KARUR SREE RAMA TRADING PVT.LTD.,KARUR V. ITO, CIRCLE-191), TRICHY

ITA 3841/CHNY/2025

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The case involves Karur Sree Rama Trading Pvt. Ltd., which appealed against the penalty imposed by the Income Tax Officer, Circle 1(1), Trichy, upheld by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The penalty was levied under section 271(1)(c) of the Income Tax Act, 1961, following a reassessment order made in the name of a dissolved partnership firm. The appellant argued that the penalty was invalid as it was initiated against a non-existent entity and lacked proper satisfaction as required under section 271(1)(c). The Tribunal agreed with the appellant, noting procedural errors in the penalty notice and order, and quashed the penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840597 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 17-12-2025
• Other Referred Cases: Honle High Court of Karnataka at Bengaluru vide order dated 23.11.2015 in ITA No. 380 of 2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: Y. SRIDHAR; F
• Section: 144; 271(1)(c)

Judgement Text

"आयकर अपीलीय अिधकरण, ’बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी एस.आर. रगुनाथॎ, लेखा सद˟ क े समƗ Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri S.R. Raghunatha, Accountant Member आयकर अपील सं./I.T.A. No.3841/Chny/2025 िनधाŊरण वषŊ/Assessment Year: 2012-13 Karur Sree Rama Trading Pvt. Ltd., S.F. No. 2262, Pari Nagar, Chinna Andan Koil Road, Karur 639 001. [PAN:AABFS8790C] Vs. The Income Tax Officer, Circle 1(1), Trichy. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri Y. Sridhar, F.C.A. ŮȑथŎ की ओर से/Respondent by : Ms. Gouthami Manivasagam, Addl. CIT सुनवाई की तारीख/ Date of hearing : 18.02.2026 घोषणा की तारीख /Date of Pronouncement : 26.02.2026 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 30.10.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2012-13 passed under section 147/271(1)(c) of the Income Tax Act, 1961 [“Act” in short]. 2. At the outset, the ld. AR Shri Y. Sridhar, F.C.A. submits that the ld. CIT(A) erred in upholding the penalty levied under section 271(1)(c) of the Act on the erstwhile partnership firm even though the firm had ceased to Printed from counselvise.com I.T.A. No.3841/Chny/25 2 exist after conversion into a company w.e.f. 02.02.2012 and the penalty proceedings initiated against a non-existent entity are void ab initio. He further submits that the penalty arises from a reassessment order made in the name of the dissolved firm and such reassessment is void and therefore, the penalty based on it is also invalid. Further, the ld. AR submits that as per section 271(1)(c) of the Act, the Assessing Officer requires to record proper satisfaction during the assessment and argued that a vague or mechanical initiation without proper satisfaction render the penalty invalid. He drew our attention to the notice issued under section 274 r.w.s. 271(1)(c) of the Act dated 26.12.2019 and submits that the notice is issued for “concealment of particulars of income”, whereas, the penalty order was passed for furnishing of “inaccurate particulars” and by relying upon the decision of the Hon’ble High Court of Karnataka at Bengaluru vide order dated 23.11.2015 in ITA No. 380 of 2015, it was prayed to quash the penalty order passed under section 271(1)(c) of the Act. 3. The ld. DR Ms. Gouthami Manivasagam, Addl. CIT strongly supported the order passed by the ld. CIT(A). 4. Having heard both the parties, on perusal of the penalty order passed under section 271(1)(c) of the Act at page 2 of the said order, we Printed from counselvise.com I.T.A. No.3841/Chny/25 3 note that by observing the assessee furnished inaccurate particulars of its income, the Assessing Officer issued notice dated 26.12.2019 under section 271(1)(c) r.w.s. 274 of the Act. We have also perused the said penalty notice dated 26.12.2019 placed on record and noted that in the first para it is mentioned that “Whereas in the course of proceedings before me for the Assessment Year 2012-13, it appears to me that you have concealed the particulars of income” whereas, as per para 5 of the penalty order, the Assessing Officer concluded by holding that the assessee has furnished inaccurate particulars of its income. Thus, it is amply clear that the Assessing Officer has erred in not concluding the penalty order for which the notice has been issued under section 274 r.w.s. 271(1)(c) of the Act dated 26.12.2019. Further, as argued by the ld. AR, we note that nowhere in the assessment order dated 18.12.2019 passed under section 144 r.w.s. 147 of the Act, the Assessing Officer recorded satisfaction for initiating penalty proceedings under section 271(1)(c) of the Act or as per first para of the penalty order dated 31.12.2021, no penalty proceedings initiated in the original assessment order dated 31.03.2015. Under the above facts and circumstances, we quash the order of levying penalty under section 271(1)(c) of the Act. Thus, the ground Nos. 2 to 5 raised by the assessee are allowed. Since the assessee is required to file separate appeal against confirmation of Printed from counselvise.com I.T.A. No.3841/Chny/25 4 quantum addition, ground Nos. 6 to 8 raised by the assessee become mere academic and requires no adjudication. 5. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 26th February, 2026 at Chennai. Sd/- Sd/- (S.R. RAGHUNATHA) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 26.02.2026 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. Printed from counselvise.com "