2023 (4) TMI 846 - AT - Income Tax

Penalty u/s 270A - under-reporting income - Addition of 20% of the expenditure on estimated basis - HELD THAT - The assessee has submitted that all the details before the AO and also expenditure incurred by the assessee. AO, on estimated basis, disallowed an amount and no penalty can be levied under section 270A of the Act. AO has disallowed 20% of the expenditure claimed by the assessee. Disallowing the expenditure cannot be said that it is an under-reporting of the income. Assessee has filed all the details and not only that the Assessing Officer, on estimated basis disallowed the expenditure. Once, the disallowance made on estimated basis, no penalty can be levied. Therefore, the penalty levied by the AO and confirmed by the ld. CIT(A) is unsustainable and thus, the penalty levied u/s 270A of the Act is deleted. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The appeal challenges the penalty u/s 270A of the Income Tax Act, 1961 imposed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2017-2018.

Delay in filing appeal:
The appeal was delayed by 52 days due to technical glitches in downloading the order u/s. 250, and further delayed by 4 days due to a courier service issue. The assessee filed a petition for condonation of delay, which was accepted as the delay was not intentional and the assessee was prevented by reasonable cause.

Assessment and penalty proceedings:
The assessee company's return for the assessment year 2017-18 was processed under section 143(1) and later scrutinized under CASS. The Assessing Officer disallowed an amount from repair and maintenance expenses, leading to penalty proceedings u/s 270A. The penalty of Rs. 5,70,222 was imposed for under-reporting income related to disallowed expenses. The ld. CIT(A) upheld the penalty.

Arguments and decision:
The assessee argued that the disallowed amount was on an estimated basis and did not constitute under-reporting. The Tribunal agreed, stating that disallowing 20% of the expenditure claimed does not amount to under-reporting income. As all details were provided to the Assessing Officer, and the disallowance was estimated, the penalty u/s 270A was deemed unsustainable. Consequently, the penalty was deleted, and the appeal by the assessee was allowed.

Conclusion:
The Tribunal ruled in favor of the assessee, deleting the penalty imposed u/s 270A of the Income Tax Act, 1961. The order was pronounced on 10th March 2023 in Chennai.