NEYSA JEWLLERY LTD, ,MUMBAI V. DCIT, CIR-2(3)(1), MUMBAI

ITA 5934/MUM/2025

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Neysa Jewellery Limited appealed against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) for allegedly furnishing inaccurate particulars of income by claiming a deduction under section 10A, which was later withdrawn. The AO had initiated penalty proceedings following a survey where the incorrect claim was admitted by the company's director. The company argued that the claim was a bona fide error corrected before the assessment was finalized. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal. The Tribunal found that the revised return was accepted without dispute and that the initial claim was made based on a Chartered Accountant's certificate, thus reversing the penalty.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835905 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 26-09-2025
• Other Referred Cases: Mohd. Farhan A. Shaikh vs DCIT, CIT vs S.D. Rice Mills, Price Waterhouse Coopers (P.) Ltd. vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Revised return; Wrong claim
• Section: 143(3); 271(1)(c); 10; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER& SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No. 5934/MUM/2025 (AY: 2005-06) (Physical hearing) Neysa Jewellery Limited (Incorporated as Shreeji Jewellery Limited), Plot GJ-11, Seepz, Seepz, Sez, MIDC, Andheri (East), Mumbai – 400096. [PAN : AAECS 1821 N] Vs DCIT, Circle – 2(3)(1), Mumbai Aayakar Bhavan, Mumbai – 400020. Appellant / Assessee Respondent / Revenue Assessee by Shri Devendra Jain, Advocate Revenue by Shri Leyaqat Ali Aafaqui, Sr. DR Date of Institution 26.09.2025 Date of hearing 14.01.2026 Date of pronouncement 12.02.2026 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A) – 51, Mumbai dated 04.08.2025 for Assessment Year (AY) 2005-06. The assessee has raised following grounds of appeal: “1. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) [through National Faceless Appeal Center) has erred in upholding the action of Ld. Assessing Officer who had erred in initiating the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 by issuing a vague show cause notice in standard format without striking off the irrelevant limb of section 271(1)(c); rendering the entire penalty proceedings as void- ab-initio. 2. In the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) [through National Faceless Appeal Center) has erred in upholding the action of Ld. Assessing Officer who had erred in initiating and concluding the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 in respect of the exemption under section 10A which was inadvertently Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 2 claimed in the original return of income disregarding the factual and legal matrix of the case; inter-alia the following: (a) That the Appellant had suo-moto revised the return of income wherein the exemption claimed under section 10A of Rs. 4,82,37,822/- was withdrawn. (b) That the exemption under section 10A of Rs. 4,82,37,822/- was inadvertently claimed in the original return of income which wassubsequently made good before the conclusion of the Assessment Proceedings. (c) That the said exemption under section 10A was bonafidely claimed based on the report/certificate of Chartered Accountant filed in Form 56F. (d) That there was no element of mens-rea or deliberate attempt to evade taxes. 3. All the above grounds are without prejudice to each other. The Appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal.” 2. Brief facts of the case are that the assessee-company filed its return of income for A.Y. 2005-06 on 30.10.2005 declaring income of Rs. 1,00,510/-. The case was selected for scrutiny. During assessment, the Assessing Officer (AO) noted that a survey action under section 133A was carried out on office premises of assessee on 19.01.2006. During survey action, certain incriminating material was found and when it was confronted with the assessee, the director of assessee-company admitted that deduction of Rs. 4.82 crore under section 10A was wrongly made. The assessee also offered additional income of Rs. 1.90 crore on account of commission payable to Hitesh Trading Co., Singapore which was more compared to earlier year. The AO further recorded that the assessee filed revised return on 13.02.2006 declaring income of Rs. 6.67 crore after withdrawing the claim under section 10A and also offered Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 3 additional income on account of commission income of Rs. 1.90 crore. The revised return was further revised on 31.03.2007 declaring total income of Rs. 5.74 crore wherein loss on account of forward contract of Rs. 98,98,011/- considered as it was not disallowed in the computation of income at the time of filing original return. The assessment was completed under section 143(3) on 29.07.2007 in accepting return income of Rs. 5.75 crore. As return of income as accepted, the assessee has no occasion to file further appeal. The AO while passing the assessment order initiated penalty proceeding under section 271(1)(c) by invoking Explanation-1 thereto for furnishing inaccurate particulars of income. Notice under section 271(1)(c) was issued vide notice dated 29.10.2007. In response to show cause notice, the assessee filed its reply dated 19.11.2013. The main points of reply of assessee is summarized in para 5 of penalty order. The assessee in its reply stated that, firstly; that the assessee inadvertently claimed deduction under section 10A presumed it as 10th year, secondly; such fact was brought in the notice of assessee during survey proceeding on 19.01.2006 accordingly, the assessee revised its return and withdrawn deduction under section 10A. Thirdly, the claim of deduction under section 10A was withdrawn much before initiation of assessment proceeding. Fourthly, a report of Chartered Accountant (CA) was also obtained regarding working of such claim in its return of income. Fifthly, no addition was made in the assessment completed in response to revised return of income; hence, there is no occasion for furnishing inaccurate particulars Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 4 of income. To support their view, the assessee relied on various case laws. The reply of assessee was not accepted by AO while referring Explanation 1 to section 271(1)(c) he held that onus was on the assessee to show that their explanation was bona fide but there is nothing on record to believe the stand of assessee. Admittedly, the income which was surrendered by the assessee was not disclosed by it in the return of income filed before survey took place. Thus, the assessee furnished inaccurate particulars to the extent of deduction under section 10A and the intention of assessee was mala fide, had survey would not have taken place, the claim of deduction under section 10A, would not have been withdrawn. The AO accordingly levied penalty of Rs. 1.67 crore being 100% of tax sought to be evaded on claim of deduction under section 10A of Rs. 4.82 crore. 3. Aggrieved by the penalty levied under section 271(1)(c), the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee reiterated that they have neither concealed the particulars of income nor filed inaccurate particulars. The action of assessee in claiming deduction was a bona fide error and subsequent suo moto withdrawal was a genuine attempt to correct a mistake apparent from record. The claim under section 10A was made erroneously. Mere addition in the quantum proceeding would not by itself justify the imposition of penalty. The assessee also relied on certain case laws. 4. The ld. CIT(A) on considering the submission of assessee held that revised return was not filed voluntary but only as a corrective measure Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 5 after unallowable claim was discovered by department. The explanation of assessee that claim was made in bona fide belief is not acceptable when the assessee had consistently claim deduction under section 10A for 10 years. The assessee failed to offer plausible explanation or evidence that claim was made under a mistake and on genuine belief. The ld. CIT(A), thus, upheld the penalty order. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue. The ld. AR of the assessee submits that while filing return of income, the assessee claimed deduction under section 10A. The assessee claimed such deduction on the basis of certificate of Chartered Accountant. A survey action was carried out on assessee group on 19.01.2006. During survey action statement of Pravin H. Shah, director of assessee was recorded. During the survey action, the assessee voluntarily agreed to withdraw claim under section 10A and to file revised return of income. Accordingly, the assessee filed revised return of income and excluded the claim of deduction under section 10A and offered the same to tax. The assessee voluntary on realizing mistake and offered claim of section 10A for taxation. In the revised return of income, there was no concealment or furnishing inaccurate particulars of income. The ld AR of the assessee further submits that assessing officer while issuing notice under section 271(1)(c) invoked provision of Explanation 1 which relates to deemed concealment, however, the Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 6 assessing officer levied penalty for furnishing inaccurate particulars. Thus, the assessing officer himself was not sure about the charges levelled against the assessee. To support such view, he relied upon the decision of full bench of Bombay High Court in Mohd. Farhan A. Shaikh vs DCIT (2021) 125 taxmann.com 253 (Bombay). 6. The ld. AR of the assessee further submits that assessee made bona fide claim while filing original return of income on the basis of certificate of Chartered Accountant and on realizing mistake offered the same for tax and thus, no such penalty is leviable on such facts. To support such view, the ld. AR of the assessee relied upon the decision of Punjab and Haryana High Court in CIT vs S.D. Rice Mills (2005) 275 ITR 206 (Punjab & Haryana) and Supreme Court in Price Waterhouse Coopers (P.) Ltd. vs CIT (2012) 348 ITR 306 / 25 taxmann.com 400 (SC). 7. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of lower authorities. The ld. Sr. DR for the Revenue submits that surrender of claim under section 10A was not voluntary, rather when the wrong claim of assessee was detected in survey, the assessee offered such income to tax to avoid the penalty, therefore, this is a fit case for levy penalty for furnishing inaccurate particulars of income as has been held by AO. The ratio of various decision relied by ld. AR of the assessee is not applicable in the facts of present case. 8. We have considered the submissions of both the parties and have gone through the orders of lower authorities carefully. We find that ld. AO Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 7 levied penalty by taking view that the income surrendered by the assessee was not disclosed by it in the return of income filed before survey took place. The assessee furnished inaccurate particulars to the extent of deduction under section 10A and the intention of assessee was mala fide, had survey would not have taken place, the claim of deduction under section 10A, would not have been withdrawn. The ld. CIT(A) confirmed the action of AO with similar observation. We find that AO while issuing notice under section 271(1)(c) invoked Explanation 1. Explanation-1 of section 271(1)(c) relates to deemed concealment, however, while levying the penalty under section 271(1)(c), the AO concluded that assessee furnished inaccurate particulars. We find that revised return of assessee has been accepted by AO. In other words, the revised return is not treated as non-est. We also find that AO has not disputed additional payment of tax on revised return. In the revised return, the assessee also offered additional commission income, which is also accepted. The AO also allowed loss at forward contract of Rs. 98,98,011/-. Thus, the AO even accepted second revised return without any variation. Thus, once the revised return is accepted by AO there cannot be any occasion for him to form a view that assessee has concealed particulars of income and furnished inaccurate particulars of such income. In the revised return of income nothing was concealed nor was any specific particulars were identified as inaccurate. We find that Hon’ble Apex Court Price Waterhouse Coopers (P.) Ltd. vs CIT (supra) it was held when the assessee acted on the basis of audit report obtained Printed from counselvise.com ITA 5934/Mum/2025 (AY 2005-06) Neysa Jewellery Limited 8 from Chartered Accountant and on realizing mistake of wrong claim and withdrawal thereof, it should not be treated in any way as concealment. Thus, in view of the aforesaid factual and legal position, we do not find any justification for levying penalty under section 271(1)(c) of the Act. In the result, the grounds of appeal raised by the assessee are allowed. 9. In the result, the appeal of assessee is allowed. Order pronounced in the open court on 12/02/2026 Sd/- (ARUN KHODPIA) Sd/- (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 12/02/2026 Biswajit,Sr PS Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "