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2024 (5) TMI 1168 - AT - Income TaxPenalty proceedings u/s 270A - misreporting of income/ under reported income - proof of misrepresentation or suppression of facts - Bonafide belief that no tax liability since TDS was deducted - misrepresentation or suppression of facts - Assessee argued that since the assessment was based on the return filed in response to the notice u/s 148 there was no underreporting or misreporting - as per assessee purchaser of property had deducted taxes at the time of purchase and the entire transaction was duly reflecting in Form No. 26AS on the portal of the Department. HELD THAT - Section 270A provides for penalty for under-reporting of income penalty at fifty per cent of tax payable on such under-reported income under sub Section (7) and misreporting of income under sub Section (8) and (9) penalty at two hundred per cent of tax payable on such income . Penalty under sub Section (8) is independent of levy of penalty under sub Section (7) even if there is no under reported income. Under sub Section (1) the AO Commissioner Principal Commissioner or the Appellate Commissioner may direct that any person who has under-reported his income to pay penalty on such under-reported income. In our view the mere fact that there is a provision for automatic levy of penalty does not mean that penalty has to be imposed. The Supreme Court in the case of Hindustan Steel Ltd. 1969 (8) TMI 31 - SUPREME COURT held that a penalty should not be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed the authority will be justified in not imposing penalty where the breach is merely technical or is based upon the bona fide belief that a particular provision has been complied with. The Supreme Court stressed the importance of not levying penalty where the assessee acts with honest and genuine belief . The word misrepresentation denotes not just written or spoken words but also any other conduct that amounts to a false assertion. The assertion so made an assertion that does not accord with the facts is also termed false representation. The case of the assessee does not fall under any of the specific provision content in Section 270A(2) of the Act which deals with various circumstances relating to under reporting of income . Therefore since the assessee s case does not fall under sub-Section (2) of Section 270A then the benefit of sub-Section (6) to Section 270A is also not available to the assessee. In the instant facts certain facts are noteworthy. The first fact is that the purchaser at the time of sale of property property taxes had been effectively deducted at source at approximately 50% of the amount of taxes payable on such sale consideration. Secondly the assessee was in the instant facts under a bona fide believe that she was not liable to pay taxes on sale of property when taxes had been withheld at source at the time of purchase by the purchaser of such property. Thirdly the assessee was under the genuine belief that there is no misrepresentation or suppression of facts since the purchaser of property had deducted taxes at the time of purchase and the entire transaction was duly reflecting in Form No. 26AS on the portal of the Department which was within the knowledge of the Income Tax Department therefore there is no question as regards to any misrepresentation or suppression of facts since the Department has not disputed the actual amount of sale consideration which has been reported in Form No. 26AS. It would be a different matter if the Department would have alleged that there was a difference / mismatch between the sale consideration as reflecting in Form No. 26AS on which TDS has been deducted under Section 194-IA of the Act and the actual sale consideration which had been received by the assessee on such sale of land. That in our view it would have been a case of misrepresentation or suppression of facts. However once the sale consideration is reported in Form No. 26AS on the Government website and the amount of sale consideration has not been challenged / disputed by the Department and taxes has been withheld on such sale consideration by the purchaser of property under Section 194-IA of the Act then in our view this is not case of misrepresentation or suppression of facts. In the instant case the assessee was under a bona fide believe that once the correct income flowing from sale of property is duly reflecting in Form No. 26AS on the Government website and taxes have been deducted at source by the purchaser of such property u/s 194-IA of the Act the assessee was under no further obligation to file return of income disclosing sale of aforesaid property and pay any further taxes thereon. This is not a fit case for levy of penalty u/s 270A of the Act. Appeal of the assessee is allowed.
Issues Involved:
1. Legality of the order passed under Section 270A of the Income Tax Act. 2. Confirmation of penalty by the Commissioner of Income Tax (Appeals) under Section 270A read with Sections 270A(8) and 270A(9). 3. Misreporting of income and underreporting of income. 4. Applicability of penalty criteria under Section 270A(9). 5. Quantum of penalty under Section 270A(10) read with Section 270A(7). Issue-wise Detailed Analysis: 1. Legality of the Order Passed under Section 270A of the Income Tax Act: The Assessee contended that the order passed by the Learned Assessing Officer (AO) under Section 270A of the Act is "bad in law" and that the Commissioner of Income Tax (Appeals) erred in upholding the same. The Assessee argued that the penalty order should be quashed. The Tribunal noted that the Assessee did not file a return of income under Section 139 for the assessment year in question. The case was reopened under Section 147, and a return was filed declaring a total income of Rs. 27,85,060/-. The AO observed that the Assessee had not declared capital gains amounting to Rs. 22,20,156/-, which led to the initiation of penalty proceedings under Section 270A for misreporting of income. 2. Confirmation of Penalty by the Commissioner of Income Tax (Appeals) under Section 270A read with Sections 270A(8) and 270A(9): The Commissioner of Income Tax (Appeals) dismissed the Assessee's appeal, observing that the Assessee had misreported income by concealing taxable income, justifying the initiation and imposition of a 200% penalty under Section 270A. The Tribunal reviewed the arguments and evidence, noting that the Assessee was under a bona fide belief that no further return was required since taxes were deducted at source by the property buyer. 3. Misreporting of Income and Underreporting of Income: The Tribunal examined whether the case involved underreporting or misreporting of income. Section 270A provides penalties for both underreporting (50% of tax payable) and misreporting (200% of tax payable). The Assessee argued that since the return of income was accepted, there was no underreporting or misreporting. The Tribunal noted the Supreme Court's stance in Hindustan Steel Ltd. vs. Assistant Commissioner, emphasizing that penalties should not be imposed merely because it is lawful to do so, especially if the breach is technical or based on a bona fide belief. 4. Applicability of Penalty Criteria under Section 270A(9): Section 270A(9) lists specific circumstances that constitute misreporting, such as misrepresentation or suppression of facts. The Tribunal found that the Assessee's case did not fall under these criteria. The Assessee had a bona fide belief that no further return was required, as taxes were deducted at source, and the transaction was reflected in Form No. 26AS, which was within the Department's knowledge. 5. Quantum of Penalty under Section 270A(10) read with Section 270A(7): The Assessee argued that even if the penalty were to be upheld, it should be 50% of the tax amount on underreported income, not 200% for misreporting. The Tribunal concluded that this was not a case of misreporting, as there was no intent to deceive or suppress facts. The Assessee's belief that no further return was required was considered bona fide and honest. Conclusion: The Tribunal held that the Assessee's case did not warrant a penalty under Section 270A, as there was no misreporting or suppression of facts. The appeal was allowed, and the penalty was deleted. The Tribunal emphasized the importance of not imposing penalties where the Assessee acts with an honest and genuine belief, aligning with the Supreme Court's guidance in Hindustan Steel Ltd. vs. Assistant Commissioner. The order was pronounced in open court on 22/05/2024.
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