February 05, 2026 : The Delhi Bench of the Income Tax Appellate Tribunal has ruled that a wrong claim of deduction does not by itself attract penalty under Section 271(1)(c) of the Income Tax Act when the assessee’s final tax liability is discharged under the Minimum Alternate Tax provisions and there is no tax evasion.
The Bench, comprising Judicial Member Anubhav Sharma and Accountant Member Manish Agarwal, allowed the appeal filed by Aromatrix Flora (P) Ltd. and deleted a penalty of ₹77.54 crore imposed for Assessment Year 2011–12.
Aromatrix Flora (P) Ltd., engaged in manufacturing and agro-based activities, had originally claimed deduction under Section 80-IC in its return. The claim related to the eleventh assessment year, even though the statute allows the benefit only for ten consecutive years. During assessment proceedings, the company accepted that the claim was inadvertent and filed a revised return withdrawing the deduction.
Despite this, the Assessing Officer disallowed the claim and levied penalty for furnishing inaccurate particulars of income. The Commissioner of Income Tax (Appeals) partly allowed the appeal but sustained the penalty relating to the 80-IC claim, prompting the assessee to approach the Tribunal.
The Tribunal noted that although the deduction was wrongly claimed in the original return, it was subsequently withdrawn through a revised return. Crucially, even after the revision, the tax payable under Section 115JB on book profits was higher than the tax computed under normal provisions. As a result, there was no loss to the revenue.
Relying on the Delhi High Court ruling in CIT v. Nalwa Sons Investments Ltd., the Bench reiterated that where income is ultimately assessed under the MAT provisions, penalty cannot be imposed for additions or disallowances made under the normal provisions if they do not result in tax evasion. The Tribunal also observed that this principle stands affirmed by the Supreme Court of India.
The Bench further took note of the fact that in a subsequent assessment year, penalty on an identical deduction claim had already been deleted by the appellate authority and that order had attained finality. It also recorded that the MAT liability remained unchanged before and after the revised return.
In view of the absence of any tax sought to be evaded and following settled judicial precedent, the Tribunal held that the penalty under Section 271(1)(c) was unsustainable. It directed the Assessing Officer to delete the penalty, allowing the assessee’s appeal in full.
Case details :
Appearance: Gautam Jain, Advocate, for the appellant and Krishna Kumar Ramawat, Senior DR, for the Revenue; Case: Aromatrix Flora (P) Ltd. v. ACIT, ITA No. 2100/Del/2024; Assessment Year: 2011–12; Date of Pronouncement: 4 February 2026.
