SS GROUP (P) LTD,HARYANA V. ACIT CIRLCE-4(1), GURGAON, HARYANA

ITA 1094/DEL/2025

AI Insights

The case involves M/s. SS Group (P) Ltd., the appellant, contesting penalties imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, 1961, for the Assessment Year 2015-16. The penalties were based on two main issues: the claim of depreciation on goodwill and disallowances related to cash payments under section 40A(3). The ITAT had previously ruled in favor of the assessee regarding the goodwill issue, leading to the deletion of that penalty. For the section 40A(3) issue, the Tribunal found that the assessee had disclosed all relevant particulars and that the payments were genuine, thus not warranting a penalty for inaccuracies in income declaration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777182 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2025
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Appeal Filed On: 25-02-2025
• Other Referred Cases: Galaxy Dwellers (P) Ltd. vs. DCIT, Ramchand Bhulchand Jajai vs. ITA No.167/Ahd/2024, Pricewaterhousecoopers Pvt. Ltd. vs. CIT, CIT Vs. Zoom Communication (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Court: TRIBUNAL
• Department Lawyers: AMISHA S. GUPT
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Depreciation; Assessment record; Deemed to accrue or arise in india
• Section: 271(1)(c); 40A(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘E’, NEW DELHI. BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.1094/DEL/2025 (Assessment Year: 2015-16) M/s. SS Group (P) Ltd., vs. ACIT, Circle 4 (1), SS House, Plot No.77, Sector 44, Gurgaon. Sector 45, Gurgaon – 122 001 (Haryana). (PAN : AADCR8945B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Dr. Rakesh Gupta, Advocate Shri Somil Agarwal, Advocate Shri Saksham Agarwal, CA REVENUE BY : Ms. Amisha S. Gupt, CIT DR Date of Hearing : 14.08.2025 Date of Order : 17.09.2025 O R D E R PER S.RIFAUR RAHMAN,AM: 1. The assessee has filed appeal against the order of the Learned Commissioner of Income-Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 07.02.2025 for the Assessment Year 2015-16 affirming the penalty order dated 21.03.2022 passed u/s 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’). Printed from counselvise.com 2 ITA No.1094/DEL/2025 2. At the time of hearing, ld. AR of the assessee brought to our notice penalty order passed vide order dated 21.03.2022 wherein penalty was levied on an amount of Rs.10,38,01,232/- for declaring inaccurate particulars of income. He submitted that in quantum, AO has proceeded to make addition under two heads, (i) claim of depreciation on goodwill; and (ii) disallowance/deemed income u/s 40A(3) of the Act. He submitted that against the quantum order, assessee preferred an appeal before the ITAT wherein ITAT decided the issue in favour of the assessee by deleting the disallowance of goodwill in ITA No.7691/Del/2018 vide order dated 12.03.2025 and placed the order on record. He submitted that since goodwill issue is already decided in favour of the assessee, to the extent of penalty levied has to be quashed. With regard to another addition made u/s 40A(3) of the Act, he submitted that assessee has submitted the details of payments made to various parties before the AO vide letter dated 06.11.2017. It is also reproduced at pages 11 & 12 of the assessment order and AO proceeded to initiate the deeming provisions of section 40A(3) to disallow the same. In this regard, he submitted that in the coordinate Bench decision in the case of Galaxy Dwellers (P) Ltd. vs. DCIT in ITA No.5293/Del/2013 dated 15.09.2017, similar issue was considered and wherein it was decided that no disallowance can be made u/s 40A(3) of the Act, when payees are identified and genuineness of the Printed from counselvise.com 3 ITA No.1094/DEL/2025 payments are not doubted. He submitted that in the present case also, assessee has submitted details of payees before the AO and it is fact on record that all the payees are identified and genuineness of payment cannot be doubted just because the payments are made by cash. Further he brought to our notice decision of ITAT, Ahmedabad Bench in the case of Ramchand Bhulchand Jajai in ITA No.167/Ahd/2024 dated 15.07.2024 wherein it was categorically held that the disallowance u/s 40A(3) of the Act cannot be charged with having concealed for furnished inaccurate particulars of income so as to impose penalty u/s 271(1)(c) of the Act by relying on the decision of Hon’ble Supreme Court in the case of Pricewaterhousecoopers Pvt. Ltd. vs. CIT (2012) 348 ITR 306. He relied on these decisions and prayed that the penalty levied on the assessee may be deleted. 3. Further ld. AR of the assessee submitted a letter dated 06.11.2017 which was submitted before the AO wherein it was submitted that assessee has submitted details of expenses in tax audit report in contravention to section 40A(3). Expenses were already reported in the tax audit report but while filing the return, the same were not picked up by the software due to clerical mistake and the return was filed accordingly. He placed the abovesaid letter with the record to submit that all these details were already submitted before the AO. Printed from counselvise.com 4 ITA No.1094/DEL/2025 4. On the other hand, ld. DR of the Revenue submitted that the letter presented by the ld. AR dated 06.11.2017 was never filed before the first appellate authority and he was not sure whether this letter is part of the assessment records. He submitted that in order to verify the same, it may be sent back to the AO to verify the above claim of the assessee. With regard to issue of goodwill, he agreed that the coordinate Bench has already decided the issue in favour of the assessee. With regard to levy of penalty on the violation of section 40A(3) of the Act, he relied on the findings of the lower authorities. 5. Considered the rival submissions and material placed on record. We observe that the AO has levied the penalty on two counts. On claim of deprecation on goodwill, the assessee has preferred an appeal before the ld. CIT (A) and subsequently before the ITAT. The coordinate Bench considered the detailed submissions and material placed on record and they have decided the issue in favour of the assessee. Since the above issue is decided in favour of the assessee, the relevant penalty levied on the above claim of depreciation on goodwill deserves to be deleted. Accordingly, penalty levied on the depreciation of goodwill is hereby deleted. 6. With regard to disallowance of expenditure u/s 40A(3)) of the Act, we observe that AO has already reproduced various expenses and relevant Printed from counselvise.com 5 ITA No.1094/DEL/2025 parties to whom the payments were made were already listed in assessment order itself. From the above details submitted by the assessee, we observe that the payees are already identified and genuineness of the transaction is not in doubt. We observe that ITAT, Ahmedabad Bench in the case of Ramchand Bhulchand Rajai (supra) has considered the similar issue in detail and held as under :- “13. We have considered the contentions of the ld. Counsel for the assessee and we find merit in the same ,that the mere disallowance of expenses u/s 40A(3) of the Act in the present case would not invite the levy of penalty for concealing or furnishing of inaccurate particulars of income. It is an undisputed fact that all particulars relating to payments made in violation of the provisions of Section 40A(3) of the Act were disclosed by the assessee in its Tax Audit Report filed in terms of section 44AB of the Act, along with the return of income. No discrepancy has been pointed out by the Revenue in the contention of the assessee that he harboured a bona fide belief that these payments having been made in compelling business circumstances, they fell in the exceptions to the provisions of Section 40A(3) as brought out in Rule 6DD of the Income-tax Rules, 1962. It is not the case of the Revenue that the explanation furnished by the assessee for bonafidely believing that these payments were excluded from the purview of Section 40A(3) of the Act were found to be false. 14. It is evident from the above that there was no concealment of the particulars of income relating to payments made in violation of Section 40A(3) of the Act by the assessee. We completely agree with the ld. Counsel for the assessee that it is simply a case of levying penalty on disallowance of claim of assessee, when the assessee admittedly had disclosed all particulars relating to the issue of payments made in violation of section 40A(3) of the Act and had also bonafidely believed the same as not covered under the said section. 15. The assessee we hold ,cannot be charged with having concealed or furnished inaccurate particulars of income so as to impose penalty u/s 271(1)(c) of the Act. Law in this regard is settled by the Hon’ble Apex Court in the case of Pricewaterhousecoopers Pvt. Ltd vs C.I.T, [2012] 348 ITR 306 (SC) wherein in identical set of facts where the assessee was noted to have disclosed all particulars of expense and the assesses explanation for not suo moto disallowing the same as being done by mistake, was found bonafide by the court, penalty levied u/s 271(1)(c) of the Act was deleted by the Apex court. Even otherwise, during the course of hearing before us, the ld. Counsel Printed from counselvise.com 6 ITA No.1094/DEL/2025 for the assessee drew our attention to the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Zoom Communication (P.) Ltd., reported in [2010] 327 ITR 510 (Delhi), which, he pointed out, though was relied upon by the Assessing Officer in the present case while levying penalty, it actually supported the assessee’s case. He drew our attention to the findings of the Hon’ble High Court in the said case holding that as long as the assessee has not concealed any material fact or any factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty u/s 271(1)(c) of the Act, even if the claim made by him is unsustainable in law, provided that he either substantiates the explanation offered by him or the explanation even if not substantiated is found to be bona fide. The said decision we agree with the Ld. Counsel for the assessee supports the case of the assessee for levying no penalty. 16. Accordingly, we hold that the levy of penalty on the addition made on account of disallowance made u/s 40A(3) of the Act is not sustainable and we direct deletion of the same.” 7. Respectfully following the above decision, we are inclined to delete the penalty levied on the disallowance made u/s 40A (3) of the Act. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 17th day of September , 2025 Sd/- sd/- (SUDHIR KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17.09.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "