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2025 Supreme(Guj) 1794
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
Director Of Income Tax (International Taxation) - Appellant
Versus
Niko Resources Ltd – Respondent
R/Tax Appeal No. 2257 of 2010 With R/Tax Appeal No. 2259 of 2010
Decided On : 13-11-2025
Penalties under Section 271(1)(c) necessitate clear evidence of inaccurate disclosures, which was lacking in this case, as established by Supreme Court precedent.
Headnote:(A) Income Tax Act, 1961 - Section 260A - Penalty under Section 271(1)(c) - Tax Appeal filed by Revenue challenging the cancellation of penalty levied on the assessee for furnishing inaccurate particulars of income - Tribunal held that mere incorrect claims do not amount to concealment - No determination of incorrect particulars found in the assessee's return - Basing its decision on the Supreme Court ruling in CIT v. Reliance Petroproducts Pvt. Ltd., the Tribunal deleted the penalty as the claims were bona fide and adequately disclosed (Paras 7, 12).
(B) In the present case, the Tribunal affirmed that the essential conditions for enforcing penalty under Sections 271(1)(c) were not satisfied, supporting its reasoning with precedents reaffirming the provision’s strict applicability to deliberate concealment (Paras 10, 11).
Facts of the case:
The assessee, a Canadian company engaged in natural gas and oil exploration, faced penalty for reporting inaccurate income while contesting the disallowance of claims for exploration costs and depreciation (Paras 4-8).
Findings of Court:
The Tribunal found in favor of the assessee, concluding that the penalty was wrongly levied due to a lack of incorrect disclosures (Paras 12-13).
Issues: Whether the Appellate Tribunal rightly appreciated facts and the law in cancelling the penalty under Section 271(1)(c).
Ratio Decidendi: The court concluded that penalties under the Income Tax Act require clear evidence of inaccurate particulars, which were absent in this case.
Result: Appeals dismissed.
| Table of Content |
|---|
| 1. court's observations and proceedings summary (Para 1 , 2) |
| 2. substantial question of law regarding penalty provisions (Para 3 , 10) |
| 3. assessing assessee's income declaration and penalty initiation (Para 4 , 5 , 6) |
| 4. tribunal's reliance on supreme court ruling against penalty (Para 8 , 9) |
| 5. legal justification for cancellation of penalty under it act (Para 11 , 12) |
| 6. final decision and dismissal of the appeal (Para 13) |
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned Senior Standing Counsel Mr. Varun K. Patel for the appellant and learned advocate Ms. Vinisha Jain for M/s. Wadia Ghandy and Co. for the respondent.
2. These Tax Appeals are filed by the Revenue under section 260A of the INCOME TAX ACT , 1961 (For short “the Act”) arising out of common order dated 30.04.2010 passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench-D, (For short “the Tribunal”) in ITA No.2719/Ahd/2008 and in ITA No.2477/Ahd/2008 for Assessment Year 2003-2004 respectively.
3. This Court has admitted the appeals vide order dated 11.06.2012 for consideration of the following substantial question of law:
“Whether the Appellate Tribunal is right in law and on facts in correctly appreciating the facts on record and law so as to cancel the penalty levied under section 271(1)(c) of the Act ?”
4. Brief facts of the case are that the assessee company which is incorporated in Canada is engaged in the business of natural gas and oil exploration.
5. The assessee company entered into a joint venture with the Gujarat State Petroleum Corporation Ltd. (GSPCL) for the exploration and development of natural gas and oil fields located in India. The joint venture resulted in entering into production sharing contracts with the Government of India on 23.09.1994 for exploration and development of five designated natural gas and oil fields in Gujarat. The Company was permitted to set up a project office in India with effect from 14.08.1994.
6. The assessee company filed its return of income for the year under consideration declaring income of Rs.25,57,03,870/-. The Assessing Officer framed the assessment under section 143(3) of the Act vide order dated 07.03.2006 determining total income at Rs.1,58,29,79,355/- wherein the Assessing Officer also initiated the penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income.
7. These penalty proceedings were kept in abeyance till the Commissioner of Income Tax (Appeals) decide the quantum appeal on 29.11.2006. In the quantum appeal, the CIT(Appeals) confirmed the following additions/disallowances :
i) Addition by way of disallowance of expenditure incurred on exploration and drilling activities amounting to Rs.25,81,55,828/- under section 42 of the Act.
ii) Disallowance of expenditure incurred on exploration and drilling activities amounting to Rs.1,06,48,81,736/- under section 42 of the Act.
iii) Deduction of Rs.25,57,03,871/- made in revised return in respect of profit and gains for the production of mineral oil.
iv) Addition by disallowance of depreciation claimed on the cost of pipeline amounting to Rs.1,60,64,938/-.
8. Subsequently, the Assessing Officer vide order dated 28.06.2007 levied the penalty under section 271(1)(c) of the Act of Rs. 60,63,10,000/-
9. The assessee preferred an appeal before the CIT(Appeals) who confirmed the penalty levied by the Assessing Officer.
10. The cross appeals were filed before the Tribunal challenging the order dated 14.05.2008 passed by CIT(Appeals) who partly confirmed the penalty levied by the Assessing Officer under section 271(1)(c) of the Act.
11. The Tribunal by the impugned order deleted the penalty levied in the facts of the case relying upon the decision of Hon’ble Supreme Court in case of CIT v. Reliance Petroproducts Pvt. Ltd. /b> reported in (2010) 322 ITR 158 (SC) by observing as under:
“9. Having heard both the sides, we have carefully gone through the orders of authorities below. It is pertinent to note that these cross appeal
