2023 (11) TMI 784 - AT - Income Tax

Penalty u/s 270A - misreporting of income - Assessee on ad hoc basis filed a claim of deduction u/s 80G - assessee did not substantiate this claim of donation by filing the relevant proof of claim and in the assessment proceedings, the assessee has surrendered the said amount in assessment proceeding - HELD THAT - Assessee did not produce the proof and the AO based on the information placed on record nothing contrary placed on record that the claim of the assessee in real terms not given. The assessee has given the name of trust, pan number and amount of donation given was made in the return of income the assessee has withdrawn the said claim of donation and ld. AO did not investigate this matter further considered the revised computation and in that there is no further amount of tax or interest payable and the details of the donation was already available on record. Assessee in the assessment proceeding submitted that Regarding Donation-I don t any document slip so request you to cancel the same and offer my apology and promise to not put any kind of non-documentary submission in future. This version does not establish that the claim of the assessee is bogus or non genuine nothing contrary brought on record. Considering the facts and circumstances of the case the penalty is not sustainable in light of this circumstances of the case, we are of the considered view that the penalty of levy of the lower authorities confirmed by the CIT(A) u/s 270A of the Act does not have any legs to stand, therefore, the same is deleted based on stated facts. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Whether the penalty imposed under Section 270A for misreporting of income is justified.
2. Whether the assessee's voluntary surrender of the wrongful deduction claim negates the applicability of Section 270A.

Summary:

Issue 1: Justification of Penalty under Section 270A

The assessee, a salaried individual, appealed against the order of the National Faceless Appeal Centre (NFAC) confirming the penalty imposed by the Assessing Officer (AO) under Section 270A for misreporting income. The AO disallowed a deduction of Rs. 5,00,000 claimed under Section 80G, which the assessee admitted was not genuine. Consequently, a penalty of Rs. 1,91,500, calculated at 200% of the tax on the misreported income, was imposed. The CIT(A) upheld the penalty, stating that the assessee's failure to contest the assessment order indicated an intention to defraud revenue and evade tax.

Issue 2: Voluntary Surrender of Wrongful Deduction

The assessee argued that since the deduction was voluntarily surrendered during the assessment proceedings and the tax was already paid through TDS, the penalty under Section 270A should not apply. The assessee cited various judgments to support the claim that voluntary surrender of income should not attract penalties. The assessee also contended that the AO should have exercised discretionary power to waive the penalty, considering it was the first year for this penalty provision.

Tribunal's Findings:

The Tribunal noted that the assessee's income from all sources was reflected in the return, and the claim for deduction under Section 80G was made on an ad hoc basis. The assessee failed to substantiate this claim during the scrutiny assessment and subsequently surrendered the amount. It was observed that the assessee had provided details of the donations in the return of income, and the AO did not further investigate the genuineness of the claim.

The Tribunal concluded that the penalty was not sustainable as the assessee had already paid the tax through TDS and there was no additional tax liability. The voluntary surrender of the deduction claim, without any adverse findings on its genuineness, did not warrant a penalty under Section 270A. Thus, the penalty imposed by the lower authorities was deleted, and the appeal was allowed.

Conclusion:

The Tribunal allowed the appeal, holding that the penalty under Section 270A was not justified given the circumstances of voluntary surrender and lack of additional tax liability. The order was pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.