SHRI DATTA SHETKARI SAHAKARI SAKHAR KARKHANA LTD,KOLHAPUR vs. DCIT, CIR-1, KOLHAPUR, KOLHAPUR

IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH “B”, PUNE

BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER
AND SHRI VINAY BHAMORE, JUDICIAL MEMBER

Sl.
No.
ITA No.
Name of Appellant
Name of Respondent
Asst.
Year
1-7
2169/PUN/2025
2170/PUN/2025
2171/PUN/2025
2172/PUN/2025
2173/PUN/2025
2174/PUN/2025
2175/PUN/2025
Shri
Datta
Shetkari
Sahakari
Sakhar
Karkhana Ltd.,
Gat No.230-231, At Post
Dattanagar,
Dattanagar,
Shirol- 416120. PAN : AAAAS0597B
DCIT, Circle-1,
Kolhapur.
2007-08
2008-09
2009-10
2010-11
2012-13
2014-15
2013-14

आदेश / ORDER

PER BENCH :

These appeals filed by the assessee are directed against the separate orders dated 31.07.2025 passed u/s 271(1)(c) of the IT Act by Ld. CIT(A)/NFAC for the assessment years 2007-08 to 2010-11
and 2012-13 to 2014-15 respectively.
2. Since identical facts and common issues are involved in all the above captioned seven appeals of the assessee, therefore, we proceed to dispose of the same by this common order.
Assessee by : Shri Pramod S. Shingte
Revenue by : Shri Amit Bobde

Date of hearing
: 11.12.2025
Date of pronouncement : 22.12.2025

ITA Nos.2169 to 2175/PUN/2025

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3. First, we shall take up the appeal of the assessee in ITA
No.2169/PUN/2025 for A.Y. 2007-08 for adjudication as the lead case.

ITA No.2169/PUN/2025, A.Y. 2007-08 :
4. The appellant has raised the following grounds of appeal :-
“1. On the facts and in the circumstances of the case and in law, Ld.
AO erred in initiating penalty proceedings u/s 271(1)(c) by issuing notice u/s 274 r.w.s 271 without specifying the correct limb under which the penalty is initiated, such non specification of the correct limb makes the entire proceedings void ab initio thereby making the consequential proceedings, orders passed, demand notices etc, bad in law, and therefore same shall be quashed.
2. On the facts and in the circumstances of the case and in law, Ld.
AO erred in levying the penalty u/s 271(1)(c) of Rs. 68,32,010/- without appreciating the facts of the case, and the fact that all the material facts regarding the issue of sale of sugar at concessional rate to members, are part of the record before Ld.
AO, and the issue of allowability is highly debatable issue, in view of the same your appellant prays for deletion of entire penalty.
Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of principle of natural justice.”

ITA Nos.2169 to 2175/PUN/2025

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order dated 30.12.2009, the Assessing Officer completed the assessment u/s 143(3) of the IT Act by determining total income at Rs.5,65,72,261/- after making additions on account of disallowance on the ground of excessive and unreasonable cane price paid and disallowance on account of sale of sugar at concessional rate.
Subsequently, the matter travelled upto the Tribunal and the coordinate bench of this Tribunal vide order dated 01.05.2019 in ITA Nos.603 & 604/PUN/2012 set-aside the matter to the file of Assessing Officer to decide the matter afresh in respect of following two issues :-
(i)
Addition/disallowance towards excessive sugarcane price paid to members and non-members.
(ii) Addition on account of sale of sugar at concessional rate to members.

ITA Nos.2169 to 2175/PUN/2025

4
sugarcane price paid to members. However, addition of Rs.2,02,97,115/- was made on account of disallowance towards sale of sugar at concessional rates to members, since the assessee has sold sugar to its members on a price which is less than the cost price of the sugar resulting in loss to the assessee. Accordingly, in view of the Assessing Officer, the discount/concession is being given out of the profits earned by the cooperative society. So the expenses incurred by the society is excessive and unreasonable which is not allowable u/s 40A(2)(a) of the IT Act. Accordingly, the disallowance on account of sale of sugar at concessional rates was worked out at Rs.2,02,97,115/- and added to the income of the assessee and vide order dated 25.09.2021 assessment was completed u/s 143(3) r.w.s. 254 of the IT Act and penalty u/s 271(1)(c) of the IT Act was initiated. Against the above quantum assessment order, the assessee cooperative society preferred an appeal before Ld.
CIT(A)/NFAC which was dismissed by Ld. CIT(A)/NFAC on 29.12.2023. However, till date no second appeal against the order dated 29.12.2023 passed by Ld. CIT(A)/NFAC involving the issue of quantum assessment, has been filed by the assessee cooperative society before the Tribunal.

ITA Nos.2169 to 2175/PUN/2025

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7. Since the appeal against quantum assessment order has been dismissed by Ld. CIT(A)/NFAC, the Assessing Officer vide order dated 26.06.2024 imposed the penalty u/s 271(1)(c) of the IT Act of Rs.68,32,010/- for concealment of income of Rs.2,02,97,115/- on account of sale of sugar at concessional rates to members.
8. Being aggrieved with the above penalty order dated
26.06.2024, the assessee preferred an appeal before Ld.
CIT(A)/NFAC. After considering the submissions of the assessee,
Ld. CIT(A)/NFAC confirmed the penalty order passed by the Assessing Officer and dismissed the appeal filed by the assessee.
9. It is this order against which the assessee is in appeal before this Tribunal.
10. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified.
Ld. AR submitted before us that the assessee has submitted all the relevant details and information during the course of assessment proceedings. And the addition of Rs.2,02,97,115/- was made on the basis of information provided by the assessee only. Therefore, the assessee neither concealed its income nor furnished inaccurate particulars of his income. Apart from above, Ld. AR also submitted that since the issue of addition of Rs.2,02,97,115/- on account of ITA Nos.2169 to 2175/PUN/2025

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sale of sugar at concessional rates to members is debatable one, penalty u/s 271(1)(c) of the IT Act is not attracted. In this regard,
Ld. AR submitted that the issue of addition on account of sale of sugar at concessional rates to members travelled upto Hon’ble
Supreme Court and this itself proves that the issue is a debatable one. In this regard, Ld. AR relied on the following judgements in support of its contentions :-
(i)
CIT vs. Reliance Petroproducts (P.) Ltd., [2010] 322 ITR 158
(SC).
(ii) Price Waterhouse Coopers (P.) Ltd. vs. CIT, 348 ITR
306 (SC).
(iii) CIT vs. Madhusudan Industries Ltd., [2014] 47
CIT vs. S. Kumar Tyres Manufacturing Co. Ltd., [2023]
456 ITR 637 (Madhya Pradesh)
(vi) CIT vs. Nayan Builders & Developers, [2014] 368 ITR
722 (Bombay).
(vii) CIT vs. Gurdaspur Cooperative Sugar Mills (P.) Ltd.,
[2024] 159 taxmann.com 7 (SC) (wherein the SLP filed by the Revenue against the judgement passed by Hon’ble
High Court of Punjab & Haryana was dismissed and it ITA Nos.2169 to 2175/PUN/2025

7
was held that if the issue is a debatable issue, penalty u/s 271(1)(C) of the IT Act was not imposable.)

ITA Nos.2169 to 2175/PUN/2025

8
incurred by the society is excessive and unreasonable which is not allowable u/s 40A(2)(a) of the IT Act. The case of Revenue in this regard was that this is the appropriation of profits and accordingly the Assessing Officer made addition of Rs.2,02,97,115/- on account of disallowance for sale of sugar at concessional rates to members.
Subsequently when the appeal against the quantum assessment order was dismissed by Ld. CIT(A)/NFAC and no further appeal against the order dated 29.12.2023 was filed before the Tribunal, the Assessing Officer on the basis of above addition of Rs.2,02,97,115/- imposed penalty of Rs.68,32,010/- u/s 271(1)(c) of the IT Act.
14. In this regard, we find that in the case of the assessee the Tribunal in first round of appeal in its order dated 01.05.2019 while deciding the appeal of Revenue remanded the matter back to the file of the Assessing Officer to decide the concerned issue afresh observed in para 5 and decided in para 24, 25 and 26 as under :-
“5. It was further pointed out that the second issue was against sale of sugar at concessional rates to Members. It was explained by the learned Authorized Representative for the assessee that every Sahakari
Sakhar Karkhana (in short „S.S.K‟) gives to its Members some quota of sugar at concessional rates. The case of Revenue in this regard was that this is the appropriation of profits. However, the Hon'ble Supreme
Departmental Representative for the Revenue that in certain cases, the matter was decided by the CIT(A) without considering the decision of the Hon'ble Supreme Court in CIT Vs. Krishna Sahakari Sakhar

ITA Nos.2169 to 2175/PUN/2025

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Karkhana Ltd. (supra) and such cases thus, need to go back to the file of Assessing Officer to decide the same. In some cases, the learned
Authorized Representative for the assessee pointed out that instead of monthly concessional sugar, it is given at particular quantity, free of cost, with Government approval, which needs to be allowed.
…………
24. Now, coming to the next issue i.e. sale of sugar at concessional rate to Members. In this bunch of appeals, this is the second issue which is mostly raised and different Counsels appearing before us have pointed out that the said issue has been decided by the Hon'ble ratio. The Assessing Officer is directed to take note of the Government approval in this regard, while deciding the issue.”

ITA Nos.2169 to 2175/PUN/2025

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Ltd. [2013] 35 taxmann.com 395 (P&H) which was also confirmed by Hon’ble Supreme Court in CIT vs. Gurdaspur Cooperative Sugar
Mills (P.) Ltd. [2024] 159 taxmann.com 7 (SC) while dismissing the SLP filed by the Revenue, wherein it was held that penalty u/s 271(1)(c) of the IT Act is not imposable if the issue was debatable.
Ld. AR also relied on the judgement of Hon’ble Gujarat High Court passed in the case of CIT vs. Madhusudhan Industries Ltd., [2014]
47 taxmann.com 241 (Gujarat) wherein it was held that issue of deduction was debatable one on which two opinions were possible, penalty was not required to be imposed. Ld. AR further relied on the judgement of Hon’ble Supreme Court in the cases of CIT vs.
Reliance Petroproducts (P.) Ltd., [2010] 322 ITR 158 (SC) wherein the Civil Appeal filed by the Revenue was dismissed by observing as under :-
“7. As against this, learned Counsel appearing on behalf of the respondent pointed out that the language of section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding the income were submitted in the Return. Section 271(1)(c) is as under :—
"271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person—

ITA Nos.2169 to 2175/PUN/2025

11
(c )has concealed the particulars of his income or furnished inaccurate particulars of such income."
A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned Counsel for revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word
"particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word
"particulars" used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple.
In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan
Bindal [2009] 9 SCC 589, where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India v. Dharamendra
Textile Processors [2008] 13 SCC 369, as also, the decision in Union of India v. Rajasthan Spg. & Wvg. Mills [2009] 13 SCC 448 and reiterated in para 13 that :—
"13. It goes without saying that for applicability of section 271(1)( c), conditions stated therein must exist."
8. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the Return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. Jt. CIT [2007]
6 SCC 329, this Court explained the terms "concealment of income"
and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under section 271(1)(c), mens rea was necessary, as according to the Court, the word

ITA Nos.2169 to 2175/PUN/2025

12
"inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of section 271(1) provided for a discretionary juri iction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N.
Shroff's case
(supra) was upset.
In Dharamendra
Textile
Processors' case (supra), after quoting from section 271 extensively and also considering section 271(1)(c), the Court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff's case (supra) was overruled by this Court in Dharamendra Textile Processors' case (supra), was that according to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N.
Shroff (supra). However, it must be pointed out that in Dharamendra
Textile Processors' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff's case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff's case (supra) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled.
9. We are not concerned in the present case with the mens rea.
However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's
Dictionary, the word "inaccurate" has been defined as :—

ITA Nos.2169 to 2175/PUN/2025

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"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.
10. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income.
It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently;
(ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income.
We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.
11. In this behalf the observations of this Court made in Sree Krishna
Electricals v. State of Tamil Nadu[2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said

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transactions were reflected in the accounts of the assessee. This Court, therefore, observed :
"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside."
The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.
12. The Tribunal, as well as, the Commissioner of Income-tax
(Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the revenue has no merits and is dismissed.”

ITA Nos.2169 to 2175/PUN/2025

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21. Under these circumstances, the appeal is allowed and the order passed by the Calcutta High Court is set aside. No costs.”

ITA Nos.2170 to 2175/PUN/2025,
A.Ys. 2007-08 to 2010-11 & 2012-13 to 2014-15:

16
A.Y. 2007-08 shall apply mutatis mutandis to the remaining appeals of the assessee in ITA Nos.2170 to 2175/PUN/2025 for A.Ys.
2007-08 to 2010-11 & 2012-13 to 2014-15. Accordingly, the remaining appeals of the assessee in ITA Nos.2170 to 2175/PUN/2025 for A.Ys. 2007-08 to 2010-11 & 2012-13 to 2014-15 are partly allowed.
21. To sum up, all the above captioned seven appeals filed by the assessee are partly allowed.
Order pronounced on this 22nd day of December, 2025. (MANISH BORAD)
JUDICIAL MEMBER

पुणे / Pune; ᳰदनांक / Dated : 22nd December, 2025. Sujeet
आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to :
1. अपीलाथᱮ / The Appellant.
2. ᮧ᭜यथᱮ / The Respondent.
3. The Pr.CIT concerned.
4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच,
पुणे / DR, ITAT, “B” Bench, Pune.

////
Senior Private Secretary

आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.