INCOME TAX OFFICER 5(2)(1), MUMBAI vs. MICRO PLANTAE LIMITED, MUMBAI

Since there was a low tax effect, assessee did not contest this disallowance made in the assessment order. The ld. AO has levied the penalty on the ground that, since assessee has not CO No.123/Mum/2025 Micro Plantea Limited preferred any appeal or contested the disallowance, therefore, penalty should be levied on such adhoc disallowance and that to be made in the order passed u/s.153C when admittedly no incriminating material qua this disallowance found during the course of search. A search action u/s.132 was carried out in the case of Temptation Foods Group on 24/09/2009 and assessee was issued notice 153C.

The ld. CIT (A) has deleted the penalty on facts in the following manner:- 9.9 Now, corning to the facts of the present case, the AO has levied the impugned penalty on the ground that the disallowance was made in the assessment order. As already discussed above, penalty u/s. 271(1)(c) of the Act cannot be levied on this ground alone. For deciding the issue of levy of penalty under the section, the points discussed in para 20(d) above are to be considered. In the instant case, the appellant's contention is that all the facts were disclosed in the return filed and, hence, there was no concealment or furnishing of inaccurate particulars of income, and, accordingly, no penalty can be levied on him u/s.271(1)(c). 9.10 I even find that the assessment being a search assessment the A.O. had jurisdiction to making addition only on the basis of any incriminating material found as a result of search even the assessment order do not reflect any incriminating mater based on which disallowance was made by the Ld. A.O. Thus, in a case where the disallowances itself are not valid, in my view, even the penalty could not be levied of such disallowance. 9.11. Under these circumstances penalty u/s 271(1)(c) cannot be sustained. Therefore, I direct the A.O. to delete penalty levied u/s. 271(1)(c) of the Act of Rs. 16,29,677/-. Accordingly appeal on this ground is ALLOWED.

CO No.123/Mum/2025 Micro Plantea Limited 6. After hearing both the parties and on perusal of the impugned orders and material placed before us, it is seen that here in this case assessment u/s.153A was made as jurisdiction was acquired u/s.153C based on search conducted in case of some other person. Nowhere, in the assessment order it had been stated that there were some incriminating material found to prove that claim of expenses by the assessee are not genuine or not for the purpose of business. First of all, such adhoc disallowance itself was outside the purview of the assessment u/s.153C / 143(3). because it was an unabated assessment year. Secondly, these expenses have been duly shown in the profit and loss account and declared in the return of income and such details and information furnished alongwith return has neither been found to be incorrect or false. Nor explanation of the assessee has been found to be incorrect or false. Nowhere, the ld. AO in the assessment order has stated how these disallowances are justified on the facts and has simply made adhoc disallowance. Accordingly, no penalty can be levied on such adhoc disallowance as firstly, it does not tantamount to furnishing of inaccurate particulars of income and secondly, the addition itself was beyond the scope of assessment u/s.153C. Accordingly, the penalty deleted by the ld. CIT (A) is confirmed and the appeal of the Revenue is dismissed.

Since Cross Objection of the assessee has raised certain other legal grounds which are purely academic in view of the fact that penalty has already been deleted and the same is dismissed as infructuous.