2023 (5) TMI 1262 - AT - Income Tax

Penalty u/s. 270A - Under-reporting of income in annual value of house property and interest income assessed under the head income from other source - AO noticed that the assessee has adopted annual value of house property less as compared to revised return file - added difference under the head income from house property - HELD THAT - As during assessment proceedings when the AO noticed said lapse, the assessee admitted the mistake and offered sum under the head income from house property towards annual value of house property. The assessee had also accepted assessment of interest income under the head income from other source. During penalty proceedings, the assessee explained before the AO that said mistake is on account of inadvertent error committed by an Accountant. We find that, if you go through income on which the AO levied penalty u/s. 270A of the Act, on annual value of house property, the Accountant who filed return of income has committed inadvertent error and reported only ALV of Rs. 5,40,000/- instead of Rs. 8,40,000/- and in our considered view said mistake cannot be considered as under reporting of income for levying of penalty u/s. 270A of the Act. In respect of assessment of interest income under the head business, instead of income from other source, the assessee fairly agreed that he was on a bonafide belief that said income is assessable under the head income from business. When the assessee has explained that there is a bonafied mistake in offering interest income under the head income from business and also there is no difference in tax when it was offered under the head income from other source and income from business, in our considered view, there is no reason for the AO to levy penalty u/s. 270A of the Act, for under reporting of income. Thus, we delete penalty levied u/s. 270A towards under reporting of income in respect of annual value of house property and also assessment of interest income under the head income from other sources. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment deals with the issue of under-reporting of income by misreporting income, warranting penalty under section 270A of the Income Tax Act, 1961.

Assessment of annual value of house property:
The assessee initially declared an annual value of house property at Rs. 5,40,000/- in the return of income, which was later revised to Rs. 8,40,000/-. The Assessing Officer (AO) made additions towards annual value of house property and initiated penalty proceedings for under-reporting of income. The assessee explained that the Accountant had committed an inadvertent error in reporting the lower value. The Tribunal held that the mistake by the Accountant cannot be considered as under-reporting of income, and thus, deleted the penalty levied under section 270A of the Act in this regard.

Assessment of interest income:
The assessee had initially declared interest income under the head income from business, which was assessed under the head income from other sources. The AO initiated penalty proceedings for misreporting income. The Tribunal noted that the assessee had accepted the assessment of interest income under the correct head and explained the mistake as a bonafide belief. As there was no tax difference between the two heads, the Tribunal concluded that there was no basis for levying penalty under section 270A of the Act. Consequently, the penalty was deleted in this regard as well.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, holding that there was no under-reporting of income warranting penalty under section 270A of the Income Tax Act, 1961. The penalty levied for the annual value of house property and interest income under the wrong head was deleted.