C.R. TEXTILE MILLS, ,SALEM V. ITO, CIRCLE-1, SALEM

ITA 1361/CHNY/2025

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The case involves CR Textile Mills, a firm engaged in the manufacturing and trading of textile goods, which appealed against a penalty imposed by the Income Tax Officer, Circle-1, Salem, confirmed by the Commissioner of Income Tax (Appeals), Delhi. The penalty was levied following an addition of Rs. 10,95,493 to the assessee's income, which was initially unconfirmed sundry creditors. The CIT(A) confirmed a reduced addition of Rs. 3,04,414, leading to the penalty for furnishing inaccurate particulars of income. The Tribunal, however, found that the penalty was incorrectly applied as the initial notice was for concealment of income, not for furnishing inaccurate particulars.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711787 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: CIT vs. Reliance Petroproducts (P) Ltd. [2020] 322 ITR 158 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: T.VASUDEVAN
• Section: 271(1)(c)

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ \u0011ा यपीठ, चे\u0016ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI \u0019ी मनु क ुमा र िग र, \u0011ा ियक सद! एवं \u0019ी जगदीश, लेखा सद! क े सम( BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1361/Chny/2025 िनधा :रण वष: /Assessment Year: 2016-17 CR Textile Mills, 204, 2B Attayampatti Road, Athanoor Post, Salem – 636 301. [PAN: AACFJ 9421A] Vs. The Income Tax Officer, Circle-1, Salem. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथG की ओर से/ Appellant by : Shri T. Vasudevan, Advocate IJथG की ओर से /Respondent by : Ms. Gouthami Manivasagam, JCIT सुनवाई की तारीख/Date of Hearing : 16.07.2025 घोषणा की तारीख /Date of Pronouncement : 24.07.2025 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2016-17 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 24.03.2025 in confirming levy of penalty u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter “the Act”) by Ld. Assessing Officer (A.O) vide order dated 24.12.2018. Printed from counselvise.com ITA No.1361/Chny/2025 C.R. Textile Mills :- 2 -: 2. The only ground of appeal in this appeal of assessee is against confirming the penalty of Rs. 94,977/- u/s. 271(1)(c) of the Act. 3. The assessee is a firm engaged in the business of manufacturing and trading of textile goods. The A.O, in the assessment order, made an addition of Rs. 10,95,493/- on account of sundry creditors not confirmed, and accordingly initiated penalty proceedings under section 271(1)(c) of the Act. Aggrieved by the said addition, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A) confirmed the addition to the extent of Rs.3,04,414/- in respect of sundry creditors not confirmed. Based on the order of the Ld. CIT(A), the A.O levied a penalty of Rs. 94,977/- for furnishing inaccurate particulars of income in respect of the unconfirmed sundry creditors of Rs. 3,04,414/-. On appeal, the Ld. CIT(A) did not accept the assessee’s contention that the credits were genuine and had been paid in the subsequent year, and therefore confirmed the penalty. 4. The Ld. Authorized Representative (AR) of the assessee submitted that the A.O had issued notice u/s. 271(1)(c) of the Act for concealment of income however, the penalty was levied for furnishing inaccurate particulars of income. Therefore, it was argued that the Printed from counselvise.com ITA No.1361/Chny/2025 C.R. Textile Mills :- 3 -: penalty is not sustainable and should be cancelled. On merits, the Ld. AR submitted that the penalty was levied in respect of sundry creditors amounting to Rs. 3,04,414/-, which remained unconfirmed. It was contended that there was no furnishing of inaccurate particulars of income, and merely because an addition has been sustained, it does not attract penalty under section 271(1)(c) of the Act. 5. The Ld. Departmental Representative has relied on the orders of the lower authorities. 6. We have heard the rival submissions and perused the materials available on record. The A.O has levied a penalty of Rs. 94,977/- u/s. 271(1)(c) of the Act in respect of sundry creditors treated as income u/s. 41(1) of the Act, for furnishing inaccurate particulars of income. The Ld. AR pointed out that the notice was issued for concealment of income, but the penalty was levied for furnishing inaccurate particulars therefore penalty cannot be sustained. It was further submitted that the sundry creditors are genuine and that the payments were made in the subsequent year. It is settled position of law that penalty proceeding is distinct from assessment proceeding and merely because the addition/disallowances has been sustained in itself does not automatically warrant the levy of penalty u/s. 271(1)(c) of the Act, as Printed from counselvise.com ITA No.1361/Chny/2025 C.R. Textile Mills :- 4 -: held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. [2020] 322 ITR 158 (SC). In view of above, the present case, does not warrant penalty u/s 271(1)(c) of the Act and accordingly , the penalty levied is hereby cancelled. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on 24th day of July, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार िग र) (Manu Kumar Giri) \u0011ाियक सद! / Judicial Member (जगदीश) (Jagadish) लेखा लेखा लेखा लेखा सद\u0011य सद\u0011य सद\u0011य सद\u0011य /Accountant Member चे\u0013नई/Chennai, \u0016दनांक/Dated: 24th July, 2025. EDN/- आदेश क\u0019 \bितिल प अ े षत/Copy to: 1. अपीलाथ\u0007/Appellant 2. \b थ\u0007/Respondent 3. आयकर आयु\u000f/CIT, Salem 4. िवभागीय \bितिनिध/DR 5. गाड\u0018 फाईल/GF Printed from counselvise.com "