ITAT Deletes Rs 1.61 Crore Penalty, Says Incorrect but Disclosed Claim Not ‘Inaccurate Particulars’

The ITAT upheld deletion of a Rs 1.61 crore penalty on the company, ruling that fully disclosed but incorrect claims do not constitute inaccurate particulars, relying on the Supreme Court‘s judgement in the case titled CIT v. Reliance Petroproducts Pvt. Ltd. Revenue’s appeal was dismissed.

The appeal was filed by the Income Tax Authorities against Unimed Technologies Limited in the ITAT Ahmedabad, challenging an order dated November 29, 2025, passed by the CIT(A), NFAC, Delhi. The impugned order had deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The case pertains to the Assessment Year 2016-17.

The dispute arose when the Assessing Officer (AO) completed the assessment of the assessee’s return under section 143(3) of the Act by making several additions to its income, including disallowances for consultancy fees, foreign exchange fluctuation loss, software expenses, testing fees, and interest capitalisation. Because of these additions, the income of the assessee was significantly increased and the officer imposed a penalty of Rs 1.61 crore under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income.

When the aggrieved assessee filed an appeal before the Commissioner of Income Tax (Appeals), the CIT(A) deleted most of the additions and sustained only partial disallowances relating to consultancy fees and foreign exchange fluctuation losses. Thereafter, the CIT(A) realised most of the additions that had been acting as the basis of the penalty imposed were no longer in existence; hence, the penalty could not survive.

The Income Tax Authorities, being dissatisfied with the CIT(A)’s order, filed an appeal before the ITAT Ahmedabad, claiming that the CIT(A) had mistakenly deleted the penalty imposed under Section 271(1)(c) of the Act on the grounds of a Rs 2.78 crore addition due to foreign currency loss without appreciating the fact that the assessee had furnished inaccurate particulars of income by misclassifying the said expenditure as being revenue in nature.

The appellate authority noted that the company had disclosed all relevant details of the expenses in its financial statements and audit reports and during assessment proceedings. Therefore, there was no evidence of tax concealment or intentional misreporting. The appellate authority cited an earlier ruling of the Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd, which held that merely making an unsustainable or incorrect claim does not automatically amount to furnishing inaccurate particulars.

The ITAT agreed with this reasoning and found no justification to restore the penalty. It emphasised that a wrong or debatable claim, when fully disclosed, cannot attract penalty provisions. In conclusion, the tribunal upheld the deletion of the Rs 1.61 crore penalty and dismissed the revenue’s appeal.