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2025 (1) TMI 1490 - AT - Income TaxPenalty levied u/s. 270A - guilty of misreporting of income - appellant had not filed original return of income and filed the return of income in response to notice u/s. 148 disclosing income - eligibility for immunity u/s 270AA - As per assessee income was offered voluntarily and also that the application u/s. 270AA of the Act seeking immunity from imposition of penalty was filed in the prescribed form HELD THAT - Case of the appellant does not fall under the category of unreported income. It can be considered under clause (b) of subsection (2) of section 270A of the Act. So it cannot be said that the case of the appellant falls under subsection (9) of section 270A of the Act. Under the circumstances the AO was neither justified in rejecting the application u/s. 270AA of the Act nor ought not have levied penalty holding the appellant is guilty of misreporting of income. It is the settled position of law that when penalty proceedings were initiated invoking one limb of section 270A penalty cannot be levied under another limb of this section. As decided in Prem Brothers Infrastructure LLP 2022 (6) TMI 130 - DELHI HIGH COURT AO as well as assessee had used same details to arrive at different quantum of disallowances this by no stretch of imagination could be held to be misreporting and further in absence of details as to which limb of section 270A was attracted impugned penalty order was to be quashed and revenue was to be directed to grant immunity u/s 270AA. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The primary issue considered by the Tribunal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in confirming the levy of penalty under Section 270A of the Income Tax Act, 1961, on the grounds of alleged misreporting of income by the appellant. Additionally, the Tribunal examined whether the rejection of the appellant's application for immunity under Section 270AA was appropriate, given the circumstances of the case. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves Section 270A of the Income Tax Act, which deals with the penalty for under-reporting and misreporting of income. Subsection (2)(b) specifies that under-reporting occurs when the income assessed is greater than the maximum amount not chargeable to tax, especially when no return of income has been furnished or when a return is furnished for the first time under Section 148. Subsection (9) outlines the conditions under which misreporting is determined. The Tribunal also referenced a precedent from the Delhi High Court in the case of Prem Brothers Infrastructure LLP v. NFAC, which clarified the application of penalties under different limbs of Section 270A. Court's Interpretation and Reasoning The Tribunal noted that the appellant did not file an original return of income but submitted a return in response to a notice under Section 148, disclosing an income of Rs. 18,08,000/-. This return was accepted during the assessment proceedings, and the appellant paid the due tax and interest. The Tribunal emphasized that the appellant fulfilled the necessary conditions for immunity under Section 270AA, which includes not appealing the assessment order and paying the assessed tax within the specified period. The Tribunal reasoned that the appellant's case did not fall under the category of misreporting as defined in Section 270A(9). Instead, it should be considered under Section 270A(2)(b), which pertains to under-reporting when no original return is filed, but a return is furnished for the first time under Section 148. Key Evidence and Findings The Tribunal found that the appellant had disclosed the income voluntarily in response to the notice under Section 148 and had not attempted to conceal any income. The appellant's actions aligned with the requirements for immunity under Section 270AA, as he did not contest the assessment and paid the required taxes promptly. Application of Law to Facts Applying the legal provisions, the Tribunal determined that the penalty imposed under Section 270A for misreporting was inappropriate. The Tribunal highlighted that invoking one limb of Section 270A for initiating penalty proceedings does not justify levying a penalty under another limb without clear grounds. The Tribunal relied on the precedent set by the Delhi High Court, which underscored the necessity of specifying the applicable limb of Section 270A when imposing penalties. Treatment of Competing Arguments The appellant argued that the penalty for misreporting was unjustified, given the voluntary disclosure and compliance with Section 270AA conditions. The respondent supported the lower authorities' decision, asserting that the penalty was warranted. The Tribunal favored the appellant's argument, finding that the conditions for misreporting were not met, and the appellant should have been granted immunity under Section 270AA. Conclusions The Tribunal concluded that the appellant was not guilty of misreporting income, and the penalty imposed under Section 270A was unwarranted. The Tribunal quashed the penalty order and directed that immunity under Section 270AA should be granted to the appellant. SIGNIFICANT HOLDINGS The Tribunal established that when penalty proceedings are initiated under one limb of Section 270A, a penalty cannot be levied under a different limb without clear justification. The Tribunal's core principle was that the appellant's actions did not constitute misreporting, and the appellant was entitled to immunity under Section 270AA due to compliance with the necessary conditions. Final Determinations on Each Issue The Tribunal determined that the penalty for misreporting under Section 270A was incorrectly applied and should be quashed. The appellant's appeal was allowed, and the Tribunal ordered that immunity under Section 270AA be granted, aligning with the legal precedent and the facts presented.
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