KARUR SREE RAMA TRADING PVT.LTD.,KARUR vs. ITO, CIRCLE-191), TRICHY
Facts
The assessee, an erstwhile partnership firm that converted into a company, is appealing a penalty levied under section 271(1)(c) for assessment year 2012-13. The penalty was imposed based on a reassessment order.
Held
The Tribunal held that the Assessing Officer erred in the penalty proceedings. The notice for penalty was issued for 'concealment of particulars of income,' but the penalty order was for 'inaccurate particulars.' Furthermore, the Assessing Officer did not record proper satisfaction for initiating penalty proceedings, and the reassessment order was made against a non-existent entity after the firm's conversion.
Key Issues
Whether the penalty levied under section 271(1)(c) is valid when the notice and penalty order differ, and the Assessing Officer failed to record proper satisfaction for initiating penalty proceedings.
Sections Cited
144, 147, 271(1)(c), 274
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
आयकर अपीलीय अिधकरण, ’बी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी एस.एस. िव�ने� रिव, �ाियक सद� एवं �ी एस.आर. रगुनाथॎ, लेखा सद� के सम� Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri S.R. Raghunatha, Accountant Member आयकर अपील सं./I.T.A. No.3841/Chny/2025 िनधा�रण वष�/Assessment Year: 2012-13 Karur Sree Rama Trading Pvt. Ltd., Vs. The Income Tax Officer, S.F. No. 2262, Pari Nagar, Chinna Circle 1(1), Andan Koil Road, Karur 639 001. Trichy. [PAN:AABFS8790C] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri Y. Sridhar, F.C.A. ��थ� की ओर से/Respondent by : Ms. Gouthami Manivasagam, Addl. CIT सुनवाई की तारीख/ Date of hearing : 18.02.2026 घोषणा की तारीख /Date of Pronouncement : 26.02.2026 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 30.10.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2012-13 passed under section 147/271(1)(c) of the Income Tax Act, 1961 [“Act” in short].
At the outset, the ld. AR Shri Y. Sridhar, F.C.A. submits that the ld. CIT(A) erred in upholding the penalty levied under section 271(1)(c) of the Act on the erstwhile partnership firm even though the firm had ceased to
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exist after conversion into a company w.e.f. 02.02.2012 and the penalty proceedings initiated against a non-existent entity are void ab initio. He further submits that the penalty arises from a reassessment order made in the name of the dissolved firm and such reassessment is void and therefore, the penalty based on it is also invalid. Further, the ld. AR submits that as per section 271(1)(c) of the Act, the Assessing Officer requires to record proper satisfaction during the assessment and argued that a vague or mechanical initiation without proper satisfaction render the penalty invalid. He drew our attention to the notice issued under section 274 r.w.s. 271(1)(c) of the Act dated 26.12.2019 and submits that the notice is issued for “concealment of particulars of income”, whereas, the penalty order was passed for furnishing of “inaccurate particulars” and by relying upon the decision of the Hon’ble High Court of Karnataka at Bengaluru vide order dated 23.11.2015 in ITA No. 380 of 2015, it was prayed to quash the penalty order passed under section 271(1)(c) of the Act.
The ld. DR Ms. Gouthami Manivasagam, Addl. CIT strongly supported the order passed by the ld. CIT(A).
Having heard both the parties, on perusal of the penalty order passed under section 271(1)(c) of the Act at page 2 of the said order, we
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note that by observing the assessee furnished inaccurate particulars of its income, the Assessing Officer issued notice dated 26.12.2019 under section 271(1)(c) r.w.s. 274 of the Act. We have also perused the said penalty notice dated 26.12.2019 placed on record and noted that in the first para it is mentioned that “Whereas in the course of proceedings before me for the Assessment Year 2012-13, it appears to me that you have concealed the particulars of income” whereas, as per para 5 of the penalty order, the Assessing Officer concluded by holding that the assessee has furnished inaccurate particulars of its income. Thus, it is amply clear that the Assessing Officer has erred in not concluding the penalty order for which the notice has been issued under section 274 r.w.s. 271(1)(c) of the Act dated 26.12.2019. Further, as argued by the ld. AR, we note that nowhere in the assessment order dated 18.12.2019 passed under section 144 r.w.s. 147 of the Act, the Assessing Officer recorded satisfaction for initiating penalty proceedings under section 271(1)(c) of the Act or as per first para of the penalty order dated 31.12.2021, no penalty proceedings initiated in the original assessment order dated 31.03.2015. Under the above facts and circumstances, we quash the order of levying penalty under section 271(1)(c) of the Act. Thus, the ground Nos. 2 to 5 raised by the assessee are allowed. Since the assessee is required to file separate appeal against confirmation of
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quantum addition, ground Nos. 6 to 8 raised by the assessee become mere academic and requires no adjudication.
In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 26th February, 2026 at Chennai.
Sd/- Sd/- (S.R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 26.02.2026 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR & 5. गाड� फाईल/GF.
