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TMI Blog2025 (4) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,972/- without deducting TDS, and therefore, applying provisions of section 40(a)(ia) of the Act, 30% of the said amount of Rs.15.09 crores,i.e Rs.4,52,85,292/-, was added to the income of the assessee. The AO initiated penalty proceedings for under-reporting of income in consequence of misreporting,under section 270A(1) r.w.s 270(A)(9) of the Act. 3. During penalty proceedings, the assessee remained unrepresented and the AO accordingly levied penalty for under reporting of income in consequence of misreporting at the rate of 200% of the tax sought to be evaded on the addition made, as prescribed in law u/s 270A(8) of the Act, resulting in penalty of Rs.3,13,44,670/-. 4. The matter was carried in appeal before the ld.CIT(A), where again the assessee remained unrepresented, but the ld.CIT(A) on going through the facts of the case noted that it was not a case of misreporting of income, but on the contrary, he held that it was a case of underreporting of income in terms of provisions of section 270A(1)/(2) of the Act. Accordingly he restricted penalty levied to 50% of the tax sought to be evaded on the underreported income, in terms of the applicable provision of law u/s 270A (7) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted, and it was on the basis of this disclosure by the assessee in the tax audit report that the assessee's case was picked up for scrutiny assessment, and addition made on account of the said disclosure. In this regard, he drew our attention to para-1 of the assessment order, wherein he pointed out that it was specifically mentioned that the case was selected for limited scrutiny on account of "Default in TDS, and disallowance for such default "and the reason for limited scrutiny was "Lower amount disallowed under section 40(a)(ia) in ITR (Part A-01) in comparison to audit report". He pointed out that even in the questionnaire issued to the assessee under section 142(1) of the Act, noted at para-1 of the assessment order, the assessee was asked to furnish complete details of disallowance under section 40(a)(ia) of the Act as per the audit report, and to explain why no amount had been disallowed under section 40(a)(ia) of the Act, whereas the tax auditor had reported disallowance under section 40(a)(ia) of the Act. He pointed out that the assessment order contained the details of violation of provision of TDS by the assessee, picked up by the AO from the tax audit report and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(1)(a) of the Act. But, having said so, he thereafter pointed out that the fact of the matter was that, no such adjustment was made to the income of the assessee in the intimation made under section 143(1)(a) of the Act. Copy of the same was filed before us. 10. Thereafter, the ld.counsel for the assessee contended that in terms of provisions of section 270A sub-section (2) of the Act, no penalty was leviable on the addition/disallowance which were of the nature to be adjusted in the intimation made under section 143(1)(a) of the Act. He drew our attention to section 270A(1) sub-section (2) as under: 270A. (1) The Assessing Officer or 95[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. (2) A person shall be considered to have under-reported his income, if- (a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143; (b) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) of the Act, he relied on the order of the ld.CIT(A), pointing out that he had given categorical finding that sub-section (9) of section 270A is an inclusive list of cases of misreporting of the income, and the assesee's case does not fall in any of the instances listed therein. He drew our attention to the provision of section 270A(9) of the Act in this regard, and to the findings of the ld.CIT(A) to the effect that the addition made in the case of the assessee did not fall in any of the instances listed under section 270A(9) of the Act. He, therefore, pleaded that in the present case, the addition made to the income of the assessee under section 40(a)(ia) of the Act, did not tantamount either to under reporting of income and or misreporting of income, and no penalty in terms of provision of section 270A(2) r.w.s 270A(7)or 270A(9) of the Act were leviable on the assessee. 14. The ld.DR, however, vehemently supported the order of the AO and contended that the AO had correctly levied penalty for misreporting of income in terms of provisions of section 270A(9) of the Act. 15. Having heard contentions of both the parties, and on going through the orders of the authorities below, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6A or Form 16 which has not been included in computing the total income in the return: 17. In terms of sub-clause (iv) thereto, we have noted,all disallowance of expenditure reported in the audit report but not taken into account in computing the total income in the return, are liable to be adjusted in the intimation made under section 143(1)(a) of the Act. The fact on record being that the disallowance was reported in the Tax Audit Report of the assessee but was not made in the return of income, the adjustment clearly was liable to be made in the intimation made u/s 143(1)(a) of the Act The ld.DR was unable to controvert the said position of law. But the fact of the matter is that in the intimation made to the assessee under section 143(1)(a) of the Act, this adjustment was not made. 18. Considering the same, what is to be considered is, whether, the disallowance of such expenses now made in assessment framed under section 143(3) of the Act would tantamount to under reporting of the income as per the provisions of section 270A(2) of the Act. The provision of section are reproduced by us above, and are being reproduced again for clarity: 270A. (1) The Assessing Officer or 95[ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A(2)(a), by treating only income assessed which is greater than income determined u/s 143(1)(a) of the Act as underreported income, is very clear that apparent mistakes in the computation of income are not to be subject to imposition of any penalty. 21. Section 270A(2)(a) of the Act, has to be read likewise that additions which are subject matter of adjustments u/s 143(1)(a) of the Act are outside the purview of being subject to penalty on account of underreporting of income. It is only income determined after scrutiny assessment which qualifies as underreported income . 22. In the facts circumstances of the case, since the addition made to the income of the assessee was an apparent mistake, which was liable to be adjusted in the intimation made under section 143(1)(a) of the Act, the addition of the same made in the regular assessment would not qualify as under reported income. 23. Having said so, since we have held the impugned income not to qualify as under reported income there is no question of the same qualifying as misreported income, since it is only when the under reported income is in consequence of misreporting that it qualifies as misreported of income. Therefore, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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