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2026 Supreme(Online)(ITAT) 4463
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
SAKTIJIT DEY, Vice-President, MAKARAND VASANT MAHADEOKAR, Accountant Member
Dwarka Cement Works – Appellant
Versus
ITO Ward-6(2)(1) – Respondent
ITA No. 6706/Mum/2025
For the Appellants/Petitioners: Satish Mody
For the Respondents: Annavaram Kosuri
No penalty u/s 271(1)(c) if reassessment accepts revised return without addition and notice lacks specific charge.
Headnote:Under S.271(1)(c) of the Income-tax Act, 1961, penalty was levied for claimed bad debts disallowed in return filed pursuant to S.148 notice, reducing loss from Rs.1.15 crores to Rs.30,057, despite original scrutiny assessment accepting the loss. Court found no addition in reassessment and defective penalty notice lacking specific charge. Issues framed: whether penalty sustainable absent addition/disallowance in reassessment accepting revised return, and validity of notice under S.274 without specifying concealment or inaccurate particulars limb. Ratio: No penalty leviable if reassessment accepts income declared under S.148 without variation; notice must precisely specify charge, else invalid. Penalty deleted; appeal allowed.
| Table of Content |
|---|
| 1. bad debts claim disallowed in reassessment, leading to penalty levy. (Para 2 , 3 , 4 , 5 , 6) |
| 2. assessee argues voluntary disclosure, no concealment, defective notice. (Para 7 , 8 , 9 , 14 , 15 , 16 , 17 , 18 , 19) |
| 3. cit(a) upholds penalty via explanation 1 and presumptions. (Para 10 , 11 , 12 , 20) |
| 4. no penalty if reassessment accepts revised return without addition. (Para 21 , 22 , 23) |
| 5. penalty notice invalid due to non-specification of charge. (Para 24 , 25) |
| 6. penalty deleted; appeal allowed. (Para 26 , 27 , 28 , 29) |
आदेश/ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
This appeal filed by the assessee is directed against the order dated 27.08.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”] for the Assessment Year 2015–16, whereby the penalty of Rs. 37,29,845/- levied under section 271(1)(c) of the Act by the Assessing Officer was confirmed.
Facts of the Case
2. The assessee, Dwarka Cement Works Limited (now converted into Dwarka Cement Works LLP w.e.f. 15.09.2022), filed its return of income for A.Y. 2015–16 under section 139(1) on 29.09.2015 declaring loss of Rs. 1,15,25,958/-. The case was selected for scrutiny under CASS and assessment was completed under section 143(3) on 28.12.2017 accepting the returned loss.
3. Subsequently, the case was reopened by issuance of notice under section 148 dated 29.07.2022. In response thereto, the assessee filed return of income on 26.08.2022 disallowing the claim of bad debts amounting to Rs. 1.18 crores. From a perusal of the assessment order and the consequential penalty order, it emerges that the assessee is engaged in the business of commission agency and is also earning interest on fixed deposits and capital gains on sale of investments. During the financial year 2014–15 relevant to the assessment year under consideration, the assessee had claimed bad debts aggregating to Rs. 1.18 crores. The said amount comprised a loan of Rs. 1.13 crores given to M/s Karnavati Securities Pvt. Ltd. and an advance of Rs. 5 lakhs paid towards purchase of a flat.
4. The Assessing Officer was of the view that the assessee was not engaged in the business of money lending and that the aforesaid amounts did not constitute trading debts arising in the ordinary course of business. According to the Assessing Officer, the amounts were in the nature of capital expenditure and were not allowable as business expenditure. Upon issuance of notice under section 148 of the Act, the assessee filed its return of income in response thereto and disallowed the entire claim of bad debts.
5. The reassessment was completed under section 143(3) read with sections 147 and 144B of the Act vide order dated 02.05.2023, wherein the returned figure of loss at Rs. (-) 30,057/- was accepted without making any further addition or disallowance. Notwithstanding the fact that no further addition was made in the reassessment order, the Assessing Officer held that the reduction in loss from Rs. 1,15,25,958/- as originally returned to Rs. (-) 30,057/- represented concealment of income to the extent of Rs. 1,14,95,901/-
6. On the aforesaid basis, the Assessing Officer initiated and subsequently levied penalty under section 271(1)(c) of the Act at 100% of the tax sought to be evaded, and imposed a penalty of Rs. 37,29,845/- vide order dated 04.01.2024.
7. The assessee preferred an appeal before CIT(A) against the order of penalty. Before the CIT(A), the assessee contended that the claim of bad debts amounting to Rs. 1.18 crores, comprising loan of Rs. 1.13 crores given to M/s Karnavati Securities Pvt. Ltd. and advance of Rs. 5 lakhs for purchase of flat, was fully disclosed in the audited accounts as well as in the return of income originally filed. It was emphasized that the scrutiny assessment under section 143(3) dated 28.12.2017 was completed after due ve
