NEYSA JEWLLERY LTD, ,MUMBAI vs. DCIT, CIR-2(3)(1), MUMBAI

1,00,510/-. The case was selected for scrutiny. During assessment, the Assessing Officer (AO) noted that a survey action under section 133A was carried out on office premises of assessee on 19.01.2006. During survey action, certain incriminating material was found and when it was confronted with the assessee, the director of assessee-company admitted that deduction of Rs. 4.82 crore under section 10A was wrongly made. The assessee also offered additional income of Rs. 1.90 crore on account of commission payable to Hitesh Trading Co., Singapore which was more compared to earlier year. The AO further recorded that the assessee filed revised return on 13.02.2006 declaring income of Rs. 6.67 crore after withdrawing the claim under section 10A and also offered

ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited additional income on account of commission income of Rs. 1.90 crore.

The revised return was further revised on 31.03.2007 declaring total income of Rs. 5.74 crore wherein loss on account of forward contract of Rs. 98,98,011/- considered as it was not disallowed in the computation of income at the time of filing original return. The assessment was completed under section 143(3) on 29.07.2007 in accepting return income of Rs. 5.75 crore. As return of income as accepted, the assessee has no occasion to file further appeal. The AO while passing the assessment order initiated penalty proceeding under section 271(1)(c) by invoking Explanation-1 thereto for furnishing inaccurate particulars of income. Notice under section 271(1)(c) was issued vide notice dated 29.10.2007. In response to show cause notice, the assessee filed its reply dated 19.11.2013. The main points of reply of assessee is summarized in para 5 of penalty order. The assessee in its reply stated that, firstly; that the assessee inadvertently claimed deduction under section 10A presumed it as 10th year, secondly; such fact was brought in the notice of assessee during survey proceeding on 19.01.2006 accordingly, the assessee revised its return and withdrawn deduction under section 10A. Thirdly, the claim of deduction under section 10A was withdrawn much before initiation of assessment proceeding. Fourthly, a report of Chartered Accountant (CA) was also obtained regarding working of such claim in its return of income. Fifthly, no addition was made in the assessment completed in response to revised return of income; hence, there is no occasion for furnishing inaccurate particulars

ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited of income. To support their view, the assessee relied on various case laws. The reply of assessee was not accepted by AO while referring Explanation 1 to section 271(1)(c) he held that onus was on the assessee to show that their explanation was bona fide but there is nothing on record to believe the stand of assessee. Admittedly, the income which was surrendered by the assessee was not disclosed by it in the return of income filed before survey took place. Thus, the assessee furnished inaccurate particulars to the extent of deduction under section 10A and the intention of assessee was mala fide, had survey would not have taken place, the claim of deduction under section 10A, would not have been withdrawn. The AO accordingly levied penalty of Rs. 1.67 crore being 100% of tax sought to be evaded on claim of deduction under section 10A of Rs. 4.82 crore.

ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited after unallowable claim was discovered by department. The explanation of assessee that claim was made in bona fide belief is not acceptable when the assessee had consistently claim deduction under section 10A for 10 years. The assessee failed to offer plausible explanation or evidence that claim was made under a mistake and on genuine belief.

The ld. CIT(A), thus, upheld the penalty order. Further, aggrieved the assessee has filed present appeal before Tribunal.

AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue. The ld. AR of the assessee submits that while filing return of income, the assessee claimed deduction under section 10A. The assessee claimed such deduction on the basis of certificate of Chartered Accountant. A survey action was carried out on assessee group on 19.01.2006. During survey action statement of Pravin H. Shah, director of assessee was recorded. During the survey action, the assessee voluntarily agreed to withdraw claim under section 10A and to file revised return of income. Accordingly, the assessee filed revised return of income and excluded the claim of deduction under section 10A and offered the same to tax. The assessee voluntary on realizing mistake and offered claim of section 10A for taxation. In the revised return of income, there was no concealment or furnishing inaccurate particulars of income. The ld AR of the assessee further submits that assessing officer while issuing notice under section 271(1)(c) invoked provision of Explanation 1 which relates to deemed concealment, however, the ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited assessing officer levied penalty for furnishing inaccurate particulars.

Thus, the assessing officer himself was not sure about the charges levelled against the assessee. To support such view, he relied upon the decision of full bench of Bombay High Court in Mohd. Farhan A. Shaikh vs DCIT (2021) 125 taxmann.com 253 (Bombay).

DR) for the revenue supported the order of lower authorities. The ld. Sr.

DR for the Revenue submits that surrender of claim under section 10A was not voluntary, rather when the wrong claim of assessee was detected in survey, the assessee offered such income to tax to avoid the penalty, therefore, this is a fit case for levy penalty for furnishing inaccurate particulars of income as has been held by AO. The ratio of various decision relied by ld. AR of the assessee is not applicable in the facts of present case.

ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited levied penalty by taking view that the income surrendered by the assessee was not disclosed by it in the return of income filed before survey took place. The assessee furnished inaccurate particulars to the extent of deduction under section 10A and the intention of assessee was mala fide, had survey would not have taken place, the claim of deduction under section 10A, would not have been withdrawn. The ld. CIT(A) confirmed the action of AO with similar observation. We find that AO while issuing notice under section 271(1)(c) invoked Explanation 1.

Explanation-1 of section 271(1)(c) relates to deemed concealment, however, while levying the penalty under section 271(1)(c), the AO concluded that assessee furnished inaccurate particulars. We find that revised return of assessee has been accepted by AO. In other words, the revised return is not treated as non-est. We also find that AO has not disputed additional payment of tax on revised return. In the revised return, the assessee also offered additional commission income, which is also accepted. The AO also allowed loss at forward contract of Rs.

98,98,011/-. Thus, the AO even accepted second revised return without any variation. Thus, once the revised return is accepted by AO there cannot be any occasion for him to form a view that assessee has concealed particulars of income and furnished inaccurate particulars of such income. In the revised return of income nothing was concealed nor was any specific particulars were identified as inaccurate. We find that Hon’ble Apex Court Price Waterhouse Coopers (P.) Ltd. vs CIT (supra) it was held when the assessee acted on the basis of audit report obtained

ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited from Chartered Accountant and on realizing mistake of wrong claim and withdrawal thereof, it should not be treated in any way as concealment.

Thus, in view of the aforesaid factual and legal position, we do not find any justification for levying penalty under section 271(1)(c) of the Act. In the result, the grounds of appeal raised by the assessee are allowed.