Penalty for ‘Inaccurate Particulars’ Sustained: ITAT upholds ₹12.45 Lakh Levy on Stock Broker [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, holding that the charge of furnishing inaccurate particulars of income was clearly communicated to the assessee and that no prejudice was caused merely because the initial penalty notice was in a printed format.

The appellant, Classic Share & Stock Broking Services Limited, a Mumbai-based stock broking company, failed to file its return of income under Section 139 of the Income Tax Act, 1961 for the Assessment Year 2012-13 after the company. Subsequently, pursuant to reopening of assessment proceedings under Section 147 of the Act, the assessee filed its return declaring nil income and a loss of ₹6.51 lakh.

During assessment under Section 143(3) read with Section 147, the Assessing Officer noted that the assessee had no business activity during the relevant year but claimed substantial business expenses. Accordingly, expenses amounting to ₹62.69 lakh were disallowed, resulting in assessed income of ₹58.91 lakh.

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Penalty proceedings were initiated on the ground that the assessee had furnished inaccurate particulars of income. While the appellate authority partly reduced the disallowance, however, confirmed disallowance of expenses amounting to ₹40.32 lakh, following which a penalty of ₹12.45 lakh was levied and upheld.

On behalf of the appellant, Counsel Gagan Khandelwal contended that the penalty proceedings were vitiated due to a defective notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961. It was argued that the notice did not specify whether the penalty was proposed for concealment of income or for furnishing inaccurate particulars of income, thereby reflecting non-application of mind.

Representing the Revenue, Virabhadra S. Mahajan argued that the penalty was validly initiated and sustained, as the assessment order itself categorically recorded satisfaction that penalty proceedings were initiated for furnishing inaccurate particulars of income.

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Further, subsequent notices issued during the penalty proceedings clearly mentioned the specific charge. The Revenue also pointed out that the assessee never objected to the alleged defect during the penalty proceedings and had fully participated in them.

The Bench comprising Sandeep Gosain, Judicial Member and Girish Agrawal, Accountant Member dismissed the appeal and upheld the penalty. The Tribunal held that the assessment order had clearly recorded satisfaction for initiation of penalty for furnishing inaccurate particulars of income and that the assessee was made fully aware of the charge against it.

The Bench noted that multiple notices issued during the course of penalty proceedings explicitly referred to inaccurate particulars of income and that the assessee had not raised any objection at the relevant stages.

On merits, the Tribunal observed that the disallowance of expenses was not based on a mere difference of opinion but on the assessee’s failure to substantiate claims, including expenses incurred on five-star hotel dining and miscellaneous items without supporting vouchers. Since, the assessee had indeed furnished inaccurate particulars of income, the Tribunal found no infirmity in the penalty confirmed by the appellate authority.

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