ITAT Deletes Penalty on Foodservice Packaging Company; Holds Disallowances Were Purely Bonafide and Not Concealment

Huhtamaki Foodservice Packaging India Pvt. Ltd. filed its return for AY 2015-16, declaring a loss of over Rs. 4 crore. During scrutiny, the Assessing Officer noted three items, including expenditure of Rs. 802,750 incurred for increasing authorised share capital, a foreign exchange loss of Rs. 1,979,364 relating to imported machinery, and a small mismatch in interest income when reconciling the books with Form 26AS. All three were disallowed or adjusted during assessment, and the AO initiated a penalty under Section 271(1)(c) alleging furnishing of inaccurate particulars.

The CIT(A) upheld the penalty, leading the assessee to approach the Tribunal.

Main Issue: Whether a penalty under Section 271(1)(c) can be sustained where all facts were disclosed and the additions arose only because of differing views on capital and revenue treatment or due to a small reconciliation mismatch.

ITAT Decided: The Tribunal held that none of the three additions involved concealment or furnishing of inaccurate particulars. For the share-capital expense, the ITAT observed that the assessee had fully disclosed the expenditure and had simply treated it as revenue due to a bona fide error. Referring to the Supreme Court’s ruling in Reliance Petroproducts, it reiterated that making an unsustainable claim does not amount to furnishing inaccurate particulars. Thus, no penalty could survive.

The foreign-exchange loss issue was found to be a timing difference. The AO himself capitalized the loss and allowed depreciation at 15%, which confirmed that the assessee had not suppressed material facts. The minor difference of Rs. 13,496 in Form 26AS reconciliation was also held to be an inadvertent oversight discovered only during cross-verification. The Tribunal deleted the penalty on this issue as well.

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