2022 (12) TMI 1470 - AT - Income Tax

Levy of penalty u/s 270A - misreporting of income in case of property sold jointly by brothers - search conducted at third party - CIT(A) deleted penalty levy - HED THAT - We observe that search was conducted at the premises of the third party and on the basis of diary seized during the course of search, certain additions were offered to tax by the assessee in order to buy peace. Since the search was conducted during the year under consideration, the accounts of the assessee were not finalised and there was still time for the assessee to file return of income. Accordingly, the addition amount offered to tax was reflected in the return of income filed by the assessee on 08-03-2018. On a perusal of the conditions laid out u/s 270A case of the assessee does not fall under any of the provisions of section 270A of the Act. Since the search took place during the year under consideration at the premises of third party, and there was still time to file return of income, the said income in respect of on-money receipts was included in the income offered to tax by the assessee in the return of income. Even the AO in the penalty order has failed to specify under which specific clause of section 270A of the Act does the case of the assessee fall under. CIT(Appeals) in his appellate order has analysed the non-applicability of the provisions of section 270A of the Act in the instant set of facts. Accordingly no infirmity in the order of Ld. CIT(Appeals) deleting penalty imposed under section 270A Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 270A for misreporting of income in a property sale case involving two brothers.

Analysis:
1. The case involved appeals by the Department against the deletion of penalty under section 270A for misreporting of income in a property sale case by two brothers. The appeals were disposed of together due to identical issues for both brothers in the same assessment year.

2. The Assessing Officer (AO) levied a penalty on the assessee for under-reporting income due to misreporting in the sale of a property jointly held with his brother. The AO concluded that the unaccounted cash receipts from the sale were shared by the brothers, leading to the penalty imposition under section 270A.

3. The assessee contended before the CIT(A) that the penalty provisions of section 270A were not applicable as the conditions specified were not met. The CIT(A) agreed, stating that the case did not fall under the provisions of section 270A due to various reasons, including the absence of under-reporting or misreporting of income.

4. The Tribunal observed that the case did not meet the conditions laid out under section 270A of the Act. The search was conducted at a third party's premises, and the income from on-money receipts was included in the return of income filed by the assessee before the due date. The AO failed to specify the specific clause of section 270A applicable to the case.

5. The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 270A, as the case did not fall under any provision of the section. The appeals of the Department were dismissed for both brothers involved in the property sale case.

6. The judgment highlighted the importance of meeting the specific conditions under section 270A for the imposition of penalties related to under-reporting and misreporting of income. In this case, the Tribunal found that the penalties were not justified based on the facts and legal provisions presented.

7. The decision provided clarity on the interpretation and application of penalty provisions under section 270A in cases involving property transactions and income misreporting, emphasizing the need for strict adherence to the statutory requirements for penalty imposition.