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2024 (11) TMI 167 - AT - Income TaxLevy of penalty u/s 270A - Disallowance of excess depreciation on computer software - as per AO internally generated software to fall under the ambit of intangible assets thereby eligible for depreciation only @25% as against @60% claimed by the assessee - HELD THAT - The facts narrated herein above, in our considered opinion, clearly prove that there is neither underreporting nor misreporting by the assessee. The disallowance of depreciation by adopting different rate had arose only due to difference in interpretation by the ld AO by not agreeing to the contention of the assessee. Ultimately this is only disallowance of a claim made by the assessee. There cannot be any allegation of either underreporting or misreporting of income. There is no concealment on the part of the assessee as all the details relevant for adjudication of the issue had been duly placed on record by the assessee in the return coupled with tax audit report thereon. Hence, the principles laid down by the Hon'ble Supreme Court and various Hon ble High Courts on the levy of penalty for concealment of income or furnishing inaccurate particulars of income u/s 271(1)(c) of the Act shall duly apply to the misreporting or underreporting of income in Section 270A of the Act. Hence, by placing reliance on the decision of Reliance Petro Products Ltd 2010 (3) TMI 80 - SUPREME COURT and Price Waterhouse Coopers (P) Ltd 2012 (9) TMI 775 - SUPREME COURT there is absolutely no justification at all for levy of penalty u/s 270A - Appeal of assessee allowed.
Issues:
1. Justification of penalty u/s 270A by National Faceless Appeal Centre (NFAC), Delhi. Analysis: The judgment pertains to an appeal (ITA No.1254/Del/2024) for AY 2017-18 arising from the order of the National Faceless Appeal Centre (NFAC), Delhi against the assessment order passed by the Assessing Officer, NFAC, Delhi. The main issue to be decided was whether the NFAC was justified in confirming the levy of penalty u/s 270A of the Income-tax Act, 1961. The assessee had claimed depreciation on internally generated software at 60%, but the AO allowed it only at 25%, resulting in disallowance of excess depreciation. The AO then levied a penalty u/s 270A(9) for misreporting income due to underreporting. However, the tribunal found that there was no underreporting or misreporting by the assessee, as the difference arose from a disagreement in interpretation. The tribunal relied on Supreme Court decisions and held that the penalty was not justified, directing the AO to delete it and allowing the appeal of the assessee. The tribunal observed that the disallowance of depreciation was not due to underreporting or misreporting of income but stemmed from a variance in interpretation between the assessee and the AO. The tribunal emphasized that all relevant details were disclosed by the assessee, and there was no concealment of income. Referring to Supreme Court cases, the tribunal concluded that the principles applicable to penalty u/s 271(1)(c) for concealment of income also apply to misreporting or underreporting of income u/s 270A. Relying on decisions like CIT Vs. Reliance Petro Products Ltd and Price Waterhouse Coopers (P) Ltd vs CIT, the tribunal found no justification for the penalty u/s 270A in the present case. Consequently, the tribunal directed the AO to delete the penalty and allowed the grounds of appeal raised by the assessee. In conclusion, the tribunal allowed the appeal of the assessee, ruling in favor of the assessee by directing the deletion of the penalty imposed by the AO under section 270A of the Income-tax Act, 1961. The tribunal emphasized that there was no underreporting or misreporting of income by the assessee, and the disagreement in depreciation treatment did not warrant the imposition of a penalty. The decision was based on established legal principles and Supreme Court judgments, highlighting the importance of disclosure and lack of concealment in tax matters.
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