Income Tax Appellate Tribunal - Hyderabad
Tulip Granites Pvt Ltd,Hyderabad vs Acit, Central Circle-1(2), Hyderabad on 25 March, 2026
आयकर अपीलीय न्यायाधिकरण में , है दराबाद 'बी' बेंच, है दराबाद
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD "B" BENCH, HYDERABAD
श्री मंजन
ु ाथा जी, माननीय लेखा सदस्य एवं श्री रववश सद
ू , माननीय न्याययक सदस्य के समक्ष।
BEFORE SHRI MANJUNATHA G. HON'BLE ACCOUNTANT MEMBER
AND
SHRI RAVISH SOOD, HON'BLE JUDICIAL MEMBER
आयकर अपील सं / ITA Nos.1801, 1802 & 1803/HYD/2025
(निर्धा र ण वर्ा /Assessment Yeas: 2010-11, 2013-14 & 2015-16)
Tulip Granites Pvt Ltd Vs. ACIT-Central Circle - 1(2)
Plot No. 99C, MLA Colony 7 th Floor, Aaykar Bhawan
Road No. 12, Banjara Hills Opp. L.B. Stadium
Hyderabad - 500034 Basheer Bagh, Hyderabad
PAN: AABCT7314E
(अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)
करदाता का प्रतततितित्व/ : Shri G. Srinivasa Rao, CA
Assessee Represented by
राजस्व का प्रतततितित्व/ : Dr. Sachin Kumar, Sr-AR
Department Represented by
सुिवाई समाप्त होिे की ततति/ : 24.02.2026
Date of Conclusion of Hearing
घोर्णध की तधरीख/ : 25.03.2026
Date of Pronouncement
ORDER
PER MANJUNATHA G., A.M:
The appeals filed by the assessee are directed against the separate, but identical orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (for short 2 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd "Ld.CIT(A)") all dated 26.08.2025, pertaining to the assessment years 2010-11, 2013-14 & 2015-16, respectively. Since common issues are involved in these appeals, the same were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.
2. First, we take up appeal in ITA No. 1801/HYD/2025 for A.Y.2010-11. The grounds raised by the assessee in this appeal are re-produced as under:
"1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not quashing the impugned penalty order dt. 18-06-2021 as bad-in-law, since it was based on an invalid show-cause notice issued u/s 271(1)(c) of the Act r.w. Explanation 5 of the Act dt.29-12-2017.
2. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the law that if the initiation of penalty proceedings is void-ab-initio due to the non-recording of proper satisfaction, any further proceedings would also be bad-in-law.
3. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate that since the addition of Rs.5,00,000/- towards unexplained investment u/s 68 of the Act in the appellant's hands is bad-in-law, the consequent penalty levied based on the said addition is also bad-in-law and liable to be deleted.
4. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate that since the addition of Rs.2,61,000/- towards unexplained investment u/s 69 of the Act for the AY 2010-11 is bad-in-law, the consequent penalty levied based on the said addition is also bad-in-law and liable to be deleted.
5. That the Learned Commissioner of Income Tax (Appeals) erred in not appreciating the legal position that when no addition can be made in the absence of incriminating evidence for a 3 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd concluded assessment year, the question of imposing penalty based on such addition does not raise.
6. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate that income offered to avoid protracted litigation cannot fall within the ambit of concealment of income for the purpose of levy a penalty.
7. That the impugned penalty order dated 18-06-2021 is null and void, as it was passed in violation of CBDT circular no. 19/2019 dated 14-08-2019, which mandates the quoting of a computer generated DIN in the body of the Penalty Order.
8. The appellant craves leave to add/alter/ modify the grounds of appeal as may be required for proper adjudication of the case."
3. The brief facts of the case are that, the assessee company is engaged in the granite business filed its return of income for the A.Y. 2010-11 admitting an income of Rs.67,01,120/-, after claiming deduction of Rs.2,95,21,133/- under section 10B of Income Tax Act, 1961 (for short "the Act"). A search and seizure operation under section 132 of the Act was conducted in the case of the assessee on 29.12.2015. Consequent to the search, a notice under section 153A of the Act has been issued, for which, the assessee has filed its return of income on 15.04.2017 declaring a total income of Rs.67,01,120/-. The case was selected for scrutiny and assessment has been completed under section 143(3) r.w.s. 153A of the Act on 29.12.2017 and assessed total income at Rs.3,33,90,978/- by making additions towards unexplained investment under section 68 of the Act and addition towards unexplained investment under section 69 of the Act. In 4 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd the assessment order, the A.O stated that penalty proceedings under section 271(1)(c) of the Act are initiated separately.
4. Subsequently, penalty proceedings under section 271(1)(c) of the Act have been initiated and show cause notice under section 271(1)(c) r.w. Explanation 5 of the Act dated 29.12.2017 was issued and called upon the assessee to explain as to why the penalty shall not be levied for having concealed the particulars of income. In response, the assessee filed its submission dated 12.01.2021 and claimed that show cause notice under section 271(1)(c) r.w. Explanation 5 of the Act is invalid because, in the case of the appellant search was conducted on 29.12.2015 and if search is conducted on or after 01.06.2007, Explanation 5A of section 271(1)(c) of the Act is applicable. The assessee had also stated that the additions made towards unexplained investment under section 68 of the Act and unexplained investment under section 69 of the Act does not come under concealment of particulars of income and therefore, penalty under section 271(1)(c) of the Act cannot be levied.
5. The A.O. after considering the submissions of the assessee, rejected the explanation of the assessee by holding that in the assessment order the A.O. has clearly stated that penalty proceedings under section 271(1)(c) of 5 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd the Act are initiated separately and hence, the penalty notice issued under section 271(1)(c) of the Act covers the penalty provisions as per Explanation 5A which is applicable to the assessee. The A.O. further observed that in the assessment proceedings, additions has been made towards unexplained investment of Rs.5,00,000/- towards advance payment to Shri Kuppu Swamy Naidu and the same has not be explained by the assessee with relevant details. Similarly, the A.O. has made additions of Rs.2,61,000/- under section 69A of the Act on the basis of seized documents for which the appellant has not offered any explanation. Therefore, observed that it is a clear case of concealment of income which attracts provisions of Explanation 5A to section 271(1)(c) of the Act. Thus, by taking into account certain judicial precedents, including the decision of the Hon'ble Supreme Court in the case of Mak Data Pvt Ld., v. CIT [2013] 358 ITR 593 (SC) levied the penalty of Rs.2,35,149/- which is 100% of tax sought to be evaded.
6. Aggrieved by the penalty order passed by the A.O, the assessee preferred the appeal before the Ld.CIT(A). Before Ld.CIT(A), the assessee challenged show cause notice issued by the Assessing Officer under section 271(1)(c) r.w. Explanation 5 of the Act dated 29.12.2017 and order passed by the Assessing Officer under section 271(1)(c) of the Act dated 6 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd 18.06.2021 and submitted that, the A.O. initiated penalty proceedings under Explanation 5, whereas levied penalty under Explanation 5A. Further, the A.O. initiated penalty proceedings in the assessment order under section 271(1)(c) r.w. Explanation 5 of the Act. From the above, it is clear that the A.O. initiated penalty proceedings for one charge and levied penalty for another charge which is illegal and thus, penalty levied by the A.O. cannot be upheld. The assessee also challenged the penalty levied by the A.O. on merits and submitted that the additions made by the A.O towards unexplained investment under section 68 /69 of the Act is not based on incriminating material found as a result of search and since assessment year under consideration was unabated / concluded as on the dated of search, no additions could have been made and therefore levying of penalty on said addition is incorrect.
7. The Ld.CIT(A), after considering the submissions of the assessee and also by taking into account certain judicial pronouncements, rejected the legal grounds raised by the assessee by holding that merely because the order is purported to be made under a wrong provision of law, it does not became invalid so long as there is some other provision of law. The Ld.CIT(A) further observed that on merits, the assessee has not been able to prove with documentary evidences that investment of Rs.5,00,000/- and 7 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd Rs.2,61,000/- was made by the appellant from disclosed sources and it was included in the return of income. Therefore observed that, it is a clear case of concealment of income and thus, rejected the explanation of the assessee and upheld the penalty levied by the A.O under section 271(1)(c) of the Act.
8. Aggrieved, by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.
9. Learned Counsel for the assessee, Shri. G. Srinivasa Rao, CA, referring to the assessment order passed by the Assessing Officer and consequent notice issued under section 271(1)(c) r.w. Explanation 5 of the Act dated 29.12.2017 submitted that, in the assessment order, the A.O. initiated penalty proceedings under Explanation 5 of section 271(1)(c) of the Act coupled with issue of show cause notice under section 271(1)(c) r.w. Explanation 5 of the Act, whereas penalty has been levied under Explanation 5A to section 271(1)(c) of the Act which is evident from relevant order passed by the Assessing Officer. Learned counsel, further submitted that initiating penalty proceedings under one limb and levying penalty under different limb vitiated entire penalty proceedings because, Explanation 5 is applicable in a case where the search was conducted on or 8 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd before 01.06.2007, whereas the Explanation 5A is applicable where the search was conducted on or after 01.06.2007. Unless the A.O. arrived at a satisfaction to the effect that the assessee has concealed the particulars of income which attract provisions of Explanation 5 or Explanation 5A, issuing of show cause notice for one limb and levying penalty for another limb is bad in law and liable to be quashed. In this regard, he relied upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory in (2013) 35 taxmann.com 250 (Karnataka) and the decision of the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). The appellant also relied on the decision of the ITAT, Mumbai Benches in the case of Fairdeal Tradelink Company v. ITO in ITA No. 3445/MUM/2016 dated 05.11.2019.
10. Learned Counsel, further submitted that on merits also penalty levied by the A.O. cannot be sustained because, the additions made by the A.O. towards unexplained investment under section 68 of the Act, towards advance paid for Marudhandapalli Village land for Rs.5,00,000/- has been paid by Mrs E. Rajani Rao, on behalf of the assessee out of her disclosed source of income and the same has been declared in her return of income. Further advance paid to land at K. Sundaram village for Rs.2,61,000/- has 9 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd been paid in F.Y. 2006-07 but the same cannot be correlated with the payments and documents. Since the additions made by the A.O. is not based on any incriminating material, levying the penalty on said additions is incorrect.
11. The Ld. Senior Authorised Representative for the revenue, DR. Sachin Kumar, on the other hand supporting the order of the Ld.CIT(A) submitted that, the A.O. initiated penalty proceedings under section 271(1)(c) of the Act in assessment proceedings itself which is followed by issue of show cause notice under section 271(1)(c) r.w. Explanation 5 of the Act. Further, the A.O. has passed order under section 271(1)(c) r.w. Explanation 5A of the Act because, the case of the assessee squarely falls under Explanation 5A because the search was conducted on or after 01.06.2007. The assessee has represented the case and responded to the Show cause notice by filing written submissions, therefore argument on hyper technical ground that show-cause notice was issued under different provisions of the Act and penalty has been levied under different provisions of the Act for this reason the proceedings becomes invalid cannot be accepted. The Ld. Senior Authorised Representative, further referring to Explanation 7(1B) of the Act submitted that, where any amount is added or disallowed in computing the total income or loss of an assessee in any order of 10 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd assessment and the said order contains a directions of initiation of penalty proceedings under clause (c) of sub-section(1), such an order of assessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). Therefore, merely for issuing a show-cause notice with a different Explanation does not invalidate the penalty proceedings. Therefore, he submitted that the ground taken by the assessee should be rejected.
12. Ld. Senior Authorised Representative for the revenue further submitted that on merit, the appellant could not explain the additions made by the A.O. towards unexplained investments and unexplained income towards advance paid for land, though appellant claims that the said advance has been paid by the Director. Since the appellant has not explained the investment, the A.O. has rightly made additions which amounts to concealment of particulars of income. Therefore, he submitted that the penalty levied by the A.O. should be upheld.
13. We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered relevant assessment orders passed by the Assessing Officer under section 143(3) r.w.s. 153A of the Act, dated 11 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd 29.12.2017 and the relevant show cause notice issued under section 271(1)(c) r.w. Explanation 5 of the Act. There is no dispute with regard to the fact that, in the assessment order against each addition the Assessing Officer initiated penalty proceedings under section 271(1)(c) r.w. Explanation 5 of the Act which was followed by issue of show cause notice under section 271(1)(c) r.w. Explanation 5 of the Act dated 29.12.2017 for concealment of particulars of income. But, in the order passed under section 271(1)(c) of the Act, the Ld. AO levied penalty under section 271(1)(c) r.w. Explanation 5A of the Act on the ground that appellant has concealed particulars of income. From the above facts, it is undisputedly clear that the Assessing Officer initiated penalty proceedings under Explanation 5 which is applicable to cases where the search was conducted on or before 01.06.2007 and levied penalty under Explanation 5A which is applicable to cases where the search was conducted on or after 01.06.2007. The assessee claims that taking up penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law because, the assessee should know the grounds which he has to meet specifically, otherwise principles of natural justice is offended.
14. We find that, penalty proceedings under section 271(1)(c) of the Act is a civil liability. Therefore, wilful concealment is not an essential ingredient 12 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd for attracting civil liability. However, existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271 of the Act. Therefore, it is mandatory for the Ld. AO to issue show cause notice under section 274 of the Act and call upon the assessee to file its objections, if any, for proposed penalty on the grounds on which the Assessing Officer is satisfied that the appellant is concealed or furnished inaccurate particulars which attracts provisions of section 271(1)(c) of the Act. Unless the assessee is given an opportunity with specific charge on which he has charged for a breach of particular section, the assessee cannot defend itself by filing relevant explanation. Therefore, for this reason, it is necessary for the Assessing Officer to issue show cause notice with a specific charge under which, he proposed to levy penalty, either for concealment of particulars of income or for furnishing inaccurate particulars of income. In our considered view, issuing show cause notice for one charge and levying penalty for another charge, vitiate entire penalty proceedings because, the assessee should know the grounds which he has to meet specifically otherwise principles of natural justices is violated.
15. In the present case, going by the facts available on record there is no dispute with regard to the fact that the Assessing Officer has initiated penalty proceedings in the assessment order itself for concealment of 13 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd particulars of income under Explanation 5, which is applicable to the cases where search was conducted on or before 01.06.2007, however levied penalty under section 271(1)(c) r.w. Explanation 5A of the Act which is applicable to the cases where search was conducted or after 01.06.2007. Therefore, in our considered view show cause notice issued by the Assessing Officer under section 271(1)(c) r.w. Explanation 5 of the Act dated 29.12.2017 is invalid and consequently, penalty levied by the Assessing Officer under section 271(1)(c) r.w. Explanation 5A of the Act becomes invalid and liable to the quashed. This legal principle is supported by the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) where the Hon'ble High Court has considered an identical issue and held the existence of conditions stipulated for initiation of penalty proceedings under section 271(1)(c) of the Act is a sine-qua-non for initiation of penalty proceedings and such conditions should be discernible from the assessment order, which was followed by issue of show cause notice under section 274 of the Act. Taking up penalty proceedings on one limb and finding the assessee guilty on another limb is bad in law. Similar view has been taken by the Hon'ble Supreme Court in the case of SSA's Emerald Meadows (supra), wherein the Hon'ble Supreme Court approved the order of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning 14 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd Factory (supra) held that arriving at a satisfaction under the correct limb is a precondition for levy of penalty under section 271(1)(c) of the Act. In case, show cause notice is issued for one limb and levied penalty for other limb, then the entire penalty proceedings becomes invalid.
16. The Ld. Counsel for the assessee relied upon the decision of the ITAT, Mumbai Bench in the case of Fairdeal Tradelink Company v. ITO (supra). The Coordinate bench of ITAT, Mumbai, under identical set of facts and also by following the decision of the Hon'ble Bombay High Court in the case of CIT v. Samson Perinchery (2013) 392 ITR 4 held that initiating penalty proceedings for furnishing inaccurate particulars of income and levying penalty for furnishing inaccurate particulars of income and concealment of income invalidate the entire penalty proceedings. The relevant findings of the Tribunal are as under: -
"5. We have heard the submissions made by rival sides and have perused the orders of authorities below. The assessee in additional grounds of appeal has challenged validity of penalty proceedings under section 271(1)(c) of the Act on the legal issue of recording of satisfaction.
6. A perusal of the assessment order shows that penalty under section 271(1)(c) of the Act has been levied by Assessing Officer by observing as under:-
"Also, the penalty proceedings u/s.271(1)(c) of the Act are hereby initiated for filing inaccurate particulars of income by way of incorrect deduction from nonspeculative business income."15
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd At the time of passing order under section 271(1)(c) of the Act the Assessing Officer observes as under:-
"The assessee is obliged to furnish the true particulars of his income and if he conceals the income, then the law prescribes levy of penalty. By furnishing the inaccurate particulars, the assessee has shown false result in the accounts. The falsity in the account thus has the element of concealment. In view of the above, I am satisfied that this is a fit case for levy of penalty under section. 271(1)(c) of the Income Tax act, 1961."
A bare perusal of satisfaction recorded for initiating penalty at the time of passing assessment order and the order levying penalty shows incoherence of charges invoked under section 271(1)(c) of the Act .
7. At the time of recording satisfaction the Assessing Officer has initiated penalty for furnishing 'inaccurate particulars'. However, at the time of levy of penalty, the Assessing Officer mentioned both the charges of section 271(1)(c) of the Act i.e. furnishing 'inaccurate particulars' and 'concealment'. The ambiguity in the mind of Assessing Officer with regard to charging for levy of penalty is apparent from the order dated 27/06/2014 passed under section 271(1)(c) of the Act. The Hon'ble Bombay High Court in the case of Samson Perinchery(supra) has held that penalty cannot be levied on a charge other than for which the satisfaction has been recorded. The relevant extract of the judgment reads as under:-
"6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pal v. CIT[20Q7] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory, (supra)} - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(l)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(l)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond 16 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice"
8. In the light of above decision of Hon'ble Bombay High Court and the facts and circumstances of the case we find merit in the additional legal grounds raised by the assessee. The order passed under section 271(1)(c) of the Act dated 27/06/2014 suffers legal infirmity and, hence, is void. The subsequent proceedings arising therefrom are also vitiated. The additional grounds of appeal raised by the assessee are thus, allowed."
17. In this view of the matter and considering the facts and circumstances of the case and by following the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) and Hon'ble Supreme Court decision in the case of SSA's Emerald Meadows (supra), we are of the considered view that penalty levied by the Assessing Officer under section 271(1)(c) r.w. Explanation 5A of the Act, in consequent to show cause notice issued under section 271(1)(c) r.w. Explanation 5 of the Act, is invalid and void ab initio and liable to be quashed. Thus, we quash the order passed by the Assessing Officer under section 271(1)(c) of the Act dated 18.06.2021.
18. In the result, appeal filed by the assessee is allowed for A.Y. 2010-11. 17
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd ITA No. 1802/HYD/2025 (A.Y. 2013-14)
19. The grounds raised by the assessee in this appeal are re-produced as under: -
"1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not quashing of the impugned penalty order dt.18-06-2021 as bad-in-law, since the Assessing Officer initiated the penalty proceedings under the limb "have furnished in accurate particulars of income" but completed the proceedings under the limb "concealment of income", and these legal inconsistencies render the satisfaction invalid in the eyes of law.
2. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the law that if the initiation of proceedings itself is void-ab-initio due to the non-recording of proper satisfaction, any further proceedings would also be bad-in-law.
3. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not adjudicating the additional ground no.2 of appeal raised by the appellant, namely that where the assessed income is computed under the MAT regime (Section 115JB), the additions and disallowances made while computing the income under normal provisions of the Act are irrelevant for the levy of penalty u/s 271(1)(c) of the Act for the Assessment years prior to 01st April 2016.
4. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the legal position that, in case of a concluded assessment year where no incriminating evidence was found during the course of search, and the assessee voluntarily offered additional income in the statement recorded u/s 132(4) of the Act to avoid protracted litigation and to maintain the peace with the department, and subsequently filed the return of income u/s 153A by disclosing the additional income offered and paid the resultant taxes, such income cannot be considered as concealment of income or furnishing inaccurate particulars of income for the purpose of levying a penalty.
5. That the impugned penalty order dated 18-06-2021 is null and void, as it was passed in violation of CBDT circular no. 19/2019 18 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd dated 14-08-2019, which mandates the quoting of a computer generated DIN in the body of the Penalty Order.
6. That the Learned Commissioner of Income Tax (Appeals), erred in not declaring the impugned penalty order dt.18-06-2021 as barred by limitation in accordance with the provisions of section 275 of the Act.
7. The appellant craves leave to add/alter/ modify the grounds of appeal as may be required for proper adjudication of the case."
20. The Ld. Counsel for the assessee, referring to the assessment order passed by the Ld. AO under section 143(3) r.w.s. 153A of the Act, dated 29.12.2017 and consequent show cause notice issued under section 271(1)(c) of the Act dated 31.12.2017 submitted that, the Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income, whereas levied penalty under section 271(1)(c) of the Act for concealment of particulars of income under section 271(1)(c) r.w. Explanation 5A of the Act. Therefore, he submitted that initiation of penalty proceedings under one limb and levying penalty under different limb is bad in law and liable to be quashed because, the assessee should be known under which limb the Assessing Officer is proposed to levy penalty under section 271(1)(c) of the Act, so as to meet specifically, otherwise principles of natural justices is offended. In this regard, he relied upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) and decision of the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows (supra). 19
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd
21. The Ld. Counsel for the assessee, further submitted that on merit also penalty levied by the Ld. AO cannot be upheld because, although the Assessing Officer made additions towards various disallowances to the normal income computed under the Act, but finally, tax has been levied on the total income computed under section 115JB of the Act. Once the tax has been computed under section 115JB of the Act, then penalty cannot be levied on additions made towards income computed under the normal provisions, because, Explanation 4 to section 271(1)(c) of the Act had explicitly provided to be effective from 01.04.2016 and thus, will accordingly, apply in relation to Asst. Year 2016-17 and subsequent Assessment years. Therefore, penalty levied by the Assessing Officer under section 271(1)(c) of the Act is liable to be quashed.
22. The Ld. Senior Authorised Representative for the revenue, DR. Sachin Kumar, on the other hand supporting the order of the Ld.CIT(A) submitted that the A.O. initiated penalty proceedings under section 271(1)(c) of the Act in assessment proceedings itself, which is followed by issue of show cause notice under section 271(1)(c) of the Act. Further, the A.O. has passed order under section 271(1)(c) r.w. Explanation 5A of the Act because, the case of the assessee squarely falls under Explanation 5A as the search was conducted on or after 01.06.2007. The assessee has 20 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd represented the case and responded to the Show cause notice by filing written submissions, therefore argument on hyper technical ground that show-cause notice was issued under different provisions of the Act and penalty has been levied under different provisions of the Act for this reason, the proceedings becomes invalid cannot be accepted.
23. Ld. Senior Authorised Representative further referring to Explanation 7(1B) of the Act submitted that where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment and the said order contains a directions of initiation of penalty proceedings under clause (c) of sub-section(1), such an order of assessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). Therefore, merely for issuing a show-cause notice with a different Explanation does not invalidate the penalty proceedings. Therefore, he submitted that the ground taken by the assessee should be rejected.
24. Ld. Senior Authorised Representative for the revenue further submitted that, although, Explanation 4 to Section 271(1)(c) of the Act has been inserted by the Finance Act is applicable from A.Y. 2016-17 on wards, but it is only clarificatory in nature and therefore should be applied for 21 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd earlier assessment years also. Further, appellant has not explained the additions made by the A.O. towards various disallowances which fall under the category of furnishing inaccurate particulars of income and therefore A.O. has rightly levied penalty under section 271(1)(c) r.w. Explanation 5A of the Act which is applicable for cases where search has been conducted on or after 01.06.2007. The Ld.CIT(A) after considering the relevant facts has rightly sustained the additions made by the A.O. Therefore, he submitted that the order of the Ld.CIT(A) should be upheld.
25. We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant assessment orders passed by the Assessing Officer under section 153A r.w.s. 143(3) dated 29.12.2017 and consequent show cause notice issued under section 271(1)(c) of the Act dated 31.012.2017. Admittedly, in the assessment order, the Assessing Officer stated that penalty proceedings under section 271(1)(c) of the Act are initiated separately without any clear satisfaction as to whether, penalty proceedings have been initiated for furnishing inaccurate particulars of income or for concealment of particulars of income. Further, in the show cause notice the Assessing Officer had also not specifically referred to Explanation 5A of Section 271(1)(c) of the Act. However, while 22 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd levying penalty under section 271(1)(c) of the Act, the Assessing Officer levied penalty for concealment of particulars of income under section 271(1)(c) r.w. Explanation 5A of the Act. In our considered view, taking the penalty proceedings on one limb and finding the assessee guilty in another limb is bad in law because, existence of conditions stipulated under section 271(1)(c) of the Act is sine qua non for initiation of penalty proceedings and such conditions should be discernible from the assessment order or from the show cause notice issued by the Assessing Officer under section 274 r.w.s 271(1)(c) of the Act as held by the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) and the Hon'ble Supreme Court in the case CIT v. SSA's Emerald Meadows (supra). Since, the Assessing Officer has issued show cause notice for one limb i.e, for furnishing inaccurate particulars of income and levied penalty for concealment of particulars of income under section 271(1)(c) r.w. Explanation 5A of the Act, in our considered view the entire penalty proceedings becomes vitiate and consequently, the order passed by the Assessing Officer under section 271(1)(c) of the Act dated 18.06.2021 is bad in law and liable to be quashed.
26. We further observe that, a similar issue has been considered by us, in appellant own case for the A.Y. 2010-11 in ITA No. 1801/HYD/2025, 23 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd wherein an identical issue has been dealt by us and after considering the relevant show cause notice and order passed by the Assessing Officer under section 271(1)(c) of the Act and by following the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) and the decision of the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows (supra) held that, issue of show cause notice for one limb and levying penalty for different limb vitiate entire penalty proceedings and consequently, penalty levied by the Assessing Officer cannot be upheld. The reasons given by us in preceding paragraph No. 13 to 17 shall mutatis mutandis applies to this appeal, as well. Therefore, for similar reasons, we quash the order passed by the Assessing Officer under section 271(1)(c) of the Act dated 18.06.2021 for A.Y.2013-14.
27. Coming back to another argument of the Ld. Counsel for the assessee in light of additions made by the Assessing Officer towards various disallowances and added back to income computed under normal provisions of the Income Tax Act, 1961 and finally determining tax payable on total income computed under section 115JB of the Act. The Ld. Counsel for the assessee submitted that once additions has been made and income is computed under normal provisions of the Act and finally tax has been levied on income computed under section 115JB of the Act, then 24 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd Explanation 4 to section 271(1)(c) of the Act cannot be applied to assessment year under consideration because, Explanation 4 to section 271(1)(c) of the Act had explicitly been provided to be effective from 01.04.20216 and thus, will accordingly, apply in relation to A.Y.2016-17 and subsequent assessment years.
28. We find that, an identical issue has been considered by the coordinate bench of ITAT Mumbai Tribunal, in the case of M/s. Flemingo Travel Retail v. DCIT in ITA No. 1197/MUM/2020 dated 07.08.2020 and after considering the relevant facts and also provisions of Explanation 4 to Section 271(1)(c) of the Act and by following the decision of the Hon'ble Delhi High court in the case of CIT v. Nalwa Sons Investments Ltd., (2010) 327 ITR 543 (Del) held that, the assessee-company had been assessed to tax under the deemed provision under section 115JB of the Act and no penalty under section 271(1)(c) can be levied in respect of additions / disallowances made under the normal provisions of the Act. Therefore, on this count also the penalty levied by the Assessing Officer under section 271(1)(c) of the Act cannot be upheld. The relevant findings of the Tribunal are as under:
"10. As the assessee has assailed the validity of the penalty imposed by the A.O u/s 271(1)(c), on the ground, that by so doing he had exceeded the scope of the jurisdiction vested 25 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd with him, therefore, we shall first deal with the said contention of the assessee. It is the claim of the ld. A.R, that ‗Explanation 4' to Sec. 271(1) of the Act, as was available on the statute during the year under consideration i.e prior to its amendment vide the Finance Act, 2015, w.e.f 01.04.2016, did not provide for any penalty in a situation where additions/disallowances were made in the hands of the assessee under the normal provisions of the Act, but the assessee is assessed to tax as per the deeming provisions of Sec. 115JB of the Act. For the sake of clarity, we reproduce herein below the ―Explanation 4‖ to Sec. 271(1) as was applicable during the year under consideration i.e A.Y 2014- 15 :
"271. Failure to furnish returns, comply with notices, concealment of income, etc.--
(1) If the AO or the CIT(A) or the CIT in the course of any proceedings under this Act, is satisfied that any person--
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or he may direct that such person shall pay by way of penalty,--
(iii) in the cases referred to in cl. (c) or cl. (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.
Explanation 4--For the purposes of cl. (iii) of this sub-section, the expression 'the amount of tax sought to be evaded'-- 26
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd
(a) In any case where the amount of income in respect of particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, means the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income;
(b) In any case to which Expln. 3 applies, means the tax on the total income assessed as reduced by the amount of advance tax, TDS, tax collected at source and self- assessment tax paid before the issue of notice under s. 148;
(c) In any other case, means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished................" On a perusal of the aforesaid, we find that penalty u/s 271(1)(c) to be imposed for either of the defaults viz. (i). concealment of income; or (ii) furnishing of inaccurate particulars of income, had to be quantified with reference to the amount of tax sought to be evaded. In other words, the tax sought to be evaded would be the difference between the tax due on the income assessed and the tax that would have been chargeable had such total income been reduced by the amount of concealed income. As such, the penalty u/s 271(1)(c) is to be levied on the basis of tax on the difference between the income assessed and the income returned. But then, the issue before us is that where the assessee was assessed as per the deeming provisions of Sec. 115JB, then, could penalty u/s 271(1)(c) as per the pre-amended ―Explanation 4‖(i.e prior to 27 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd amendment vide the Finance Act, 2015, w.e.f 01.04.2016) could be imposed in respect of additions/disallowances made under the normal provisions of the Act. We find that the Hon'ble High Court of Delhi in the case of CIT Vs. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del), dealing with this issue, had observed, in context of the pre-amended ―Explanation 4‖ to Sec. 271(1)(c), that in a case where the income of an assessee company was finally assessed at ‗book profit' by deeming the same to be the total income of the assessee, then in such a case penalty u/s 271(1)(c) could only be levied in respect of any adjustment /addition /disallowance made while computing such ‗book profit' of the assessee company. It was observed by the Hon'ble High Court, as under:
"20. We have considered the rival submissions. Judgment of the Supreme Court in Gold Coin (supra) clarifies that even if there are losses in a particular year, penalty can be imposed as even in that situation there can be a tax evasion. As per s. 271(1)(c), the penalty can be imposed when any person has concealed the particulars of his income or furnished incorrect particulars of the income. Once this condition is satisfied, quantum of penalty is to be levied as per cl.
(iii) of s. 271(1)(c) which stipulates that the penalty shall not exceed three times "the amount of tax sought to be evaded". The expression "the amount of tax sought to be evaded" is clarified and explained in Expln. 4 thereto, as per which it has to have the effect of reducing the loss declared in the return or converting that loss into income. It is in this context that in Gold Coin (supra) the Supreme Court explained the legal position as under :
"Reference to the Department Circular No. 204, dt. 24th July, 1976 reported in 1978 CTR (Jourl) 1 : (1977) 110 ITR 21 (St) has also substantial relevance. Same reads as follows : ‗ 28 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd New Expln. 4 defined ‗the amount of tax sought to be evaded'. According to the definition, this expression will ordinarily mean the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of which particulars have been concealed. In a case, however, where on setting off the concealed income, against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure, ‗the tax sought to be evaded' will mean the tax chargeable on the concealed income as if it were the total income. Another exception to the general definition of the expression ‗tax sought to be evaded' given earlier is a case to which Expln. 3 applies. Here, the tax sought to be evaded will be the tax chargeable on the entire total income assessed.' A combined reading of the Committee's recommendations and the circular makes the position clear that Expln. 4 (a) to s. 271(1)(c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1st April, 1976 to 1st April, 2003 the position was that the penalty was leviable even in a case where addition of concealed income 29 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd reduces the returned loss. When the word 'income' is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1st April, 1976 to 1st April, 2003. Even in the circular dt. 24th July, 1976, referred to above, the position was clarified by Central Board of Direct Taxes (in short ‗CBDT'). It is stated that in a case where on setting off the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case 'the tax sought to be evaded' will be tax chargeable on concealed income as if it is 'total income'."
21. The question, however, in the present case, would be, as to whether furnishing of such wrong particulars had any effect on the amount of tax sought to be evaded. Under the scheme of the Act, the total income of the assessee is first computed under the normal provisions of the Act and tax payable on such total income is compared with the prescribed percentage of the ‗book profits' computed under s. 115JB of the Act. The higher of the two amounts is regarded as total income and tax is payable with reference to such total income. If the tax payable under the normal provisions is higher, such amount is the total income of the assessee, otherwise, ‗book profits' are deemed as the total income of the appellant in terms of s. 115JB of the Act.
30
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd
22. In the present case, the income computed as per the normal procedure was less than the income determined by legal fiction namely ‗book profits' under s. 115JB of the Act. On the basis of normal provision, the income was assessed in the negative i.e. at a loss of Rs. 36,95,21,018. On the other hand, assessment under s. 115JB of the Act resulted in calculation of profits at Rs.
4,01,63,180.
23. In view thereof, in conclusion, the assessment order records as follows :
"Assessed at Rs. 4,01,63,180 under s.
115JB, being higher of two. Interest under ss. 234B and 234C has been charged as per the provisions of IT Act, 1961. Penalty proceedings under s. 271(1)(c) of the IT Act, 1961 have been initiated. Issue necessary forms."
24. The income of the assessee was thus assessed under s. 115JB and not under the normal provisions. It is in this context that we have to see and examine the application of Expln.
4.
25. Judgment in the case of Gold Coin (supra), obviously, does not deal with such a situation. What is held by the Supreme Court in that case is that even if in the IT return filed by the assessee losses are shown, penalty can still be imposed in a case where on setting off the concealed income against any loss incurred by the assessee under other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even a 31 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd minus figure. The Court was of the opinion that ‗the tax sought to be evaded' will mean the tax chargeable not as if it were the total income.
Once, we apply this rationale to Expln. 4 given by the Supreme Court, in the present case, it will be difficult to sustain the penalty proceedings. Reason is simple. No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed under s. 115JB of the Act which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed under s. 115JB of the Act. Hence, when the computation was made under s. 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all.
26. The upshot of the aforesaid discussion would be to sustain the order of the Tribunal, though on different grounds. Therefore, while we do not agree with the reasoning and approach of the Tribunal, for our reasons disclosed above, we are of the opinion that penalty could not have been imposed even in respect of claim of depreciation made by the assessee. This appeal is accordingly dismissed.
On a perusal of the aforesaid judgment of the High Court, we find that it was observed that an addition/disallowance in the hands of the assessee may result to concealment, but that had its repercussions only when the assessment was done under the normal procedure. It was observed, that as the assessment as per the normal procedure was, however, not acted upon, and it was the 32 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd deemed income of the assessee that was assessed under s. 115JB of the Act, as it was higher of the two, therefore the concealment based on the additions /disallowances made under the normal provisions of the Act had no role to play and were totally irrelevant. We may herein observe, that the ―Special Leave Petition‖ (SLP) filed by the revenue against the aforesaid judgment of the Hon'ble High Court of Delhi had thereafter been dismissed by the Hon'ble Supreme Court in CIT Vs. Nalwa Sons Investment Ltd. [SLP (Civil) No(s). 18564/2011; dated 04.05.2012]
11. At this stage, we may herein observe, that the legislature in all its wisdom after considering the aforesaid shortcoming in the ―Explanation 4‖ to Sec. 271(1)(c), had therein came forth with an amendment vide the Finance Act, 2015, w.e.f 01.04.2016, which therein reads as under:
"Explanation 4.-- For the purposes of clause (iii) of this sub-section,--
(a) the amount of tax sought to be evaded shall be determined in accordance with the following formula--
(A - B) + (C - D) where, A = amount of tax on the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);
B = amount of tax that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished;
33
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd C = amount of tax on the total income assessed as per the provisions contained in section 115JB or section 115JC;
D = amount of tax that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished:
Provided that where the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D:
Provided further that in a case where the provisions contained in section 115JB or section 115JC are not applicable, the item (C - D) in the formula shall be ignored;
(b) where in any case the amount of income in respect of which particulars ave been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, the amount of tax sought to be evaded shall be determined in accordance with the formula specified in clause (a) with the modification that the amount to be determined for item (A - B) in that formula shall be the amount of tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate 34 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd particulars have been furnished had such income been the total income;
(c) where in any case to which Explanation 3 applies, the amount of tax sought to be evaded shall be the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148."
On the basis of the aforesaid amendment, w.e.f Asst. Year 2016-17, even in a case where there are certain additions/disallowances under the normal provisions of the Act, penalty u/s 271(1)(c) can be imposed, irrespective of the fact that the assessee is assessed as per the deeming provisions of Sec. 115JB or Sec. 115JC of the Act. In fact, a careful perusal of the aforesaid amendment reveals that the machinery proviso for quantification of penalty had now been rendered as workable. On a perusal of the "Explanatory Notes to the Provisions of the Finance Act, 2015", we find that the same reads as under:
"55. Amount of tax sought to be evaded for the purposes of penalty for concealment of income under clause (iii) of sub- section (1) of section 271 55.1 The provisions contained in clause (c) of sub-section (1) of section 271 of the Act, before amendment by the Act, provided that penalty for concealment of income or furnishing inaccurate particulars of income is to be levied on the "amount of tax sought to be evaded", which has been defined, inter-alia, as the difference between the tax due on the income assessed and the tax which would have been chargeable had such total income been reduced by the amount of concealed income.35
ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd 55.2 Problems have arisen in the computation of amount of tax sought to be evaded where the concealment of income or furnishing inaccurate particulars of income occurs in the computation of income under provisions of section 115JB or 115JC of the Income tax Act and also under the provisions other than the provisions of section 115JB or 115JC of the Income-tax Act (hereafter referred as general provisions). Further, courts have held that penalty under clause (c) of sub-section (1) of section 271 of the Income tax Act cannot be levied in cases where the concealment of income occurs with regard to the income computed under general provisions and the tax is paid under the provisions of section 115JB or 115JC of the Income-tax Act. 55.3 Tax paid under the provisions of section 115JB or 115JC over and above the tax liability arising under general provisions is available as credit for set off against future tax liability. Understatement of income and the tax liability thereon under general provisions results in larger amount of such credit becoming available to the assessee for set off in future years. Therefore, where concealment of income, as computed under the general provisions, has taken place, penalty under clause (c) of sub-section (1) of section 271 should be leviable even if the tax liability of the assessee for the year has been determined under provisions of section 115JB or 115JC of the Income-tax Act.
55.4 Accordingly, section 271 of the Income-tax Act has been amended so as to provide that the amount of tax sought to be evaded shall be the summation of tax sought to be evaded under the general provisions and the tax sought to be evaded under the provisions of section 115JB or 115JC of the Income-tax Act. However, if an amount of concealment of income on any issue is considered both under the general provisions and provisions of section 115JB or 115JC then such amount shall not be considered in computing tax sought to be evaded under provisions of section 115JB or 115JC. Further, in a case where the provisions of section 115JB or 115JC are not applicable, the computation of tax 36 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd sought to be evaded under the provisions of section 115JB or 115JC shall be ignored.
55.5 Applicability: This amendment will take effect from 1st April, 2016 and will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years."
As such, the legislature observed that in a case where tax was paid by an assessee under the deeming provisions of Sec. 115JB or 115JC, the excess of such tax paid over and above its tax liability under the general provisions would thereafter be available as credit for set off against its future tax liability. On the said premises, it was observed that in a case of understatement of income under the general provisions of the Act, would thus, result in larger amount of such credit becoming available to the assessee for set off in future years. Accordingly, it was observed that, where concealment of income as computed under the general provisions has taken place, penalty under clause (c) of sub-section (1) of section 271 should be leviable even if the tax liability of the assessee for the year has been determined under provisions of section 115JB or 115JC of the Income-tax Act. But then, we find that the said amendment to ―Explanation 4‖ to Sec. 271(1)(c) had explicitly been provided to be effective from 1st April, 2016 and thus will accordingly apply, in relation to the assessment year 2016-17 and subsequent assessment years. As the case of the assessee before us is for A.Y 2014-15 therefore, the post-amended ―Explanation 4‖ to Sec. 271(1)(c) would not be applicable in its case. As the issue involved in the present case is squarely covered by the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Nalwa Sons Investments Ltd. (2010) 327 ITR 543 (Del), we thus respectfully follow the same. As such, now when the assessee company had been assessed to tax under the deeming provisions of Sec. 115JB of the Act, therefore, on the basis of our aforesaid observations no penalty u/s 271(1)(c) in respect of additions/disallowances made under the normal provisions of the Act could have been 37 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd imposed upon the assessee. We thus in the backdrop of our aforesaid deliberations quash the penalty imposed by the A.O u/s 271(1)(c) of the Act. The Ground of appeal No. 2 is allowed in terms of our aforesaid observations."
29. In the result, appeal filed by the assessee is allowed for A.Y.2013-14. ITA NO. 1803/HYD/2025 (A.Y.2015-16)
30. The grounds raised by the assessee in this appeal are re-produced as under: -
"1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi erred in not quashing of the impugned penalty order dt.18-06-2021 as bad-in-law, since the Assessing Officer initiated the penalty proceedings under the limb "have furnished in accurate particulars of income" but completed the proceedings under the limb "concealment of income", and these legal inconsistencies render the satisfaction invalid in the eyes of law.
2. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the law that if the initiation of penalty proceedings itself is void-ab-initio due to the non-recording of proper satisfaction, any further proceedings would also be bad-in-law.
3. That the Learned Commissioner of Income Tax (Appeals) failed to appreciate the legal position that, in the cases where the assessee has voluntarily offered the additional income in the statement recorded u/s 132(4) of the Act to avoid the protracted litigation and to maintain the peace with the department, and has filed the return of 38 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd income u/s 153A disclosing the additional income offered and paid the resultant taxes, such income cannot be considered as concealment of income or furnishing inaccurate particulars of income for the purpose of levying a penalty.
4. That the impugned penalty order dated 18-06-2021 is null and void, as it was passed in violation of CBDT circular no. 19/2019 dated 14-08-2019, which mandates the quoting of a computer generated DIN in the body of the Penalty Order.
5. The appellant craves leave to add/alter/ modify the grounds of appeal as may be required for proper adjudication of the case."
31. The facts and issues involved in this appeal filed by the assessee are identical to the facts and issues which we had considered in appellant own case for the A.Y. 2013-14 in ITA NO. 1802/HYD/2025. In the present case, the Assessing Officer issued show cause notice under section 271(1)(c) of the Act dated 29.12.2017, for furnishing inaccurate particulars of income and levied penalty under section 271(1)(c) of the Act for concealment of particulars of income under section 271(1)(c) r.w. Explanation 5A of the Act. An identical issue has been considered by us, in appellant own case for the A.Y. 2013-14 in ITA NO. 1802/HYD/2025. The reasons given by us in preceding paragraph No. 25-26 shall equally applicable to this appeal, as well. Therefore, for similar reasons, we quash 39 ITA Nos.1801, 1802 & 1803/HYD/2025 Tulip Granites Pvt Ltd the order passed by the Assessing Officer under section 271(1)(c) of the Act dated 18.06.2021 for A.Y. 2015-16.
32. In the result, appeal filed by the assessee is allowed for A.Y.2015-16.
33. To sump-up, all the appeals filed by the assessee are allowed.
Order pronounced in the Open Court on 25th March, 2026.
Sd/- Sd/-
(रववश सूद) (मंजुनाथा जी)
(RAVISH SOOD) (MANJUNATHA G.)
न्याययक सदस्य /JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER
Hyderabad, dated 25.03.2026.
Giridhar/ Sr.PS (on Tour)
40
ITA Nos.1801, 1802 & 1803/HYD/2025
Tulip Granites Pvt Ltd
आदे शकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-
1. निर्धाररती/The Assessee : Tulip Granites Pvt Ltd Plot No. 99C, MLA Colony Road No. 12, Banjara Hills Hyderabad - 500034
2. रधजस्व/ The Revenue : ACIT-Central Circle - 1(2) 7th Floor, Aaykar Bhawan Opp. L.B. Stadium Basheer Bagh, Hyderabad
3. The Principal Commissioner of Income Tax, Hyderabad.
4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad
5. गधर्ा फ़धईल / Guard file आदे शधिुसधर / BY ORDER TIRUPATI Digitally signed by TIRUPATI YAMINI NAGA YAMINI NAGA MALLESWARI Date: 2026.03.27 19:19:41 MALLESWARI +05'30' Sr. Private Secretary ITAT, Hyderabad