2023 (3) TMI 815 - AT - Income Tax

Penalty u/s 270A - payment of VAT was made / deposited after due date of filing of return - HELD THAT - AO simply made disallowance by taking view that such amount was not paid before due date of filing return. It is settled law that disallowance of amount can be made, only on the event if such allowance is claimed in the computation of income. AO while passing the assessment order has not given any categorically finding that the assessee claimed deduction of such amount in computation of income of such amount. In response to show cause against levy of penalty u/s 270A(2), the assessee again specifically contended that assessee has not claimed the amount as expenditure in the succeeding assessment year. The alleged disallowance does not find place in clause (a) to (f) of sub-section (9) of Section 270A. Assessee while filing response to the show cause during the assessment as well as during the penalty proceedings has given bona fide explanation within the scope of sub-section-6 of section 270A and disclosed all the material. Thus, the penalty imposed by AO is quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty imposed under section 270A of the Income Tax Act, 1961 for assessment year 2017-18.
2. Validity of penalty imposition based on VAT payment made after the due date of filing the return.
3. Application of due diligence by the Assessing Officer in assessing under-reporting of income.
4. Adjudication of penalty appeal by the National Faceless Appeal Centre, Delhi.
5. Consideration of bona fide explanation by the assessee in penalty proceedings.

Issue 1: Penalty Imposed under Section 270A:
The appeal was directed against the penalty levied by the Assessing Officer under section 270A of the Income Tax Act, 1961. The penalty was imposed due to the VAT payment made after the due date of filing the return for the assessment year 2017-18. The Assessing Officer disallowed the amount and initiated penalty proceedings for misreporting under section 270A(2) of the Act.

Issue 2: Validity of Penalty Imposition based on VAT Payment:
The Assessing Officer issued a show cause notice under section 274 read with section 270A to offer an explanation for the penalty imposition. The assessee contended that the disallowance was tax-neutral as the VAT payment would be deductible in the subsequent assessment year. The Assessing Officer, however, held that there was under-reporting of income due to misreporting, leading to the imposition of a penalty.

Issue 3: Application of Due Diligence by Assessing Officer:
The Assessing Officer maintained that due diligence was exercised while passing the assessment order, and penalty proceedings were initiated for under-reporting of income in consequence of misreporting. The penalty was calculated at 200% of the tax payable on the under-reported income.

Issue 4: Adjudication of Penalty Appeal by NFAC/Ld. CIT(A):
The penalty appeal was adjudicated by the National Faceless Appeal Centre, Delhi. The NFAC/Ld. CIT(A) confirmed the action of the Assessing Officer, leading to the filing of the present appeal before the Tribunal by the assessee.

Issue 5: Consideration of Bona Fide Explanation by the Assessee:
The assessee argued that the disallowance of VAT payment made after the due date did not fall within the categories of misreporting specified in section 270A. The assessee maintained that the explanation provided was bona fide and disclosed all material facts, thus warranting the dropping of the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, quashing the penalty imposed by the Assessing Officer. The Tribunal found merit in the assessee's arguments regarding the tax-neutral nature of the disallowed amount and the bona fide explanation provided. The penalty was deemed unjustified, and the assessing officer was directed accordingly.