M/S RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD.,JAIPUR vs. DCIT, CIRCLE-6, JAIPUR, JAIPUR

1
ITA NO.309 & 310/JPR/2025
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES,”A” JAIPUR

Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa a Jh xxu Xkks;y ys[kk lnL; ds le{k
BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA. No.309 & 310/JPR/2025
fu/kZkj.k o"kZ@Assessment Years : 2013-14 & 2014-15

Rajasthan State Industrial Development &
Investment Corporation Ltd.
Tilak Marg, Udyog Bhawan, C-Scheme
Jaipur- 302005 (Raj) cuke
Vs.
The DCIT
Circle-6
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCR 4965 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal, CA jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 29/05/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 06/08/2025

vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M.

Both these appeals have been filed by the assesse against two different orders of the ld. CIT(A) dated 06-01-2025, National Faceless Appeal Centre, Delhi
[ hereinafter referred to as (NFAC) ] for the assessment years 2013-13 & 2014-15
respectively raising therein following grounds of appeal.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

ITA No. 309/JP/2025 – A.Y. 2013-14
‘’1. The ld. CIT(A) has erred on facts and in law in not deciding the legal ground of assessee that the order passed by AO u/s 271(1)(c) is illegal and bad in law.

ITA No. 310/JP/2025 – A.Y. 2014-15
‘’1. The ld. CIT(A) has erred on facts and in law in not deciding the legal ground of assessee that the order passed by AO u/s 271(1)(c) is illegal and bad in law.

Office of :ACIT, Cir-6, JPR

File No. 10

Dated: 31-12-2015

PAN: AABCR 4659J

To M/s. Rajasthan State Industrial Development & Investment Corporation Ltd.

Tilak Marg, Udyog Bhawan

C-Scheme, Jaipur (Raj) 302 005

Sir/ Madam,

‘’Whereas in the course of proceedings before me for the assessment year 2013-
14 it appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income.

You are hereby requested to appear before me on 15-01-2016 at 11AM and show cause why an order imposing a penalty on you should not be made under section 271(1)© of the Income Tax Act, 1961. If no one attends this office on the said date of hearing, the case shall be decided on the basis of the material available on records.

Yours faithfully, 4
ITA NO.309 & 310/JPR/2025
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

SEAL

Office of : ACIT CIT-6,JPR
Date and Time of Attending:
15 AN 16 at 11.00

Particulars
Addition/
Disallowance made by AO
Addition/
Disallowanceremained after CIT(A) order
Addition/
Disallowance remained after
ITAT Order
Contribution to State
Renewal Fund
20,00,000
Nil
Nil
Contribution to construction of Rajasthan
Bhawan
5,00,00,000
5,00,00,000
Nil
Contribution to Center for Development of Stones
(CDOS)
2,00,00,000
Nil
Nil
Prior period expenses
36,73,140
Nil
Nil
CSR expenses
6,41,42,000
6,41,42,000
1,41,42,000
Deduction u/s 80IA
15,33,95,189
Nil
Nil
Disallowance u/s 14A
71,75,575
71,75,575
71,75,575
Service Tax Receivable
1,93,00,000
1,93,00,000
Set aside
Excess provision of IT written back
8,10,90,469
Nil
Set aside
Disallowance of deduction on account of reduction in nature of land under litigation
3,72,56,000
Nil
Set aside
Short credit of TDS
1,44,565
Nil
Nil

Thus after the order of ITAT dt.10.04.2018 (PB 18-83), following disallowance made by the AO stood confirmed:-
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

Disallowance of CSR Expenses

Rs.1,41,42,000/-
Disallowance u/s 14A

Rs. 71,75,575/-

After the order of Hon’ble ITAT, AO again issued notice dt.14.02.2019 (PB 84) to show cause why penalty u/s 271(1)(c) may not be imposed. The assessee filed reply on 30.03.2019 (PB 85-92). However, AO rejected the explanation of the assessee and held that the assessee has concealed income of Rs.2,13,17,575/-
(1,41,42,000 + 71,75,575/-) and thus imposed penalty of Rs.72,45,844/-, being
100% of the amount of tax sought to be evaded.
3.3
In appeal before Ld. CIT(A), assessee filed detailed submission challenging the legality of order passed by AO u/s 271(1)(c) and also on merits. The Ld.
CIT(A), however, without deciding the legal ground of assessee, confirmed the levy of penalty by applying Explanation 1 to section 271(1)(c) by holding that the amount of Rs.2,13,17,575/- added or disallowed by the AO which has reached finality in computing the total income of the assessee shall, for the purpose of clause (c) of this sub-section (1) of section 271 be deemed to represent the income in respect of which particulars have been concealed. The relevant observation of the ld. CIT(A) at para 7.6 is reproduced as under:-
‘’7.6 In view of the discussion above and binding precedents, I am of the view that the issue involved in the appellant's case is attracting penalty u/s 271(1)(c)/Explanation of the Act. Under the facts and the circumstances of the case, the AO is justified in levying penalty u/s 271(1) (c) of the Act as the appellant had furnished inaccurate particulars of income and the appellant has offered an explanation which he has failed to prove to be bona fide and he has RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR failed to prove that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Therefore, the amounts of Rs. 2,13,17,575/- added or disallowed by the AO which has reached finality in computing the total income of the assessee shall, for the purpose of clause (c) of this subsection (1) of section 271, be deemed to represent the income in respect of which particulars have been concealed. Thus, I confirm the penalty levied by the AO of Rs. 72,45,844/- u/s: 27:1(1)(c) of the Act, being 100% of the tax sought to be evaded.’’

CIT Vs. SSA’S Emerald Meadows (2016) 242 Taxman 180 (SC)(Case laws compilation index PB 8)
Where Tribunal relying on decision of Division Bench of Karnataka High Court rendered in case of CIT Vs. Manjunatha Cotton & Grinning Factory 359 ITR 565, allowed appeal of assessee holding that notice issued by AO u/s 274 r.w.s. 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether concealment of particulars of income or furnishing of inaccurate particulars of income and High Court on appeal held that matter was covered by aforesaid decision of Division Bench and therefore there was no substantial question of law arising for determination, there was no merit in SLP filed by revenue and same was liable to be dismissed.

PCIT Vs. Blackroak Securities (P.) Ltd. (2024) 297 Taxman 69 (Delhi) (HC)(Case laws compilation index PB 9-13)
Where AO initiated penalty proceedings u/s 271(1)(c) without specifying as to whether penalty was being levied on account of concealment of income or for reason that assessee had furnished inaccurate particulars, impugned penalty order had rightly been set aside by Tribunal.

PCIT Vs. Shyam Sunder Jindal (2024) 462 ITR 501 (Delhi) (HC)(Case laws compilation index PB 14-15)
Where penalty notice issued against assessee was not adverted to any specific limb of section 271(1)(c), thus, Assessing Officer was not clear whether he intended to levy a penalty on assessee for concealment of particulars of his income or furnishing inaccurate particulars, Tribunal was justified in quashing penalty proceedings u/s 271(1)(c) initiated against assessee.

271(1)(c) and penalty cannot be imposed for one breach when satisfaction has been recorded for the other breach in the assessment order. Reliance in this connection is placed on the following cases:-

Ventura Textiles Ltd. Vs. CIT (2020) 190 DTR 165 (Bom.) (HC) (Case laws compilation index PB 16-18)
The AO cannot initiate penalty on the charge of 'concealment of particulars of income', but ultimately find the assessee guilty in the penalty order of 'furnishing inaccurate particulars of income' (and vice versa). In the same manner, he cannot be uncertain in the penalty order as to concealment or furnishing of inaccurate particulars of income by using slash between the two expressions. Such error is not procedural but goes to the root of the matter and is not saved by s. 292B. The error renders the penalty order unsustainable in law.
The relevant finding at Para 6 of the order reads as under:-

“6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton &
Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach.
This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.”

In view of above, penalty levied is illegal and bad in law.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

“275. (1) No order imposing a penalty under this Chapter shall be passed—
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later:

Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later;

From the plain reading of the section it is evident that no penalty order can be passed after the six months from the end of the month in which the order of the CIT(A) or appellate tribunal is received by the commissioner, whichever periods expires later or after the expiry of the FY in which the proceedings for imposition of penalty has been initiated are completed or after one year from the end of the FY in which the order of CIT(A) is received by the commissioner whichever is later. In the present case, the order of the CIT(A) is dt.20.03.2017 and therefore the period of one year from the end of FY 16-17 expire on 31.03.2018. Further the order of Hon’ble ITAT dt.10.04.2018and therefore the period of 6
months expire on 31.10.2018. It may be further noted that once the Hon’ble ITAT passes the order the limitation period has to be determined with reference to section 275(1)(a) and not with the reference to the proviso to section 275(1)(a). Hence the penalty order should have been passed before 31.10.2018 and therefore the penalty order dt.31.03.2019 passed by AO is clearly barred by limitation.

(a) Penalty on disallowance of CSR expenses of Rs.1,41,42,000/-

(i)
The assessee claimed deduction for CSR expenses amounting to Rs.641.42 lakhs u/s 37(1), details of which is as under:-
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

DainikBhaskar Corporation Limited

Rs. 10,00,000/-
Rajasthan Skill Development Livelihood

Rs.5,00,00,000/-
Development Corporation
Apparel Training Design Centre (Churu)

Rs.1,31,42,000/-
Total

Rs.6,41,42,000/-

The Hon’ble ITAT sustained the disallowance of Rs.1,41,42,000/- on account of contribution to Apparel Training & Development Centre and DainikBhaskar
Corporation Limited holding that the assessee could not establish any nexus between the expenditure and the business activity of the assessee.

(ii)
The penalty imposed on CSR expenses is illegal as no satisfaction has been recorded for the same in the assessment order. The satisfaction recorded by the AO at Para 11 of the assessment order reads as under:-

“11. I am satisfied that the assessee has furnished inaccurate particulars of income thereby concealed its taxable income with respect to the above additions made to the total income of the assessee from para no. (3) to (10) of the order above on account of claim of expenditure for State Renewal Fund, prior period expenditure, contribution to CDOS, incorrect claim of deduction u/s 80IA &
disallowance u/s 14A. Penalty proceedings u/s 271(1)(c) of the I.T. Act have been initiated separately.”

From the above it is clear that AO has not recorded any satisfaction for initiation of penalty proceedings in respect of disallowance of CSR expenses. Therefore penalty imposed on disallowance of CSR expenses is uncalled for. Reliance in this connection is placed on the following cases:-
The Hon’ble High Court at Para 9 of the order held as under:-

“9. In our opinion, the legal position is well-settled in view of the Supreme Court decisions in S.V. AngidiChettiar’s case (supra) and D.M. Manasvi’s case (supra), that power to impose penalty under section 271 of the Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. It is true that mere absence of the words
‘I am satisfied’ may not be fatal but such a satisfaction must be spelt out from the order of the Assessing Authority as to the concealment of income or deliberately furnishing inaccurate particulars. In the absence of a clear finding as to the concealment of income or deliberately furnishing inaccurate particulars, the initiation of penalty proceedings will be without juri iction. In our opinion, the RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR law is correctly laid down in Ram Commercial Enterprises Ltd.’s case (supra) and we are in respectful agreement with the same. The reference is answered accordingly.”
(Del.) (Trib.)(Case laws compilation index PB 19-27)
Penalty u/s 271(1)(c) having been initiated by AO specifically in respect of certain additions to the exclusion of other additions, penalty imposed by AO in respect of additions so excluded could not be sustained.

(iii) Even on merit there is no dispute on the genuineness of the expenditure incurred.
The entire expenditure is duly evidenced, accounted for and audited by the statutory auditor of the company. The expenditure for which disallowance is confirmed by the Hon’ble ITAT is for the purpose of business as explained by the assessee in course of assessment proceedings and also before ITAT as per Para
3.3 to 3.9, Pg -13 of the ITAT order (PB24-28). However the Hon’ble ITAT by following its decision in AY 2012-13 has confirmed the same. It may be pointed out that in AY 2012-13 the AO has not initiated any penalty proceedings on the disallowance made out of CSR expenditure and no penalty was imposed on the same. Hence the penalty imposed on the same facts in the year under consideration is unjustified and uncalled for.

(iv) Otherwise also it is not a case of furnishing inaccurate particulars of income or concealing income. The assessee has a strong and bonafide belief that the expenditure is incurred for the purpose of the business and therefore deductible u/s 37(1). The disallowances made by the AO in the assessment order is solely on account of different view taken on the same set of facts and therefore, it could, at the most, be termed as difference of opinion but it has nothing to do with the furnishing of inaccurate particulars of income or concealing the income. Mere disallowance of claim in the assessment proceedings could not be the sole basis for levying penalty u/s 271(1)(c) of the Act. It is a settled law that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income or concealment of income. Reliance in this connection is placed on the following cases:-

CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) (Case laws compilation index PB 28-36)
“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.
…
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 s. 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 the RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the Legislature. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed.”
SLP dismissed against High Court ruling that where assessee had furnished certain details regarding expenditure as well as income in return which were not found inaccurate nor could be viewed as concealment of income on part of assessee, merely because said claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty u/s 271(1)(c).
Merely because assessee preferred a claim which was not acceptable to revenue, assessee could not be visited with proceedings u/s 271(1)(c) unless twin requirements u/s 271(1)(c) were satisfied.
Where assessee furnished all particulars related to its claim of expenditure towards professional fees and interest paid on borrowed capital and none of evidences filed by assessee were incorrect, merely because issue was decided against assessee by instant court by confirming disallowance of these expenses, it could not result into levy of penalty u/s 271(1)(c) for furnishing inaccurate particulars.

M/s Ajmer VidyutVitran Nigam Ltd.Vs. ACIT ITA No.936/JP/17 order dated 09.01.2020 (Jaipur) (Trib.)
Once the assessee has produced and disclosed all the relevant facts, then mere disallowance of claim by the AO on the ground that the same is not allowable as per provisions of the Income Tax would not lead to conclusion that the assessee has furnished the inaccurate particulars of income or concealed the particulars of income.

(b) Penalty on disallowance u/s 14A of Rs.71,75,575/-

(i)
The AO observed that the assessee has earned dividend income of Rs.2,32,25,630/- from shares. The assessee explained that the shares have been held as stock in trade and therefore no disallowance u/s 14A can be made. The AO, however, rejected the explanation of the assessee and made disallowance of Rs.71,75,575/- u/s 14A r.w.r. 8D(2). The same was sustained by CIT(A) and ITAT holding that section 14A would apply whether shares are held as investment or as stock in trade.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

(ii)
The CIT(A)/ITAT confirmed the disallowance on the ground that section 14A will also apply on the shares held as stock in trade. Thus simply because disallowance is confirmed in appeal does not mean that the assesse has concealed the particulars of income. All the facts relating to the investment in shares and exempt income earned therefrom are duly shown in the financial statement which was not found incorrect. The disallowanceso made was solely on account of different views taken on the same set of facts and therefore, they could, at the most, be termed as difference of opinion but it has nothing to do with the furnishing of inaccurate particulars of such income or concealing income. Mere disallowance of claim in the assessment proceedings could not be the sole basis for levying penalty u/s 271(1)(c) of the Act. It is a settled law that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income or concealment of income. Reliance in this connection is placed on the case laws referred above. Further reliance is placed on the decision of Hon’ble
420(Case laws compilation index PB 38-39)where SLP was dismissed against order of High Court where High Court upheld the decision of Tribunal deleting penalty u/s 271(1)(c) in respect of disallowance made u/s 14A because there was no evidence of furnishing inaccurate particulars of income.

In view of above, penalty confirmed by Ld. CIT(A) is uncalled for and be deleted.

To support the above mentioned written submission, the ld. AR of the assessee has filed following paper book.
S.N.
Particulars
Page No.
Filed before
AO/CIT(A)
1. Copy of submission filed before ld CIT(A)
1-15
CIT(A)
2. Copy of Index of paper book filed before ld. CIT(A)
16
CIT(A)
3. Copy of penalty notice u/s 274 r.w.s. 271(1)© dated
31-12-2015
17
Both
4. Copy of ITAT order dated 10-04-2018 in assessee’s own case for A.Y. 2013-14 & 2014-15
18-83
Both
5. Copy of penalty notice ated 14-02-2019
84
Both
6. Copy of assessee’s reply dated 30-03-2019 in response to above notice
85-92
Both

Besides above, the ld. AR of the assessee has filed list of following case laws:-

Rajasthan State Industrial Development & Investment Corporation Ltd.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

AY 2013-14& 2014-15
ITA No.309& 310/JPR/2025
Fixed on 28.05.2025 at A Bench

Case laws compilation index

S. No.
Particulars
Pg No.
1. Copy of decision of Hon’ble Bombay High Court in case of Mohd.
Farhan A. Shaikh Vs. DCIT &Anr. (2021) 200 DTR 65/ 434 ITR 1
(FB)
1-6
2. Copy of decision of Hon’ble Supreme Court in case of PCIT Vs.
Unitech Reliable Projects (P.) Ltd. (2024) 300 Taxman 585
7
3. Copy of decision of Hon’ble Supreme Court in case of CIT Vs.
SSA’S Emerald Meadows (2016) 242 Taxman 180
8
4. Copy of decision of Hon’ble Delhi High Court in case of PCIT Vs.
Blackroak Securities (P.) Ltd. (2024) 297 Taxman 69
9-13
5. Copy of decision of Hon’ble Delhi High Court in case of PCIT Vs.
Shyam Sunder Jindal (2024) 462 ITR 501
14-15
6. Copy of decision of Hon’ble Bombay High Court in case of Ventura
16-18
7. Copy of decision of Hon’ble ITAT Delhi Bench in case of Hindustan
19-27
8. Copy of decision of Hon’ble Supreme Court in case of CIT Vs.
Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158
28-36
9. Copy of decision of Hon’ble Supreme Court in case of CIT Vs. U.P.
State Bridge Corporation Ltd. (2018) 258 Taxman 63
37
10. Copy of decision of Hon’ble Supreme Court in case of PCIT Vs.
Gruh Finance Ltd. (2018) 259 Taxman 420
38-39

Office of :ACIT, Cir-6, JPR

File No. 236

Dated: 07-10-2016

PAN: AABCR 4659J

To M/s. Rajasthan State Industrial Development & Investment Corporation Ltd.

Tilak Marg, Udyog Bhawan

C-Scheme, Jaipur (Raj) 302 005

Sir/ Madam,

‘’Whereas in the course of proceedings before me for the assessment year 2014-
15 it appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income.

You are hereby requested to appear before me on 28-10-2016 at 11.30 AM and show cause why an order imposing a penalty on you should not be made under section 271(1)© of the Income Tax Act, 1961. If no one attends this office on the said date of hearing, the case shall be decided on the basis of the material available on records.

Yours faithfully, SEAL

Office of : ACIT CIT-6,JPR
Date and Time of Attending:
28 OCT 16 at 11.30

Particulars
Addition/
Disallowance made by AO
Addition/
Disallowanceremained after CIT(A) order
Addition/
Disallowance remained after
ITAT Order
Contribution to Center for Development of Stones
(CDOS)
2,00,00,000
Nil
Nil
Prior period expenses
36,44,553
Nil
Nil
CSR expenses
40,42,000
40,42,000
40,42,000
Deduction u/s 80IA
10,70,76,173
Nil
Nil
Disallowance u/s 14A
37,19,337
37,19,337
37,19,337
Service Tax Receivable
1,64,16,000
1,64,16,000
Nil
Short credit of TDS
15,65,426
Nil
Nil

Thus after the order of ITAT dt.10.04.2018 (PB 25-94), following disallowance made by the AO stood confirmed:-

Disallowance of CSR Expenses

Rs.40,42,000/-
Disallowance u/s 14A

Rs.37,19,337/-

After the order of Hon’ble ITAT, AO again issued notice dt.14.03.2019 (PB 17) to show cause why penalty u/s 271(1)(c) may not be imposed. The assessee filed reply on 19.03.2019 (PB 18-24). However, AO rejected the explanation of the assessee and held that the assessee has concealed income of Rs77,61,337/-
(40,42,000 + 37,19,337/-) and thus imposed penalty of Rs.26,38,078/-, being 100%
of the amount of tax sought to be evaded.
5.3
In appeal before Ld. CIT(A), assessee filed detailed submission challenging the legality of order passed by AO u/s 271(1)(c) and also on merits. The Ld.
CIT(A), however, without deciding the legal ground of assessee,confirmed the levy
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR of penalty by applying Explanation 1 to section 271(1)(c) by holding that the amount of Rs.77,61,337/- added or disallowed by the AO which has reached finality in computing the total income of the assessee shall, for the purpose of clause (c) of this sub-section (1) of section 271 be deemed to represent the income in respect of which particulars have been concealed. The observations as made by the ld. CIT(A) at para 7.6 of his order is reproduced as under:-
‘’7.6 In view of the discussion above and binding precedents, I am of the view that the issue involved in the appellant's case is attracting penalty u/s 271(1)(c)/ Explanation 1 of the Act. Under the facts and the circumstances of the case, the AO is justified in levying penalty u/s 271(1) (c) of the Act as the appellant had furnished inaccurate particulars of income and the appellant has offered an explanation which he has failed to prove to be bona fide and he has failed to prove that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Therefore, the amounts of Rs. 77,61,337/-added or disallowed by the AO which has reached finality in computing the total income of the assessee shall, for the purpose of clause (c) of this subsection (1) of section 271, be deemed to represent the income in respect of which particulars have been concealed. Thus, 1 confirm the penalty levied by the AO of Rs. 26.38,078/-u/s: 271(1)(c)of the Act, being 100% of the tax sought to be evaded.’’

CIT Vs. SSA’S Emerald Meadows (2016) 242 Taxman 180 (SC)(Case laws compilation index PB 8)
Where Tribunal relying on decision of Division Bench of Karnataka High Court rendered in case of CIT Vs. Manjunatha Cotton & Grinning Factory 359 ITR 565, allowed appeal of assessee holding that notice issued by AO u/s 274 r.w.s. 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether concealment of particulars of income or furnishing of inaccurate particulars of income and High Court on appeal held that matter was covered by aforesaid decision of Division Bench and therefore there was no substantial question of law arising for RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR determination, there was no merit in SLP filed by revenue and same was liable to be dismissed.

PCIT Vs. Blackroak Securities (P.) Ltd. (2024) 297 Taxman 69 (Delhi) (HC)(Case laws compilation index PB 9-13)
Where AO initiated penalty proceedings u/s 271(1)(c) without specifying as to whether penalty was being levied on account of concealment of income or for reason that assessee had furnished inaccurate particulars, impugned penalty order had rightly been set aside by Tribunal.

PCIT Vs. Shyam Sunder Jindal (2024) 462 ITR 501 (Delhi) (HC)(Case laws compilation index PB 14-15)
Where penalty notice issued against assessee was not adverted to any specific limb of section 271(1)(c), thus, Assessing Officer was not clear whether he intended to levy a penalty on assessee for concealment of particulars of his income or furnishing inaccurate particulars, Tribunal was justified in quashing penalty proceedings u/s 271(1)(c) initiated against assessee.

Ventura Textiles Ltd. Vs. CIT (2020) 190 DTR 165 (Bom.) (HC) (Case laws compilation index PB 16-18)
The AO cannot initiate penalty on the charge of 'concealment of particulars of income', but ultimately find the assessee guilty in the penalty order of 'furnishing inaccurate particulars of income' (and vice versa). In the same manner, he cannot be uncertain in the penalty order as to concealment or furnishing of inaccurate particulars of income by using slash between the RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR two expressions. Such error is not procedural but goes to the root of the matter and is not saved by s. 292B. The error renders the penalty order unsustainable in law.
The relevant finding at Para 6 of the order reads as under:-

“6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton &
Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach.
This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.”

In view of above, penalty levied is illegal and bad in law.

“275. (1) No order imposing a penalty under this Chapter shall be passed—
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later:
Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later;

From the plain reading of the section it is evident that no penalty order can be passed after the six months from the end of the month in which the order of the CIT(A) or appellate
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR tribunal is received by the commissioner, whichever periods expires later or after the expiry of the FY in which the proceedings for imposition of penalty has been initiated are completed or after one year from the end of the FY in which the order of CIT(A) is received by the commissioner whichever is later. In the present case, the order of the CIT(A) is dt.20.03.2017 and therefore the period of one year from the end of FY 16-17 expire on 31.03.2018. Further the order of Hon’ble ITAT dt.10.04.2018 and therefore the period of 6
months expire on 31.10.2018. It may be further noted that once the Hon’ble ITAT passes the order the limitation period has to be determined with reference to section 275(1)(a) and not with the reference to the proviso to section 275(1)(a). Hence the penalty order should have been passed before 31.10.2018 and therefore the penalty order dt.29.03.2019 passed by AO is clearly barred by limitation.

(a) Penalty on disallowance of CSR expenses of Rs.40,42,000/-

(i)
The assessee claimed deduction for CSR expenses amounting to Rs.40,42,000/- u/s 37(1) of the Act. Out of this CSR expenditure of Rs.29.60 lakhs was incurred by providing assistance to Apparel Training & Development Centre (ATDC) for the training provided by it at 6 Smart Centres at Jaipur, Bhilwara, Chittorgarh,
Jodhpur& Hanumangarh in the field of textile. It also provided assistance of Rs.3,06,000/- to Anurag SangeetSanstha engaged in giving musical training to blind student, of Rs.3,54,000/- to Muskan Foundation for road safety and social issues and Rs.4,01,500/- for equipment to the Animal Husbandry Department as a good corporate citizen which enhances the image of the assessee in the society.
The same was disallowed by the AO by holding that the same is not expended wholly and exclusively for the purpose of business. Ld. CIT(A) and Hon’ble
ITAT confirmed the disallowance.

(ii)
There is no dispute on the genuineness of the expenditure incurred. The entire expenditure was duly evidenced and accounted for and was audited by the statutory auditor of the company. The Hon’ble ITAT at Para 13.1 at Page 67 of the order (PB 91) held that these expenditure are not allowable u/s 37(1) of the Act in absence of any nexus between the expenditure and the objects and business activity of the assessee. The said finding is based on the decision of Hon’ble ITAT for AY 2013-14 as per Para 3.11 to 3.13 of the ITAT order (PB 38-43). For AY
2013-14 the Hon’ble ITAT confirmed the above disallowance by following its decision in AY 2012-13. It may be pointed out that in AY 2012-13 the AO has not initiated any penalty proceedings on the disallowance made towards CSR expenditure and no penalty was imposed on the same. Hence the penalty imposed on the same facts in the year under consideration is unjustified and uncalled for.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

(iii) Otherwise also it is not a case of furnishing inaccurate particulars of income or concealing income. The assessee has a strong and bonafide belief that the expenditure is incurred for the purpose of the business and therefore deductible u/s 37(1). The disallowances made by the AO in the assessment order is solely on account of different view taken on the same set of facts and therefore, it could, at the most, be termed as difference of opinion but it has nothing to do with the furnishing of inaccurate particulars of income or concealing the income. Mere disallowance of claim in the assessment proceedings could not be the sole basis for levying penalty u/s 271(1)(c) of the Act. It is a settled law that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income or concealment of income. Reliance in this connection is placed on the following cases:-

CIT Vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) (Case laws compilation index PB 28-36)
“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.
…
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 s. 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 the AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the Legislature. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the Revenue has no merits and is dismissed.”
SLP dismissed against High Court ruling that where assessee had furnished certain details regarding expenditure as well as income in return which were not found inaccurate nor could be viewed as concealment of income on part of assessee, merely because said claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty u/s 271(1)(c).
Merely because assessee preferred a claim which was not acceptable to revenue, assessee could not be visited with proceedings u/s 271(1)(c) unless twin requirements u/s 271(1)(c) were satisfied.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

Where assessee furnished all particulars related to its claim of expenditure towards professional fees and interest paid on borrowed capital and none of evidences filed by assessee were incorrect, merely because issue was decided against assessee by instant court by confirming disallowance of these expenses, it could not result into levy of penalty u/s 271(1)(c) for furnishing inaccurate particulars.

M/s Ajmer VidyutVitran Nigam Ltd.Vs. ACIT ITA No.936/JP/17 order dated 09.01.2020 (Jaipur) (Trib.
Once the assessee has produced and disclosed all the relevant facts, then mere disallowance of claim by the AO on the ground that the same is not allowable as per provisions of the Income Tax would not lead to conclusion that the assessee has furnished the inaccurate particulars of income or concealed the particulars of income.

(b) Penalty on disallowance u/s 14A of Rs.71,75,575/-

(i)
The AO observed that the assessee has earned dividend income of Rs.2,91,24,341/- from shares. The assessee explained that the shares have been held as stock in trade and therefore no disallowance u/s 14A can be made. The AO, however, rejected the explanation of the assessee and made disallowance of Rs.37,19,337/- u/s 14A r.w.r. 8D(2). The same was sustained by CIT(A) and ITAT holding that section 14A would apply whether shares are held as investment or as stock in trade.
(ii)
The CIT(A)/ITAT confirmed the disallowance on the ground that section 14A will also apply on the shares held as stock in trade. Thus simply because disallowance is confirmed in appeal does not mean that the assesse has concealed the particulars of income. All the facts relating to the investment in shares and exempt income earned therefrom are duly shown in the financial statement which was not found incorrect. The disallowanceso made was solely on account of different views taken on the same set of facts and therefore, they could, at the most, be termed as difference of opinion but it has nothing to do with the furnishing of inaccurate particulars of such income or concealing income. Mere disallowance of claim in the assessment proceedings could not be the sole basis for levying penalty u/s 271(1)(c) of the Act. It is a settled law that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income or concealment of income. Reliance in this connection is placed on the case laws referred above. Further reliance is placed on the decision of Hon’ble Supreme Court in case ofPCIT Vs. Gruh Finance Ltd. (2018) 259 Taxman
420(Case laws compilation index PB 38-39)where SLP was dismissed against order of High Court where High Court upheld the decision of Tribunal deleting penalty u/s 271(1)(c) in respect of disallowance made u/s 14A because there was no evidence of furnishing inaccurate particulars of income.

In view of above, penalty confirmed by Ld. CIT(A) is uncalled for and be deleted.’’
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

To support the above mentioned written submission, the ld. AR of the assessee has filed following paper book.
S.N.
Particulars
Page No.
Filed before
AO/CIT(A)
1. Copy of submission filed before ld CIT(A)
1-14
CIT(A)
2. Copy of Index of paper book filed before ld. CIT(A)
15
CIT(A)
3. Copy of penalty notice u/s 274 r.w.s. 271(1)© dated
07-10-2016
16
Both
4. Copy of penalty notice ated 14-03-2019
17
Both
5. Copy of assessee’s reply dated 19-03-2019 in response to above notice
18-24
Both
6. Copy of ITAT order dated 10-04-2018 in assessee’s own case for A.Y. 2013-14 & 2014-15
25-94
Both

‘’This submission is filed respectfully on behalf of the Revenue, opposing the assessee’s appeal in penalty proceedings under Section 271(1)(c) of the Income
Tax Act, 1961. The Assessing Officer has rightly levied, and the Ld. CIT(A) has correctly upheld, the penalty in view of the following legal and factual positions:
1. Assessee’s Explanation is Unsubstantiated and Not Bona Fide
The explanation offered by the assessee for claiming deductions of CSR expenditure and for not making disallowance under Section 14A is self-serving and unsupported by any evidence. Both the Assessing Officer and the Ld.
CIT(A) have:
 Evaluated the factual matrix and held the explanation to be neither bona fide nor substantiated;
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

 Found that the assessee failed to make a fair and full disclosure of material particulars at the time of filing the return;
 Rightly invoked Explanation 1 to Section 271(1)(c).
The assessee continues to merely reiterate the same untenable claims before this Hon’ble Tribunal, without placing any new material on record.
2. Scrutiny Selection Revealed Concealment – Claim Would Have Gone
Undetected Otherwise
It is important to emphasize that the inadmissible claims made by the assessee would have remained unnoticed had the case not been selected for scrutiny.
This reflects an intended concealment of income and misreporting of facts to unduly reduce tax liability.
The Supreme Court in Mak Data Pvt. Ltd. v. CIT [(2013) 358 ITR 593 (SC)]
held that:
“Voluntary disclosure does not release the assessee from the mischief of penalty proceedings... such surrender after detection is not a defence.”
This applies squarely here — where detection occurred only due to scrutiny, not voluntary compliance.
3. Disallowance of CSR Expenditure – Clear Misinterpretation of Settled Law
The assessee claimed deduction for CSR expenses, despite the statutory bar under Explanation 2 to Section 37(1) inserted by the Finance Act, 2014. CSR expenditure is treated as application of income, not incurred for business, and is expressly non-deductible.
Despite audited books, the assessee made this claim, ignoring the settled legal position and guidance under:
 National Small Industries Corporation Ltd. v. CIT [2021] 124
taxmann.com 72 (Del Trib.)
 Bharat Aluminium Co. Ltd. v. ACIT [2021] 125 taxmann.com 199 (Del
Trib.)
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

These cases held that claiming CSR deduction in violation of the statute justifies penalty under Section 271(1)(c), particularly when no supporting justification exists.
4. Section 14A Disallowance – No Disallowance Made Despite Earning
Exempt Income
The assessee earned exempt income and had substantial investments, yet failed to make any suo motu disallowance under Section 14A.This is contrary to:
 PCIT v. Caraf Builders & Constructions (P.) Ltd. [2019] 414 ITR 122
(Del HC)
 CIT v. State Bank of Patiala [2018] 99 taxmann.com 286 (SC)
 DCIT v. B.T. Patil & Sons Belgaum (P.) Ltd. [2018] 94 taxmann.com 434
(Mumbai Trib.)
These rulings affirm that disallowance under Section 14A is mandatory, and failure to do so constitutes furnishing inaccurate particulars, attracting penalty.
CBDT Circular No. 5/2014 dated 11.02.2014
Ratio:
Clarifies that Section 14A disallowance is mandatory where exempt income is earned, even if no expenditure is claimed by the assessee.
5. Explanation 1 to Section 271(1)(c) Squarely Applies
Under Explanation 1 to Section 271(1)(c), if the assessee:
 Fails to offer an explanation, or  Offers one which is found to be false, or  Fails to substantiate the explanation with evidence, then the amount added or disallowed is deemed to represent income for which particulars have been concealed.
The assessee has not demonstrated reasonable cause or bona fide conduct, and thus the presumption under Explanation 1 applies with full force.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

B. Cases Supporting Disallowance under Section 14A
PCIT v. Caraf Builders & Constructions (P.)Ltd.
Citation:
[2019]
414
ITR
122
(Delhi
HC)
Held:Even if no disallowance was made by the assessee, disallowance under Section 14A is mandatory where exempt income exists.
Backs Revenue’s stand on 14A.
CIT v. State Bank of Patiala
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

Citation:
[2018]
99
taxmann.com
286
(SC)
Held: If assessee earns exempt income, some disallowance under Section 14A is warranted, even if the investment was for business or strategic purpose.
Supreme Court endorsement of 14A applicability.
DCIT v. B.T. Patil & Sons Belgaum (P.)Ltd.
Citation:
[2018]
94
taxmann.com
434
(Mumbai
-
Trib.)
Held: Non suo-motu disallowance u/s 14A when exempt income is earned constitutes furnishing of inaccurate particulars, inviting penalty under Section 271(1)(c).
C. More Penalty-Supporting Precedents
Reliance PetroproductsPvt. Ltd. v. CIT
Citation:
(2010)
322
ITR
158
(SC)
Note:This case is often cited by assessees for relief, but limited to cases where the claim was legally debatable and all facts were disclosed.
Distinguishable in your case as the claim (CSR and 14A) is barred by statute and not disclosed fully.
The assessee’s conduct is squarely covered by judicial precedents where penalty under Section 271(1)(c) has been upheld for claiming CSR expenditure ( National
Small Industries Corp. Ltd., Bharat Aluminium Co. Ltd.) and for failure to make
14A disallowance despite earning exempt income ( Caraf Builders, State Bank of Patiala). These precedents clearly establish that such claims are not innocent errors but represent inaccurate particulars and concealment.
Each of these cases supports penalty where the assessee fails to disclose true particulars or claims inadmissible deductions despite knowledge of the law.
RAJASTHAN STATE INDUSTRIAL DEVELOPMENT & INVESTMENT CORPORATION LTD VS DCIT, CIRCLE-6, JAIPUR

PRAYER
In view of the above, it is most respectfully prayed that this Hon’ble Tribunal may kindly:
1. Reject the explanation filed by the assessee as false, unsubstantiated, and lacking bona fides;
2. Uphold the penalty levied under Section 271(1)(c) and confirmed by the CIT(A);
3. Hold that this is a clear case of concealment of income and furnishing of inaccurate particulars, not a mere legal dispute;
4. Dismiss the assessee’s appeal and confirm the action of the Revenue.’’

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(Gagan Goyal)

(Dr. S. Seethalakshmi) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 06 /08/2025

*Mishra
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1vihykFkhZ@The Appellant-M/s. Rajasthan State Industrial Development & Investment
Corporation Ltd., Jaipur
2izR;FkhZ@ The Respondent- DCIT, Circle-6, Jaipur
3vk;dj vk;qDr@ CIT
4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत.
5. xkMZ QkbZy@ Guard File { ITA No. 309 & 310/JPR/2025}

vkns'kkuqlkj@ By order

सहायक पंजीकार@Aेेज. त्महपेजतंत