DHANUKA AGRITECH LTD,NEW DELHI V. ACIT, CENTRAL CIRCLE-2, NEW DELHI

ITA 1794/DEL/2023

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Dhanuka Agritech Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-23, which upheld the penalty imposed by the Assistant Commissioner of Income Tax under Section 270A for disallowing a claim of leave encashment. The company had initially claimed a deduction for leave encashment on a provisional basis, which was disallowed during the assessment, leading to an increased assessed income. The Tribunal considered various judicial pronouncements and the provisions of the Income Tax Act, particularly focusing on whether the issue was debatable and whether the claim was adequately disclosed. The Tribunal concluded that the penalty was not justified as the legal position regarding the claim was not clear-cut and the company had disclosed all material facts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705478 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Exide Industries Ltd. vs. Union of India [2007] 292 ITR 470 (High Court of Calcutta), M/S Sicpa India Pvt Ltd v/s Addnl CIT (ITA No 704/Kol/2015)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: NIRBHAY MEHTA; ANUP MEHTA
• Keywords: Reasonable cause; Question of law
• Section: 143(3); 43B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘B’: NEW DELHI) BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:- 1794/Del/2023 (Assessment Year- 2017-18) M/s DhanukaAgritech Ltd., 82, 1st Floor, Abhinash Mansion, 110055, Joshi road, Karol Bagh, New Delhi-110005. Vs. Assistant Commissioner of Income Tax, Central Circle-2, New Delhi. PAN No:AAACD0105G APPELLANT RESPONDENT Assessee by : Shri Nirbhay Mehta, Adv. & Shri Anup Mehta, CA Revenue by : Ms. Pooja Swaroop, CIT(DR) Date of Hearing : 08.05.2025 Date of Pronouncement : 30.06.2025 ORDER PER SUDHIR PAREEK, JM The captioned appeal has been preferred by the Assessee against the order of Commissioner of Income Tax (Appeals)-23, New ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 2 Delhi- 110055, [in short (Ld. CIT(A)] dated 13.04.2023 for Assessment Year 2017-18. 1.1. The Assessee has raised the following grounds of appeal: “ 1.0 That on the facts and in the circumstances of the case, the imposition of penalty and interest with reference thereto has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the AO to give appropriate relief in accordance with law. 1.1That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the penalty order passed in utter disregard to the provisions of the Act and hence, was illegal and void ab initio. 2.0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in sustaining the penalty imposed_u/s 270A of the Act for disallowance of claim of leave encashment without considering the fact that it was claimed on provisional basis after relying on various judicial pronouncements including that from jurisdictional ITAT. 3.0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of the Act without considering the fact that the allowability of leave encashment expenditure on provisional basis was a debatable issue and therefore, no penalty should have been imposed. 4.0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of the Act without considering the fact that a substantial question of law was involved in the appellant's claim. 5.0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in sustaining the imposition of penalty u/s 270A of the Act without considering the fact that the appellant adequately disclosed its claim of leave encashment expenditure wherever required. 6.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 3 the Act without considering the fact that while imposing stay on the decision of Exide Industries Ltd. vs. Union of India [2007] 292 ITR 470 (High Court of Calcutta), Hon'ble Supreme Court simultaneously entitled the assessce to make claim of leave encashment expenditure in its returns. 7.0Without prejudice to the above, that on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty equal to two hundred percent of the amount of tax payable on under-reporting of income in consequence of misreporting, without considering the fact that the appellant's case does not fall under any clause of Section 270A(9) of the Act. 8.0That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the grounds stated here-in- above, either before or at the time of hearing of this appeal.” 2. The brief facts of the case are the assessee company, engaged in the business of manufacturing and trading of Power & Energy, had filed its return of income declaring a total income of Rs. 118,61,64,030 by claiming refund of Rs. 6,35,89,969/- and the same was processed u/s 143(1) of the Act, on 16.03.2019. 2.1 Thereafter the case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and the assessment was completed u/s 143(3) of the Act, for the A.Y. 2017-18 on 23.12.2019 at an assessed income of Rs. 1,23,48,92,320/- after making the following additions, by disallowing the claim of leave encashment and imposed penalty u/s 270A: ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 4 Sl.No. Additions Amount (Rs.) 1 Addition on account of disallowance under section 43B (on account of non-payment of leave encashment on or before due date of filing of return of income) 4,87,28,296/- Total 4,87,28,296/- 3. Heard rival submissions and carefully perused the material available on record. Reiterated the grounds of appeal, the Learned AR submitted that the Ld. AO disallowed the claim of leave encashment without considering the fact that it was claimed on provisional basis after relying on various judicial pronouncement including the jurisdictional ITAT. Further, he submitted that the allowability of leave encashment expenditure on provisional basis is a debatable issue and therefore, no penalty should have been imposed and the Hon’ble Supreme Court, while imposing stay on the decision of Exide Industries Ltd. vs. Union of India [2007] 2923 ITR 470 (high court of Calcutta), simultaneously entitled the assessee to make claim of leave encashment expenditure in its return. The assessee adequately disclosed its claim of leave encashment expenditure wherever required and the Ld. CIT-(A) erroneously upheld the levy of penalty equal to two hundred percent of the amount of tax payable on under-reporting of income in ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 5 consequence of misreporting, without considering the fact that the appellant's case does not fall under any clause of Section 270A(9) of the Act 4. Per Contra, Ld. CIT(DR) has relied upon the orders of the authorities below. 5. In the course of hearing, the Learned AR submitted that during the year under consideration, assessee made the provision for leave encashment by relying upon various judicial pronouncements wherein leave encashment has been allowed on provisional basis i.e. by the coordinate bench in the case of M/S Sicpa India Pvt Ltd v/s Addnl CIT (ITA No 704/Kol/2015). It is also submitted that in the impugned order of penalty dated 25-03-2022, the Learned AO alleged that the assessee has under reported and misreported it’s income by way of claiming deduction on account of leave encashment not paid on or before due date of filing of return of income, but the Learned AO has not specifically pointed out as under which clause of section 270A(9) of the Act in which matter has considered appellants claim as misreporting. Further submitted that the claim of the assessee was quite bona fide as per the prevailing legal position and assessee has not under reported the ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 6 income in consequence of any misreporting. It is also submitted that the Learned CIT(A) also observed that the assessee paid advance tax on the impugned amount and subsequently claimed deduction. 6. As per section 270A(6)(a) of the Act, the under reported income shall not include the amount of income in respect of which the assessee offers bona fide explanation and disclosed all the material facts to substantiate the explanation offered. The Learned AR emphatically argued that the Learned CIT(A) erroneously concluded that the assessee had suppressed the facts and so the case of the assessee falls u/s 270A(9) of the Act, which is quite contrary to facts available on record. It is also submitted that the both lower authorities nowhere specifically denied that the assessee has offered a bona fide explanation for under reported or misreported income in it's reply. It is also submitted that despite adequate disclosure in the annual accounts regarding the leave encashments, the Learned CIT(A) declined to accept without any strong reasons by quoted it incorrect and fallacious. The Learned AR contended that the Learned CIT(A) however, inferred that there was no reasonable cause for making the claim but there is no any single whisper in the ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 7 impugned order that claim in question was not bona fide. On the basis of foregoing fact situation, we finds material substance in the submissions advanced on behalf of the assessee that the claim in question was on provisional basis having debatable issue with it’s bona fides and so imposition of penalty was not called for. Hence, appeal of the assessee deserves to be allowed as imposition of penalty in question is unsustainable. 7. Consequently, the appeal of the assessee is hereby allowed as indicated above. Order pronounced in the open court on 30.06.2025 Sd/- Sd/- (SHAMIM YAHYA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30.06.2025 Pooja, Sr. PS/ NEHA, Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 8 ITAT, Delhi Sr. No. Particulars Date 1 Date of dictation of Tribunal Order 27.05.25 2 Date on which the typed draft Tribunal Order is placed before the Dictation Member 27.05.25 3 Date on which the typed draft Tribunal Order is placed before the other Member 4 Date on which the approved draft Tribunal Order comes to the Sr. P.S. /P.S. 5 Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6 Date on which the signed order comes back to the Sr. P.S. /P.S 7 Date on which the final Tribunal Order is uploaded by the Sr. P.S. /P.S. on official website 8 Date on which the file goes to the Bench Clerk along with Tribunal Order 9 Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10 Date on which the file goes to the Supervisor (Judicial) ITA No.-1794/Del/2023 DhanukaAgritech Ltd. 9 11 Date on which the file goes for Xerox 12 Date on which the file goes for endorsement 13 Date on which the file goes to the superintendent for checking 14 The date on which the file goes to the Assistant Registrar for signature on the tribunal order 15 Date on which the file goes to dispatch section 16 Date of Dispatch of the Order "