CHITRA RAMANATHAN,CHENNAI vs. ITO, NON CORP WARD-17(6), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, dated 01.03.2023 relevant to the assessment year 2018-19 passed under section 270A of the Income Tax Act, 1961 [“Act” in short].

Fact are, in brief, that the assessee is an individual and having salary income. For the year under consideration, the assessee filed the return of income in ITR-1 on 19.07.2018 and declared gross salary income from Fidelity Business Services India Pvt. Ltd. at ₹.5,61,096/- and claimed Chapter VI-A deduction of ₹.1,50,000/- and thereby, arrived at the total income of ₹.4,11,100/-. The return was duly processed by the CPC on 19.09.2018 and a refund of ₹.28,760/- was issued.

Subsequently, the case was selected for scrutiny and in response to the notices issued under sections 143(2) and 142(1) of the Act, the assessee has submitted various details and also furnished copies of Form 16 issued by Fidelity Business Services India Pvt. Ltd., Form 16A issued by Aitken Spence Hotel Management Pvt. Ltd. and insurance premium receipt in respect of claim of deduction under section 80C of the Act. On verification of ITR-1 filed by the assessee as well as Form 16A of Aitken Spence Hotel Management Pvt. Ltd., the Assessing Officer found that the assessee had received income of ₹.2,60,000/- from Aitken Spence Hotel Management Pvt. Ltd. and interest income of ₹.12,769/- from HDFC from which TDS of ₹.2,600/- and ₹.1,276/- respectively have been made. It was found that the assessee had not disclosed the income received from Aitken Spence Hotel Management Pvt. Ltd. and HDFC totalling to ₹.2,72,769/-. Accordingly, the Assessing Officer issued show- cause notice and immediately, the assessee has paid the taxes.

Subsequently, the Assessing Officer issued notice under section 270A of the Act dated 06.11.2019 to the assessee to explain why the penalty under section 270A of the Act may not be levied. In response, the assessee filed the reply and the Assessing Officer has noted that the reply has been considered and the same was not acceptable. Accordingly, the Assessing Officer levied penalty towards mis-reporting of income under section 270A of the Act of ₹.1,68,569/-, being 200% of tax payable. On appeal, the ld. CIT(A) confirmed the penalty levied under section 270A of the Act.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that against the notice issued under section 270A of the Act, the assessee furnished the reply. However, in the penalty order, the Assessing Officer has not at all discussed anything about the reply of the assessee as well as reasons for not considering the same. Further, the reasons for levying penalty at 200% was also not recorded by the Assessing Officer and thus, the ld. Counsel prayed for deleting the penalty levied under section 270A of the Act.

On the other hand, the ld. DR has submitted that the assessee has not shown the rental income as well as interest income received and thus, it is a fit case to levy penalty under section 270A of the Act for mis- reporting of income.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In the draft assessment order, the Assessing Officer has proposed additions to be made and the assessee has accepted the proposed addition and paid the taxes. Further, against the show-cause notice issued under section 270A of the Act, the assessee has furnished the reply, which was considered by the Assessing Officer, but was not accepted.

On perusal of the penalty order, we find that the Assessing Officer has not recorded what the reply was furnished by the assessee against the show-cause notice issued under section 270A of the Act and why it was not acceptable. Moreover, the Assessing Officer has mentioned any reason for levying penalty at 200%. The Assessing Officer has simply recorded that 200% of penalty has been levied for the tax payable on mis- reporting of income. When the assessee has furnished his explanation in response to the show-cause notice, it is the duty of the Assessing Officer to consider and record as to why the reply is not acceptable. However, in the penalty order, the Assessing Officer has not discussed anything and simply stated that “the reply of the assessee is considered and is not acceptable” is not correct. Under these facts and circumstances of the case, we are of the opinion that the penalty order passed by the Assessing Officer and confirmed by the ld. CIT(A) cannot survive. Thus, the penalty levied under section 270A of the Act stands deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 29th November, 2023 at Chennai.