Disallowance in Unabated Assessment Without Incriminating Material: ITAT Upholds Deletion of ₹16.29 Lakh Penalty u/s 271(1)(c) [Read Order]
The Tribunal ruled that adhoc disallowance in an unabated assessment under Section 153C without incriminating material does not warrant penalty for furnishing inaccurate particulars of income.
![Disallowance in Unabated Assessment Without Incriminating Material: ITAT Upholds Deletion of ₹16.29 Lakh Penalty u/s 271(1)(c) [Read Order]](https://images.taxscan.in/h-upload/2025/07/30/2070898-itat-penalty-deletes-taxscan.webp "Disallowance in Unabated Assessment Without Incriminating Material: ITAT Upholds Deletion of ₹16.29 Lakh Penalty u/s 271(1)(c) [Read Order]")
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld the deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 and held that adhoc disallowance in an unabated assessment without incriminating material found during search does not justify penalty. Micro Planteca Limited (assessee) was subjected to assessment under Section 153C following a search...
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) upheld the deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961 and held that adhoc disallowance in an unabated assessment without incriminating material found during search does not justify penalty.
Micro Planteca Limited (assessee) was subjected to assessment under Section 153C following a search under Section 132 on the Temptation Foods Group on 24.09.2009. The Assessing Officer (AO) made an adhoc disallowance of expenses, leading to an addition.
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Subsequently, the penalty under Section 271(1)(c) amounting to Rs. 16.29 lakh was levied by the AO on the ground that the disallowance constituted furnishing of inaccurate particulars of income.
The AO contended that since the assessee did not contest the disallowance or prefer an appeal, penalty was warranted on the adhoc addition made in the order passed under Section 153C, despite no incriminating material relating to the disallowance being found during the search.
Aggrieved by the penalty order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) deleted the penalty, observing that the adhoc disallowance did not amount to concealment or furnishing inaccurate particulars, especially in the absence of any incriminating evidence from the search.
Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The Revenue argued that the disallowance justified the penalty as it was not contested by the assessee. The assessee filed a cross-objection raising additional legal grounds challenging the validity of the penalty proceedings.
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The two-member bench, comprising Amit Shukla (Judicial Member) and Renu Jauhri (Accountant Member), observed that the assessment under Section 153C was for an unabated year, and no incriminating material was found to prove the expenses were not genuine or business-related.
The bench noted that the adhoc disallowance was outside the scope of Section 153C assessment, as the disclosed expenses and details in the return were neither incorrect nor false.
The bench held that such adhoc disallowance does not tantamount to furnishing inaccurate particulars of income, and penalty cannot be levied without specific evidence of concealment. It confirmed the CIT(A)’s deletion of the Rs. 16.29 lakh penalty. The appeal of the Revenue was dismissed.
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