2024 (8) TMI 496 - AT - Income Tax

Penalty u/s. 270A(9) - Mis-reporting of income - excess claim of ineligible expenditure u/s. 35(2AB) - quantum of deduction claimed on account of part disallowance of expenditure by the DISR - HELD THAT - As observed earlier, the certificate of the DSIR in Form No. 3CL disallowing part of the expenditure was received by the assessee on 05.12.2019, i.e. at a much later stage, even after the AO has started enquiry with regard to assessee's claim of deduction under section 35(2AB) of the Act. We further noted that Ld. CIT(A)/NFAC has observed that in view of the facts the assessee cannot be alleged of mis-reporting of income, as it was not made with a malafide intention. Therefore, in our considered opinion, the penalty restricted to 100% of tax payable by CIT(A)/NFAC is not justified, as he himself admitted in his order that the assessee cannot be alleged of mis-reporting of income as it was not made with a malafide intention. Thus, in our view, the penalty in dispute deserves to be deleted. Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 270A(9) of the Income Tax Act, 1961 for misreporting of income.
2. Reduction of penalty imposed by the Assessing Officer by the Ld. CIT(A)/NFAC, Delhi.

Issue 1: Penalty under section 270A(9) of the Income Tax Act, 1961 for misreporting of income:

The appellant filed an appeal against the order of the Ld. CIT(A)/ National Faceless Appeal Centre (NFAC), Delhi, challenging the penalty imposed under section 270A(9) of the Income Tax Act, 1961. The appellant claimed a business loss of Rs. 3,28,29,990/-, but the Assessing Officer disallowed a portion of this claim related to expenditure under section 35(2AB). The AO initiated penalty proceedings for misreporting of income and imposed a penalty of Rs. 1,09,39,526/-, which was later reduced to 100% by the Ld. CIT(A)/NFAC, Delhi. The appellant contended that the penalty was unjustified as the claim was based on the tax audit report and not made deliberately or with malafide intention. The Ld. CIT(A) also acknowledged that there was no misreporting of income with malafide intention. Consequently, the tribunal held that the penalty deserved to be deleted, and the appeal was allowed.

Issue 2: Reduction of penalty imposed by the Assessing Officer by the Ld. CIT(A)/NFAC, Delhi:

The appellant argued that the penalty imposed by the Assessing Officer under section 270A(9) for misreporting of income was not justified as the claim for deduction under section 35(2AB) was based on the tax audit report and was revised after receiving DSIR approval disallowing a part of the expenditure. The tribunal noted that the appellant revised the claim during assessment proceedings upon learning about the disallowed expenditure. The Ld. CIT(A) acknowledged that the claim was not made with malafide intention and that the DSIR had approved the R&D facility and expenditure. The tribunal agreed that there was no misreporting of income with malafide intention and, therefore, ruled in favor of the appellant, directing the deletion of the penalty.

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