ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE, SHILLONG, SHILLONG vs. MEGHALAYA POWER TRANSMISSION CORPORATION LIMITED, LUMJINGSHAI, SHILLONG

PER BENCH:

This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 11.09.2025 for the AY 2016-17. 2. The only issue raised by the Revenue is against the order of ld. CIT
(A) deleting the penalty of ₹1,00,78,595/- as imposed by the ld. AO for furnishing inaccurate particulars of income in respect of carry forward of losses.
3. The facts in brief are that the assessee filed the return of income on 17.10.2016, declaring total loss of ₹2,98,51,729/-. The assessee is mainly engaged in the activity of power transmission. The ITA No. 308/GTY./2025
Meghalaya Power Transmission Corporation Limited; A.Y. 2016-17

assessment was completed u/s 143(3) vide order dated 11.12.2018, by assessing the loss at ₹2,74,27,701/-. The carry forward loss for A.Y. 2017-18 was ₹43,33,71,531/-. Thereafter, the ld. PCIT revised the assessment by invoking the provisions of Section 263 of the Act for fresh adjudication and in the assessment proceedings the ld. AO observed that the assessee filed the ITR u/s 139(4) of the Act on 07.10.2017, along with tax audit report belatedly and therefore, the business loss claimed by the assessee is not allowable as per the provisions of Section 80IA of the Income-tax Act, 1961 (the Act).
Thereafter, the ld. AO referred to the provisions of Section 72, 73
and 73A of the Act and noted that the assessee was not entitled to carry forward and set off of the business loss of ₹43,33,71,531/- as the same is not as per the provisions of Income Tax Act. Finally, the ld. AO assessed the loss at ₹2,74,27,701/- and also initiated the penalty proceedings u/s 271(1)(c) of the Act. The ld. AO finally imposed penalty vide order dated 29.11.2023, passed u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income to the tune of ₹3,04,83,004/- and imposed the penalty equal to 100% of the tax sought to be evaded i.e. ₹1,00,78,595/-.
4. In the appellate proceedings, the ld. CIT (A) deleted the penalty by observing and holding as under:-
“The penalty order, the grounds of appeal and the submission have been perused.
It is seen that the penalty u/s 271(1)(c) has been imposed for furnishing of inaccurate particulars of two amounts (i) an amount of Rs 6,31,275/- In respect of disallowances made by the AO to the extent sustained in appeals (ii) an amount of Rs.2,98,51,729/- which the AO had held as wrongly claimed loss in the belated Return filed u/s 139(4). I find that the appellant has pressed for the grounds related to the second amount only.
It has been submitted by the appellant as follows:
In this case the assessee, being Meghalaya Power Transmission Corporation limited (MePTCL) is mainly engaged eaming income from power transmission
ITA No. 308/GTY./2025
Meghalaya Power Transmission Corporation Limited; A.Y. 2016-17

bearing PAN number AAICM1936G and had filed its return of income on 17-10-
2016 declaring total income at loss at Rs (-) 29051729/ The sold return was treated as defective u/s 139(9). In view of this, consequently, return was filed again this time u/s 139(4) on 07.10.2017. Assessment in this case was completed vide order u/s 143(3) of the Income tax
Act dated 11/12/2018 at total loss of Rs.(-) 2,74,27,701/- as against the returned loss of Rs.(-)2,98,51,729/- claimed by the assessee in its return of income filed on 07.10.2017. Later, it was seen that the assessee has filed its ITR u/s 139(4) on 07.10.2017 along with tax audit report belatedly and therefore, the business loss claimed by the assessee is not allowable as per the provisions of section 80 of the IT Act. Accordingly, the assessment order dated
11.12.2018 was set aside by PCIT u/s 263 of the IT Act vide DIN & Order No.
ITBA/REV/F/REV5/2020-21/1032110013(1) dated 31.03.2021 and directed the AO to make the assessment of the assessee afresh after examining all the aspects involved in the issue es discussed in his order. The learned assessing officer in its assessment order u/s 144 r.w.s 263 read with section 1448 of the Income-tax Act dated 10.03.2022 and having DIN ITBA/AST/S/144/2021-
22/1041777920(1) in page 2 states that "It may be mentioned that the assesse was allowed to carry forward and set of assessed loss for the year at Rs (-)
43,33,71,534/- which is not correct as per the provisions of the Act."
Here it is worthwhile to it mention that the Loss of Rs 433371531 is a combined brought forward loss as on AY 2016-17 and the same is allowed to be carried forward even if the return of the current year was not filed in time. Hence the findings of the learned AO was not correct in this regard,
During the course of filing of return u/s 139(4), it was adequately mentioned in the return that the return has been filed belatedly. Further, when the return form is filed up, the return filing utility as provided by updates the figures in the fab-named-es: "Schedule CFL". Hence, whatever the provided by the Income
Tax Department automatically amount of loss is mentioned /computed in the Profit and loss account, the same amount is automatically transferred under the head of "Details of losses to be carried forward to future years" under the column of current year losses. There is no option to delete the said amount as the cell is greyed out. A screenshot of the same is attached for your kind reference.
……………………………..
Thus it is evident that there was no malafilde intention of the assessee to claim the carry forward and further set off the loss against any income in future years. As the tax system of the income tax department is robust and technologically advanced, the assessee was also of the bonfire view that while processing the returns of the current year as well as future years, the said loss will not be allowed to be carried forward as the retum was filed u/s 139(4).
There was absolutely no intention of the assessee to claim a loss which was not allowed to it within the parameters of law.
ITA No. 308/GTY./2025
Meghalaya Power Transmission Corporation Limited; A.Y. 2016-17

I find that the appellant's action in claiming the loss of the current year was not intentional. As evidenced from the screenshot provided by the appellant in the submissions above, the appellant did not have a choice to leave that relevant column of "current year loss blank since the system is designed to populate that column by fetching it from the P&L account
The jurisprudence on imposition-of-penalty holds t that while mens rea is not a statutory requirement for penalty, the assessee’s bona fide belief and disclosure can be a valid defense, in CIT v. Reliance Petro products Pvt. Ltd. (2010) 322 ITR 158 (SC) the Hon'ble Supreme Court held that making a claim which is not sustainable in law does not automatically amount to furnishing inaccurate particulars. Further the Court emphasized that mere disallowance of a claim does not justify penalty, unless the claim is found to be false or mala fide. As observed above the claim was not intentional much less malafide. Hence I find no reason to sustain the penalty in respect of the claim of carried forward loss, which is accordingly deleted.
The appeal is allowed.”
5. After hearing the rival contentions and perusing the materials available on record, we find that the penalty was imposed by the ld.
AO u/s 271(1)(c) of the Act for claiming wrong brought forward losses and set off thereof which was not as per the provisions of the Income-tax Act, 1961 (the Act). Therefore the said losses are not allowed to be carry forward and set off against the income of the assessee and constitute filing of inaccurate particulars of income by the assessee. Therefore, the ld. AO has rightly imposed the penalty on the assessee for furnishing in accurate particulars of income as the assessee has claimed the loss which was not allowable to the assessee under the Provisions of the Act. While the ld. CIT (A) deleted the penalty by just holding that the claiming of the losses for the current year was not intentional and stated the same to be for the technical reasons. The ld. CIT (A) thereafter referred to the jurisprudence for imposition of penalty which provides that mens rea is not a statutory requirement for levying penalty, the assessee’s bona fide belief and disclosure can be a valid defense as held in the case of cit vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158
(SC), wherein the Hon'ble Supreme Court has held that making a ITA No. 308/GTY./2025
Meghalaya Power Transmission Corporation Limited; A.Y. 2016-17

claim which is not sustainable in law does not automatically amount to furnishing of inaccurate particulars of income unless the claim is found to be false and malafide. The ld. CIT (A) held that the claim was not intentional much less malafide and therefore, deleted the penalty. In our opinion, the assessee has wrongly claimed the loss which was not allowable, thereby furnishing of inaccurate particulars of items which are certainly not genuine and thus furnished in accurate particulars of income. Therefore, we are not in agreement with the conclusion drawn by the ld. CIT (A) on this issue.
Consequently, we set aside the order of the ld. CIT (A) and restore the order of the ld. Assessing Officer.
6. In the result, the appeal of the Revenue is allowed.
Order pronounced on 13.03.2026. (RAJESH KUMAR)
(DUVVURU RL REDDY)
(ACCOUNTANT MEMBER)
(VICE PRESIDENT)

Guwahati, Dated: 13.03.2026
Sudip Sarkar, Sr.PS
Copy of the Order forwarded to:

BY ORDER,//

Sr. Private Secretary/ Asst.