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TMI Blog2024 (12) TMI 1552X X X X Extracts X X X X X X X X Extracts X X X X ..... se was selected for complete scrutiny under CASS to examine the following issues: (i) Default in TDS (ii) Default in TDS & Disallowance for such default (iii) Refund claim (iv) Unsecured loan 2.1. Accordingly, the Assessing Officer issued statutory notices u/sec. 143(2) and 142(1) of the I.T. Act, 1961, in response to which, the Authorised Representative of the Assessee appeared before the Assessing Officer from time to time and filed the requisite details. The Assessing Officer completed the assessment determining the total income of the assessee at Rs. 32,18,44,630/- by estimating the income from contract work at 10% of the turnover as against 7.37% declared by the assessee, which the assessee accepted and paid the due taxes. 2.2. Subsequently, the Assessing Officer initiated penalty proceedings u/sec. 270A of the Act. Before the Assessing Officer assessee submitted that penalty u/sec. 270A is not leviable as the case of the assessee company is covered by exclusion mentioned in sec. 270A(6)(a) of the Act. It was submitted that during the course of assessment proceedings, statement of the Managing Director Shri Mahendra Murlidhar Patil was recorded u/s. 131 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of exact clause of mis-reporting of income under which he wanted to charge the assessee company. Since the Assessing Officer has failed to mention both in the assessment order as well as in the notice issued u/sec. 274 r.w.s. 270A of the Act as to under which limb/sub-clause of sec. 270A(9) of the Act penalty proceedings are initiated, penalty so levied is not in accordance with law. The assessee also relied on various decisions to the proposition that penalty is not leviable in absence of non-communication of the exact limb from clause (a) to (g) of sub-section (2) of section 270A or as to which of the specific clause (a) to (f) of sub-section (9) of section 270A was detriment before imposing the impugned penalty u/sec. 270A of the Act in the assessment order or in the notice u/sec. 274 r.w.s. 270A of the Act. 3.2. Based on the arguments advanced by the assessee, the Ld. CIT (A) cancelled the penalty so levied by observing as under : "Finding : 5.2. I have considered the submission of the appellant and the facts of the case. From the assessment order, it is seen that the addition is made on account of addition of Net Profit taken 10% of contract receipts of Rs. 8,33,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total Income assessed or reassessed Immediately before such reassessment; (g) the Income assessed or reassessed has the effect of reducing the loss or converting such loss into income. (3) The amount of under-reported income shall be.- (i) in a case where income has been assessed for the first time, - (a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub-section (1) of section 143; (b) in a case where no return has been furnished,- (A) the amount of income assessed, in the case of a company, firm or local authority; and (B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A); (ii) in any other case, the difference between the amount of income reassesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. (5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported for the preceding year in the following order- (a) the preceding year immediately before the year in which the receipt, deposit or investment appears, being the first preceding year, and (b) where the amount added or deducted in the first preceding year is not sufficient to cover the receipt, deposit or investment, the year immediately preceding the first preceding year and so on. (6) The under-reported income, for the purposes of this section, shall not include the following, namely:- (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported income as if it were the total income; (c) in any other case determined in accordance with the formula- (X-Y) where, X = the amount of tax calculated on the under-reported income as increased by the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order as if it were the total income; and Y = the amount of tax calculated on the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order. (11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the basis of Imposition of penalty in the case of the person for the same or any other assessment year. (12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the Assessing Officer, the Commissioner (Appeals), the Commissioner or the Principal Commissioner, as the case may be." In this connection, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions an otiose. I accordingly hold in these peculiar facts and circumstances that the impugned penalty notice issued by the Ld. AO deserves to be quashed as not sustainable in the eye of law. In view of the above, penalty levied u/s 270A of the Act is bad in law. Hence, the AO is directed to delete the impugned penalty. The additional ground raised by the appellant is, therefore, allowed. 5.6. As the ground No. 4 of appeal has been allowed, therefore, the grounds no.1 to 3 of the appeal become academic in nature and do not require separate adjudication." 3.3. Since the Ld. CIT (A) has cancelled the penalty on account of non-specification of limb within which the penalty is imposed as unsustainable, he did not adjudicate the ground challenging the validity of the penalty when such income is estimated. 4. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal by raising the following grounds : 1. "On the facts and in the circumstances of the case and in law the Ld. CIT (A) has erred by deleting penalty levied u/s. 270A of the Act of Rs. 4,19,55,786/- for mis- reporting income. 2. On the facts and in the circumstances of the case and in law, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Counsel for the Assessee relied upon the following decisions : 1. Sagar S. Wedhane v. ITO [ITA No. 191/PUNE/2024] dated 03.07.2024. 2. ACIT v. Kedari Redekar Shikshan Sanstha [ITA No. 559/PUNE/2024] dated 05.07.2024. 3. Shivaji Sonawane v. ITO [ITA No. 708/PUNE/2023] dated 02.02.2024. 4. Annasaheb Gunjal v. ITO [ITA No. 182/PUNE/2024] dated 21.10.2024. 5. Kasat Prakash M. HUF v. ITO [ITA No. 1328/PUNE/2023] dated 19.06.2024. 6. Ritu Multitrade Services Pvt. Ltd. v. ITO [(2024) 164 taxmann.com 121 (Mum)]. 7. Lyka Labs Ltd. v. DCIT [(2024) 38 NYPTTJ 706 (Mum)]. 8. Smita Ashok Thakur v. DCIT [ITA No. 4386/Mum/2023] dated 07.10.2024. 9. G.R. Infraprojects Ltd. v. ACIT [(2024) 336 CTR 249 (Raj H.C.)]. 10. Schneider Electric South East Asia (HQ) PTE Ltd. v. ACIT [(2022) 443 ITR 186 (Del) (HC)]. 11. Kishor D. Patil v. ITO [ITA Nos. 54 & 55/PUNE/2023] dated 30.03.2023. 12. PCIT v. Jehangir H. C. Jehangir [(2023) 155 taxmann.com 209 (Bom HC)]. 13. Mohd. Farhan A. Shaikh v. DCIT [434 ITR 1 (Bom)(HC)]. 6.1. He submitted that although the assessee has raised a ground before the Ld. CIT (A) that when profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the assessee company for A.Y. 2020-21. Penalty proceedings u/s 270A of the Income Tax Act, 1961 is initiated separately for underreporting in consequence of mis-reporting of income." 7.1. Similarly, we find the notice issued u/sec. 274 r.w.s. 270A dated 30.09.20222, copy of which, is placed at page-12 of the paper book, reads as under : 7.2. Similarly, the second notice issued u/sec. 270A dated 05.01.2023 reads as under : 7.3. We find the Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. v. ACIT reported in (2022) 443 ITR 186 (Del) has held that when there is not even a whisper as to which limb of sec. 270A is attracted and how the ingredient of sub-sec.(9) of sec. 270A is satisfied, the action of the Assessing Officer is contrary to the legislative intent. The relevant observations of Hon'ble High Court reads as under : "6. Having perused the impugned order dt. 9th March, 2022, this Court is of the view that the respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under s. 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove backdrop of the factual matrix that the Ld. AO disallowed the excess claim of capital expenditure of Rs. 1,42,54,268/-. In our considered view there is no intentional misrepresentation of expenditure as alleged. By no stretch of imagination it can be said to be a case of attempted tax evasion as even after revision of computation, the taxable income remained Nil which is same as returned income of the assessee. In the assessment order there is no whisper that there is under- reporting on total income as a consequence to misreporting as envisaged u/s 270A(8) and (9) of the Act. 10. None-the-less the notice dated 27.12.2019 u/s 274 r.w.s. 270A of the Act states : "it appears to me under-reporting/misreporting of income". Obviously, the initiation of penalty itself is based on suspicion and surmise. Nowhere it has been pinpointed - either in the penalty notice or in the impugned order of penalty as to under which stipulated specific clauses (a) to (f) to subsection (9) r.w. sub-section (8) of section 270A of the Act, the assessee has committed default attracting "underreporting" as a consequence of "mis-reporting". In such a scenario the Co-ordinate Bench of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further detailed investigation on facts, is already settled in NTPC Ltd. Vs. CIT (1998) 229 ITR 383 (SC). That being the case, we are of the considered view that going by the foregoing judicial precedent, this tribunal is very much entitled to entertain and decide such a pure legal plea for the first time in section 254(1) proceedings. We accordingly reject the Revenue's instant technical arguments to conclude in light of section 270A (8) & (9) r.w. clauses (a to f) that the learned Assessing Officer's failure to pinpoint the corresponding default of assessee's part indeed vitiates the entire proceedings as per (2022) 443 ITR 186 (Del) Schneider Electric South Asia Ltd. Vs. ACIT (in the new scheme) and Md. Farhan S.A. Vs. ACIT (2021) 434 ITR 1 (Bom.) in section 271(1)(c) old penal provision. We order accordingly. The impugned penalty of Rs. 15,54,736/- stands deleted in very terms. 5. This assessee's appeal is allowed." 7.6. The various other decisions relied on by the Learned Counsel for the Assessee also supports his case to the proposition that where neither in the assessment order nor in the notice issued u/sec. 274 r.w.s. 270A the Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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