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2024 (4) TMI 1115 - AT - Income TaxPenalty proceedings u/s 270A - Applicable rate of penalty - underreporting of income or misreporting the income - substantial difference in the rate of penalty for under-reporting and misreporting of income - contention of the assessee is that the AO has throughout in the notice for imposing the penalty stated about under-reporting of income and also in the impugned order, but while imposing penalty, he invoked the provision related to the misreporting of income - HELD THAT - The assessee was called upon to explain about under-reporting of income. But while imposing the penalty u/s 270A of the Act, the AO imposed penalty @ 200% which falls under clause (8) of section 270A of the Act. The Co-ordinate Bench of the Tribunal in the case of Alrameez Construction (P.) Ltd. 2023 (8) TMI 371 - ITAT MUMBAI held that no penalty can be imposed in this case, as there is no misreporting is there by assessee for the purposes of section 270A. Even addition u/s. 43CA was not sustainable in view of Jai balaji Business Corporation (P.) Ltd. 2023 (2) TMI 421 - ITAT PUNE - But as assessee before us is for penalty issue only and matter of quantum issue is not before us that are of no use to assessee in present appeal. In the result grounds of appeal raised by assessee is allowed. Therefore AO ought to have restricted the penalty to the extent of 50% which is leviable for under-reporting of the income. Since it is the case of the AO that the assessee had under reported his income and AO nowhere states that clause (8) of section 270A of the Act is applicable. Appeal of the assessee is partly allowed.
Issues Involved:
1. Legality and jurisdiction of the penalty order u/s 270A. 2. Differentiation between under-reporting and misreporting of income. 3. Consideration of the assessee's reply in the penalty order. 4. Appropriateness of the 200% penalty u/s 270A. 5. Erroneous imposition of penalty rate. Summary: Issue 1: Legality and Jurisdiction of the Penalty Order u/s 270A The assessee argued that the penalty order passed by the AO u/s 270A was illegal, bad in law, time-barred, and without jurisdiction. The Tribunal examined the facts and noted that the AO initiated penalty proceedings u/s 270A after determining the income of the assessee at INR 13,53,184/- against the declared income of INR 4,93,460/-. The penalty was imposed at 200%. Issue 2: Differentiation Between Under-reporting and Misreporting of Income The assessee contended that while the penalty notice was issued for under-reporting of income, the penalty was levied for misreporting of income, which is contrary to binding precedents. The Tribunal observed that the AO issued a notice for under-reporting of income but imposed a penalty @ 200% for misreporting, which falls under clause (8) of section 270A. The Tribunal cited the Co-ordinate Bench decision in Alrameez Construction (P.) Ltd. vs CIT/NFAC, Delhi, which held that no penalty can be imposed for misreporting if the assessee did not misreport income. Issue 3: Consideration of the Assessee's Reply in the Penalty Order The assessee argued that the penalty order was passed without considering the reply submitted. The Tribunal noted that the AO, while initiating penalty proceedings, called upon the assessee to explain the under-reporting of income but proceeded to impose a penalty for misreporting without addressing the assessee's explanation. Issue 4: Appropriateness of the 200% Penalty u/s 270A The assessee challenged the 200% penalty imposed u/s 270A, arguing that it was only applicable for misreporting. The Tribunal found that the AO imposed the penalty @ 200% without indicating that clause (8) of section 270A, which pertains to misreporting, was applicable. The Tribunal held that the AO should have restricted the penalty to 50% for under-reporting of income. Issue 5: Erroneous Imposition of Penalty Rate The Tribunal concluded that the AO erroneously imposed a 200% penalty instead of the 50% prescribed for under-reporting. The Tribunal partly allowed the appeal, directing that the penalty should be restricted to 50%. Conclusion: The appeal was partly allowed, with the Tribunal directing the penalty to be restricted to 50% for under-reporting of income, as the AO did not establish that the case fell under misreporting as per clause (8) of section 270A. The Tribunal emphasized adherence to the correct legal provisions and precedents.
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