levied for concealment of income or for furnishing of inaccurate particulars of income in the notice u/s. 271 r.w.s. 274 of the Act dated 30.03.2015. Further, it is the submission of the ld. AR of the assessee that the AO passed the order u/s. 271(1)(c) of the Act by invoking both limbs i.e. concealment of income & for furnishing of inaccurate particulars of income, whereas the notice merely used the expression “concealed the particulars of income or furnished inaccurate particulars of such income”. On perusal of the penalty order passed by the AO u/s. 271 (1)(c) of the Act, we observed that the AO categorically held that the assessee company had furnished inaccurate particulars of Income to the extent of Rs. 23,77,677/- being the wrong claim of business loss and concealed income of Rs. 1,73,01,527/-. The assessee has also failed to prove that the claim is bonafide and accordingly, the AO held that the penalty is leviable on account of concealed income and furnishing inaccurate particulars of income total amounting to Rs. 1,96,79,204/- (Rs. 23,77,677/- + Rs. 1,73,01,527/-).

9.2 We also observed that the assessee had been a habitual defaulter in filing its return of income as noted by the AO. It was only after the notice u/s. 153C was issued to the assessee that a return of income for AY 2009-10 was filed as late as on 08.09.2014. As reflected in the assessment order, the total amount of Rs. 23,77,677/- being wrong claim of business loss amounting to Rs. 15,62,305/- and wrong claim of depreciation amounting to Rs. 8,15,372/- as confirmed by CIT(A) was treated as inaccurate particulars of income furnished by the assessee. Further, the assessee admitted the income from house property of Rs. 60,59,260/- and interest income of Rs. 1,12,42,267/- only after the

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 12 of 15 initiation of proceedings u/s. 153C of the Act as the assessee failed to declare the same and hence, the amount of Rs. 1,73,01,527/- (Rs.60,59,260/- + Rs.1,12,42,267/-) was treated as concealment of income which in the natural course has been evaded by the assessee. Also, the assessee failed to file the original return of income and also did not furnish correct particulars of the Income filed in response to notice u/s. 153C of the Act. Thus, we are of the considered opinion that the AO had levied the penalty not only for concealment of particulars of its income but also furnishing inaccurate particulars of such income. Therefore, we find that the penalty notice as well as the penalty order were rightly issued by the AO on both the limbs as mentioned in section 271(1)(c) of the Act and for this reason, we find no breach in the action of the AO. Since the assessee not only concealed the particulars of its income but also furnished inaccurate particulars of such income as categorically observed by the AO, the AO has rightly specified both the limbs not only while issuing the showcause notice u/s. 274 r.w.s. 271 of the Act, but also while passing the penalty order 271(1)(c) of the Act and therefore, the AO has rightly passed the penalty order u/s. 271(1)(c) of the Act by invoking both the limbs. Had the assessee company come under the purview of one limb and the AO would not have specifically mentioned that limb while issuing the showcause notice and passing the penalty order, then it can be said that the AO has violated the principles of natural justice by not specifying the particular limb. In our considered opinion, the judgments of the Hon’ble Karnataka High Court as relied upon by the AR of the assessee is distinguishable on the facts and circumstances of the present case. Coming to the contention of the ld. AR of the assessee that there is violation of principles of natural justice on the ground of absence of opportunity, in our considered opinion, the assessee has to establish that prejudice is caused to the assessee company. We also take a note of the fact

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 13 of 15 that the AO had not only given the assessee an opportunity of being heard but the assessee had infact, given a written reply and was quite aware of the charges which it was required to meet and accordingly, in reply to the SCN dated 30.03.2015, the assessee had categorically stated that “on the facts and circumstances of the case and law applicable, there is no concealment of income or furnishing of inaccurate particulars of the Income and accordingly prayed to drop the penalty proceedings u/s. 271(1)(c) of the Act and oblige.” In our considered opinion, u/s. 274 of the Act, all that was required was that the assessee should be given an opportunity to show cause. No statutory notice was prescribed in this behalf and therefore, we do not find any merits in the argument of the ld. AR of the assessee that the AO had erred in passing the order without specifying the particular limb.

9.3 Now coming to another contention of the ld. AR of the assessee that the AO erred in confirming the penalty despite the fact that the conditions for levying penalty u/s. 271(1)(c) read with explanation 1 are not being satisfied. In our considered opinion where in respect of any facts material to the computation of the total income of any person (a) such person fails to offer an explanation or offers an explanation which is found by the AO to be false or (b) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of its total income have been disclosed by them then, the amount added or disallowed in computing the total income of such person as a result thereof, shall be deemed to represent the income in respect of which particulars have been concealed. Thus in our considered opinion, the assessee has to prove that the explanations are bonafide and that it has disclosed all material facts necessary for assessment. The assessee has to substantiate all

ITA No.512/Bang/2026 T V Aleyas Engineers Private Limited, Bengaluru Page 14 of 15 explanations. Therefore, by this explanation, the burden of proof has been specifically placed on the assessee company which it failed to do so. Therefore, we also do not agree with this contention of the ld. AR of the assessee. Further, the assessee had been a habitual defaulter in filing the return of income as observed by the AO. It was only after the notice u/s. 153C was issued to the assessee that a return of income for AY 2009-10 was filed as late as on 08.09.2014 that too without paying the self assessment tax. A defective memo was issued on 17.03.2015 giving opportunity to the assessee to rectify the defects in its return which was not cured and accordingly, the assessment was completed u/s. 144 of the Act. We agree with the view of the ld. CIT(A) that the assessee admitted the income only after the issue of notice u/s. 153C of the Act and such post detection disclosure does not absolve the assessee from the rigors of section 271(1)(C) of the Act. Further, the explanation offered by the assessee company has not been substantiated with credible evidence and therefore, it fails the test prescribed under explanation 1 to section 271(1)(C) of the Act. In view of the above, we find no merits in the contention of the assessee and accordingly, we held that the AO has rightly levied the minimum penalty of Rs. 66,89,000/- u/s. 271(1)(C) of the Act.

Order pronounced in the open court on 6th Oct, 2026

Sd/- Sd/- (Balakrishnan S.) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 6th Oct, 2026. VG/SPS

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Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order

Asst. Registrar, ITAT, Bangalore. Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.14 17:53:59 +05'30'