DURAISAMY SENTHIL KUMAR,ERODE vs. ITO, ERODE
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, VICE- & SHRI MANJUNATHA.G
PER MANJUNATHA.G AM:
This appeal filed by the assessee is directed against
order passed by the learned Commissioner of Income Tax
(Appeals), National Faceless Appeal Centre (NFAC), Delhi
dated 24.03.2023 and pertains to assessment year 2018-19. 2. The assessee has raised following grounds of appeal:-
“1. The order of the NFAC, Delhi dated 24.03.2023 vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1051236160(1) for the above mentioned Assessment Year is contrary to law, fact and in circumstances of the case.
The NFAC, Delhi erred in confirming the levy of penalty u/s 270A of the Act to the tune of Rs. 9,69,180/- on the presumption of misreporting of income of Rs.4,84,590/- as per the provisions of section 270A(8) of the Act without assigning proper reasons and justification.
2
The NFAC, Delhi failed to appreciate the levy of penalty u/s 270A of the Act for presumed mis-reporting of income was wholly unjustified and ought to have appreciated that the inadvertent mistake of treating the Selfoccupied Property as Let out Property for the purpose of computation of income from house property and consequential claim of carried forward the loss from House Property amounting to Rs. 15,05,253/-would not attract automatically the presumption of misreporting of income, thereby vitiating the levy of penalty u/s 270A of the Act.
The NFAC, Delhi failed to appreciate that failed to appreciate that the presumption of mis-reporting of income on the factual matrix of the case was erroneous and ought to have appreciated that the bonafide action of the appellant in not claiming the carried forward losses from house property for the purpose of computation of taxable total income for the next immediate succeeding assessment year, fortify the inadvertent mistake of the appellant in reporting such loss for the assessment year under consideration, thereby vitiating the consequential penalty order under consideration.
The NFAC, Delhi ought to have appreciated that in any event, the present penal provisions under consideration are subjected to reasonable cause in terms of Section 273B of the Act and further ought to have appreciated that the discretion vested in the hands of the JA0 for passing the penalty order under consideration was not exercised in proper perspective, thereby vitiating the impugned order in its entirety.
The NFAC, Delhi failed to appreciate that the findings in para 8 of the impugned order were wrong, incorrect, erroneous, invalid, unjustified and not sustainable both on facts and in law.
The NFAC, Delhi ought to have appreciated that in any event. the levy of penalty u/s 270A of the Act on various facets was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.
The NFAC, Delhi failed to appreciate that the impugned order was passed out of time, invalid, passed without juri iction and not sustainable both on facts and in law.
The NFAC, Delhi failed to appreciate that procedure for conducting Faceless Appeal Regime was not followed and ought to have appreciated that in the light of the procedural irregularities committed, the impugned order under consideration accordingly should be reckoned as bad in law.
3
The NFAC, Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law.”
Brief facts of the case are that the assessee has filed his
return of income for the assessment year 2018-19 on 18.03.2019 declaring total income of Rs.5,10,760/-. The assessment has been completed u/s.143(3) r.w.s. 143(3A) &
143(3B) of the Income Tax Act, 1961, on 12.04.2021 and determined total income at Rs.5,73,760/-. During the course of assessment proceedings, on the basis of information submitted
by the assessee, the Assessing Officer noticed that the assessee has computed loss from ‘income from house
property’ and carried forward house property loss of Rs.15,05,253/- to subsequent assessment years. On verification of details filed by the assessee, the Assessing
Officer noticed that the assessee has wrongly claimed total
interest paid on loan borrowed for acquiring self-occupied
house property as against maximum limit of Rs.2 lakhs and carried forward loss of Rs.15,05,253/-. Therefore, restricted loss
from income from house property at Rs.2.00 lakhs and disallowed carried forward losses amounting to Rs.15,05,253/-.
4
The Assessing Officer had also initiated penalty
proceedings u/s.270A of the Income Tax Act, 1961, for under-
reporting of income, as a consequence of misreporting and called upon the assessee to explain as to why penalty shall not be levied. In response, the assessee submitted that while filing
return of income for assessment year 2018-19, he has computed excessive loss under the head ‘income from house
property’ and carried forward losses to subsequent years.
However, while filing return of income for assessment year
2019-20 and the same was filed on 28.07.2020, he has not taken set off of brought forward losses against house property
income. Therefore, showing excess loss by mistaken of facts
cannot be considered as under-reporting of income. The Assessing Officer, however, was not satisfied with the explanation furnished by the assessee and according to the Assessing Officer, as per provisions of section 270A(2) of the Act, if the income assessed has effect of reducing loss or converting such loss into income should be considered as under-reporting income and penalty provisions of section 270A
of the Act become applicable. The assessee has claimed set
off of unabsorbed losses in the next year or not claimed is also 5 does not matter. Since, the assessee has computed excess
loss, the Assessing Officer has levied penalty of Rs.9,69,180/-
under provisions of section 270A(8) of the Income Tax Act,
1961, which is equivalent to 200% of tax sought to be evaded.
Being aggrieved by the assessment order, the assessee
carried the matter in appeal before the First Appellate Authority,
but could not succeed. The Ld.CIT(A) for the reasons stated in their appellate order dated 24.03.2023 sustained penalty levied
u/s.270A of the Act and dismissed appeal filed by the assessee. Aggrieved by the Ld.CIT(A) order, the assessee is in further appeal before us.
The learned counsel for the assessee submitted that the learned CIT(A) erred in confirming levy of penalty u/s.270A of the Act to the tune of Rs.9,69,180/- on presumption of misreporting of income of Rs.4,84,590/-, as per the provisions
of section 270A(8) of the Act, without appreciating fact that the assessee neither claimed loss computed under the head
‘income from house property’ against any other income for the impugned assessment year, nor set off of brought forward loss
under the head ‘income from house property’ against income
6 from house property for the subsequent assessment year. The learned counsel for the assessee referring to provisions of section 270A(8) of the Act submitted that the Assessing Officer
failed to make out a case of levying 200% penalty, which is evident from fact that parameters required u/s.270A(8) of the Act does not applicable to the facts of the present case.
The learned DR Shri P.Sajit Kumar, supporting order of the learned CIT(A), submitted that it is a clear case of misreporting or suppression of facts, as per section 270A(9) of the Act, which is clear from the facts brought on record by the Assessing Officer that the assessee has computed excessive
loss under the head ‘income from house property’ and carry
forward loss to subsequent assessment years. The arguments
of the assessee that he did not claim set off of loss in subsequent year does not hold good for levy of penalty,
because, the moment income computed results in excess
income over and above income returned or reduces loss, then
penalty u/s.270A is applicable. The Assessing Officer has rightly levied penalty and the Ld.CIT(A) after considering
7 relevant facts has rightly confirmed the penalty levied by the Assessing Officer and hence, their orders should be upheld.
We have heard both the parties, perused material
available on record and gone through orders of the authorities
below. There is no dispute with regard to fact that the assessee
has computed excess loss of Rs.15,05,253/- under the head
‘income from house property’ in respect of self-occupied house
property. As per the provisions of the Act, interest paid on borrowed capital for self-occupied house property is allowable
as deduction upto maximum limit of Rs.2.00 lakhs per annum.
In the present case, the assessee has claimed actual interest
paid on loan borrowed for self-occupied house property
which results in loss from house property amounting to Rs.15,05,253/-. The assessee has computed loss from house
property and carried forward loss to subsequent assessment
years as per return of income filed for impugned assessment
year. It is also an admitted fact that the assessee has not taken benefit of set off of brought forward losses under the head ‘income from house property’ against income from house
property in subsequent assessment year 2019-20, which is 8 evident from return of income filed for assessment year 2019-
20 on 28.07.2020. In fact, the Assessing Officer never disputed
this fact, but only reason for the Assessing Officer to levy
penalty u/s.270A(8) of the Act is the assessee has misreported
or suppressed facts with regard to income from house
property which resulted in computation of excessive loss under the head ‘income from house property’. According to the Assessing Officer, whether the assessee has claimed set off of unabsorbed losses in next year or not claimed is also does not matter.
In our considered view, the Assessing Officer has misunderstood the provisions of section 270A(9), while
interpreting levy of penalty for under reporting of income. The concept of underreporting of income should be understood in the context of claiming any deduction or expenses, which is otherwise not allowable for computing loss, which is not otherwise as per law, which resulted in reduction in taxable
income for relevant assessment year. Even if you want to apply
sub-clause (a) of sub-section (9) of section 270A of the Act,
same needs to be understood with the context of reduction in income or reduction in loss computed by the assessee for 9 relevant assessment year. In the present case, parameters
prescribed for levy of penalty u/s.270A is not satisfied, because
the assessee neither claimed excessive loss, which resulted in reduction in taxable income or reduction in loss to be adjusted
against income either in the impugned assessment year or subsequent assessment years. Therefore, explanation offered
by the assessee that he has computed excessive loss under the head ‘income from house property’ in respect of self-
occupied house property needs to be understood in the above
context of underreporting of income. Since, the assessee has neither claimed any benefit of loss against any other income
for the impugned assessment year, nor has taken set off of said
loss against income from house property in subsequent
assessment years, in our considered view, the Assessing
Officer has completely erred in considering loss computed by the assessee as underreporting of income on account of mis
reporting of income. Thus, we are of the considered view that the Assessing Officer has completely erred in levying penalty
u/s.270A(8) of the Income Tax Act, 1961, in respect of loss
computed under the head ‘income from house property’. The ld. CIT(A) without appreciating relevant facts has simply
10 sustained penalty levied by the Assessing Officer and thus, we
set aside order passed by the Ld.CIT(A) and direct the Assessing Officer to delete penalty levied u/s.270A of the Income Tax Act, 1961. 10. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 27th September, 2023 (महावीर "संह) (जी. मंजुनाथ) (Mahavir Singh) (G. Manjunatha ) उपा"य"/ Vice-President लेखा सद%य / Accountant Member चे'नई/Chennai, (दनांक/Dated : 27.09.2023 DS
आदेश क" ""त*ल+प अ,े+षत/Copy to: 3. आयकर आयु-त/CIT 4. +वभागीय ""त"न0ध/DR 1.Appellant 2. Respondent 5. गाड" फाईल/GF.
