SAI EXPORT ENTERPRISES,KOLLAM vs. ITO, WARD 1 & TPS, KOLLAM
Facts
The assessee, a partnership firm engaged in cashew nut processing and export, filed its return of income declaring Rs. 42,15,670. The AO completed the assessment at Rs. 56,04,300, making an addition of Rs. 13,88,632 for belated remittance of employees' PF and ESI contributions, though paid before the return filing due date.
Held
The Tribunal held that the mere disallowance of a deduction does not automatically lead to the conclusion of concealment or furnishing inaccurate particulars of income, and thus, penalty under Section 271(1)(c) is not attracted. Reliance was placed on the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd.
Key Issues
Whether the penalty levied under Section 271(1)(c) of the Income Tax Act is justified when the addition was made on account of belated remittance of employees' PF and ESI contributions, which were paid within the due date for filing the return of income.
Sections Cited
271(1)(c), 143(3), 144, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SONJOY SARMA, JM ITA No. 339/Coch/2025 Assessment Year: 2016-17 Sai Export Enerprises .......... Appellant Mangad P.O., Kollam 691015 [PAN: ABSFS2716A] vs. The Income Tax Officer, WD-1 & TPO, Kollam .......... Respondent Appellant by: Shri Rajakannan, Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 13.06.2025 Date of Pronouncement: 31.07.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 31.03.2024 for Assessment Year (AY) 2016-17.
Brief facts of the case are that the appellant is a partnership firm. It is engaged in the business of processing and export of cashew nuts. The return of income for AY 2016-17 was filed on 17.02.2017 declaring income of Rs. 42,15,670/-. Against the said return of income, the assessment was completed by the National
2 ITA No. 339/Coch/2025 Sai Export Enerprises Faceless Assessment Centre, Delhi (hereinafter called "the AO") vide order dated 27.12.2019 passed u/s. 143(3) r.w.s. 144((13) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 56,04,300/0. While doing so, the AO made addition of an amount of Rs. 13,88,632/- being the belated remittance of employees’ contribution to PF and ESE remitted beyond the due date specified in the respective Acts, but before the due date for filing the return of income. While the matter stood thus, the AO initiated penalty proceedings u/s. 274 r.w.s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. In response to the show cause notice the appellant filed explanation stating that mere disallowance of claim does not amount to furnishing of inaccurate particulars of income, therefore, no penalty can be levied.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the levy of penalty
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
We have heard the rival contentions and perused the material available on record. The issue that arises in the present appeal is whether the order imposing penalty u/s. 271(1)(c) is justified or not. Penalty proceedings were initiated in respect of addition made on account of belated remittance of employees’ contribution to PF & ESI but paid within the due date for filing the return of income u/s.
3 ITA No. 339/Coch/2025 Sai Export Enerprises 139(1) of the Act. The mere fact that the additions were made to the returned income by disallowing certain deductions by itself does not lead to the conclusion that the assessee concealed particulars of income or furnished incorrect particulars of income and provisions of section 271(1)(c) is not attracted. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroporducts Pvt. Ltd. [2010] 322 ITR 158. Relevant portion of the judgement if extracted below: -
“ 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
4 ITA No. 339/Coch/2025 Sai Export Enerprises 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.” 6. In view of the above discussion, we are of the considered opinion that the facts of the present case does not warrant levy of penalty u/s. 271(1)(c) of the Act.
Order pronounced in the open court on 31st July, 2025.
Sd/- Sd/- (SONJOY SARMA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 31st July, 2025 n.p. Copy to:
The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order
Assistant Registrar ITAT, Cochin
