2025 (3) TMI 400 - AT - Income Tax

Penalty u/s 270A - Assessee has declared income only after notice u/s 148 issued to him - CIT(A) affirming the penalty u/s 270A imposed by the AO on tax paid erroneously after receipt of notice on income which is exempt u/s 10(37 ) - Assessee initially declared income on interest from enhanced compensation later claimed it as exempt u/s 10(37) based on legal advice HELD THAT - In the instant case it is seen that assessee has originally declared the interest on enhanced the compensation in the return filed u/s 139 of the Act and paid the due taxes thereon. Thereafter based on some legal advise and by placing reliance upon the judgment of Ghanshayam (HUF) 2009 (7) TMI 12 - SUPREME COURT the asessee claimed such interest as exempt u/s 10(37) of the Act. When the assessee received the notices u/s 148 of the Act and also after obtaining legal advise it was came to his notice that law has been changed in view of the judgment of Mahender Pal Narang 2021 (3) TMI 1399 - SC ORDER Thus as a law abiding citizen he immediately included such interest in the total income in the return filed in response to notice u/s 148 of the Act and paid due tax along with interest thereon. All the series of events clearly establish that assessee has acted bonafidely and never attempted to under report any income. Assessee should be granted immunity u/s 270AA of the Act and no penalty should be levied in the case of the assessee for under reporting of income u/s 270A of the Act. It is further seen that neither in the assessment order nor in the penalty order the AO has recorded the satisfaction that as to which specific circumstances or instances as provided in clause (a) to (g) of sub-section 2 of section 270A by virtue of which the income of the assessee could be held as under reported is invoked. Nor the same was not communicated to the assessee so as to allow him an opportunity to explain his case. Under these circumstances the entire penalty proceedings are invalid and thus untenable in the eye of law. Accordingly the penalty levied u/s 270A is hereby deleted. Decided in favour of assessee.

Summary

The issues presented and considered in the judgment are as follows:1. Whether the penalty imposed under section 270A of the Income Tax Act, 1961 on the Assessee for erroneously paying taxes on income exempt under section 10(37) of the Act is justified.2. Whether the Assessee's actions in declaring income and paying taxes after receiving notice under section 148 of the Act were bonafide and whether the penalty under section 270A should be upheld.The detailed analysis of the issues is as follows:The Court considered the relevant legal framework under section 270A of the Income Tax Act, 1961, which defines under-reporting of income and provides for penalties in such cases. The Court also examined the provisions of section 270AA which grants immunity from penalty under certain conditions.The Court interpreted the Assessee's case, where the Assessee initially declared income on interest from enhanced compensation, later claimed it as exempt under section 10(37) based on legal advice and judgments of the Supreme Court. The Assessee then declared the income again upon receiving notice under section 148 of the Act. The Court analyzed the Assessee's actions as bonafide and in compliance with the law.Key evidence and findings included the Assessee's original and revised returns, legal advice received, judgments of the Supreme Court, and the notice under section 148 of the Act. The Court noted that the Assessee paid taxes and interest on the income upon receiving the notice.The Court applied the law to the facts by considering the bonafide nature of the Assessee's actions, the changes in legal interpretations, and the Assessee's compliance with tax obligations.Competing arguments were presented by the Assessee's representative and the Senior DR supporting the penalty. The Assessee's representative argued for bonafide actions and eligibility for immunity under section 270AA.The Court concluded that the Assessee acted bonafide, followed legal advice and judgments, paid due taxes, and was eligible for immunity under section 270AA. The Court found the penalty proceedings invalid due to lack of specific charges communicated to the Assessee and quashed the penalty under section 270A. The Court also ruled in favor of the Assessee on the merits of the case, considering the debatable nature of the issue and the Assessee's compliance with tax laws.Significant holdings include the Court's determination that the Assessee should be granted immunity under section 270AA, and the penalty under section 270A was deleted. The Court emphasized the Assessee's bonafide actions and compliance with tax obligations.In conclusion, the Court allowed the Assessee's appeal, ruling in favor of the Assessee and deleting the penalty under section 270A.End of analysis.