ITAT Deletes Rs 1.18 Lakh Penalty on BR Agrotech, Rules Debatable Issues Cannot Attract Penalty:

ITAT Deletes Rs 1.18 Lakh Penalty on BR Agrotech, Rules Debatable Issues Cannot Attract Penalty The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted a penalty of Rs 118,074 imposed on BR Agrotech Limited under Section 270A of the Income Tax Act for Assessment Year 2017-18. The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-27, New Delhi, which had upheld the penalty levied by the Assessing Officer (AO) for alleged under-reporting of income. BR Agrotech Limited was engaged in the business of manufacturing and selling PET bottles to alcohol industries and distilled water companies. Search was conducted under section 132 on 30.01.2023.

Also Read

GST Fraud Shock: Ahmedabad Trader Files Case Against Former Tax Consultant

Based upon the documents found and personal deposition of key employee AO rejected the books of accounts of the assessee and made an addition of Rs 682,350 u/s 43B of the Act. Further, the AO put a penalty of Rs 118,074 under section 270A on the said addition of Rs 682,380. The CIT(A) confirmed this penalty. The assessee argued that the penalty was not justified. It was argued that no penalty can be imposed where the issue involved is debatable. The counsel relied on previous judgements of the same situation. The revenue department defended the penalty and relied on the orders of the lower tax authorities.

Also Read

GSTAT has No Jurisdiction to Extend Due Date: 30th June last date to clear backlog of appeals

After considering the submissions of both parties and examining the records, the Tribunal agreed with the assessee's contention that no penalty can be imposed on a debatable issue. The Tribunal noted that while the tax auditor had disallowed the leave encashment expenditure in Form 3CD, the assessee nevertheless claimed the deduction in its income tax return. However, the Revenue failed to establish any deliberate intent or guilty mind (mens rea) on the part of the assessee, which is a necessary requirement for imposing a penalty. Holding that a mere incorrect claim on a debatable issue does not justify penal action, the Tribunal set aside the order of the CIT(A) and quashed the penalty order dated 13.02.2025. In the result, the appeal of the assessee is allowed.