2024 (6) TMI 407 - AT - Income Tax

Levy of penalty u/s 270A - assessee was not able to substantiate its expenses with concrete evidences and it is clear that these expenses were wrongly claimed to evade tax - AO has passed penalty order levying penalty u/s 270A(9)(a) of the Act stating that there is a mis-representation or suppression of the facts, thereby misreporting of income - HELD THAT - The facts are that the assessee produced the books of accounts, vouchers and the payment has been made through banking channels, the payments which are required to be subject to deduction of TDS, same has been deducted. Still, the ld. AO was of the opinion that the assessee has not produced the concrete evidence to support the payments. NFAC/CIT(A) has agreed by the contention that there was no failure on the part of assessee to claim expenditure and it was admitted that assessee has substantiated the expenditure by evidence. On the other hand, he invoked the provisions of section 270A(9)(a) of the Act for misrepresentation or suppression of facts. In our opinion, even if he wants to change the head of levying of penalty u/s 270A of the Act after agreeing with the contention of the assessee that it not falls under the limb for which the ld. AO has levied the penalty, he should give a fresh notice to the assessee, so as to give an opportunity of hearing to explain the case of the assessee under the limb which the CIT(A) has invoked. Admittedly, the NFAC has not carried out this exercise. On this count, the penalty cannot be levied. Disallowance of expenditure made by ld. AO on estimate basis though the assessee has filed all the necessary details of expenditure, which is not accepted by the ld. AO for the reason best known to him and as such, this case is not fit for levy of penalty u/s 270A(9)(a) or 270A(9)(c) of the Act. Authorities proceeded merely on the basis of findings in the quantum proceedings and have not independently examined the matter for levy of impugned penalty. Disallowance of expenditure by itself cannot be the reason to levy the penalty u/s 270A(9)(a) or 270(9)(c) of the Act. The addition is only on estimate basis and the ld. AO could not prove that there was non- incurring of this expenditure by assessee and there was no positive material to suggest that the assessee misrepresented or suppressed any facts either before ld. AO or before ld. CIT(A). Hence, in our opinion, this is not a fit case for penalty u/s 270A(9)(a) or 270A(9)(c) of the Act. Accordingly, we delete the penalty. Assessee appeal allowed.

Summary

Issues involved: Appeal against order of NFAC for assessment year 2017-18 u/s 250 of the Income Tax Act, 1961.

Grounds of Appeal:
1. Challenge to the order of the Ld. Commissioner of Income Tax, NFAC, Delhi.
2. Dispute over penalty order upheld by Ld. CIT (Appeals), NFAC, Delhi.
3. Contention regarding under-reported income and applicability of Sec 270A(9).
4. Dispute over expenditure subjected to TDS and alleged bogus expenditure.
5. Challenge regarding uploading of bills and vouchers in faceless assessment.
6. Prayer to confirm no penalty under Sec 270A and delete penalty levied by Ld. AO.

Facts of the Case:
- Assessee engaged in real estate development business, converted prime site into flats.
- Claimed various expenditures including depreciation, subject to tax audit u/s 44AB.
- Scrutiny assessment revealed disallowed expenses, resulting in total addition and demand.
- Penalty u/s 270A proposed and subsequently levied, leading to appeal before ld. CIT(A).

Decision of ld. CIT(A):
- Upheld penalty for misreporting of income under sec. 270A(9)(a) of the Act.
- Dismissed appeal of the assessee based on lack of concrete evidence for claimed expenses.

Appellant's Arguments:
- Contention that expenses were supported by vouchers and audited accounts.
- Disagreement with penalty imposition under sec. 270A(9)(a) based on estimation.
- Cited relevant judgments to support claim that penalty cannot be sustained.

Tribunal's Analysis:
- Noted discrepancies in vouchers and disallowed expenses based on estimates.
- Criticized authorities for not independently examining the matter for penalty levy.
- Found no conclusive evidence to support penalty imposition under sec. 270A(9)(a) or (c).
- Deleted the penalty and allowed the appeal of the assessee.

Conclusion:
The Tribunal ruled in favor of the assessee, deleting the penalty imposed under sec. 270A(9) of the Income Tax Act, 1961. The decision highlighted the importance of concrete evidence in substantiating expenses and criticized the authorities for procedural lapses in penalty imposition. The appeal was allowed on 18th Jan, 2024.