SANTOSH KUMAR KHANDELWAL,BARIPADA vs. ACIT, BALASORE, BALASORE

For that the penalty so initiated by the AO is arbitrary and unjustifed and does not have any stand and should be deleted in the interest of justice.

For that the learned CIT(A) after going through the fact and accepting the facts of the assessee in its order was not justified in rejecting the contention of the appellant and confirming the action of the learned AO levying penalty under Section 270A.

For that the penalty assessment as made under Section 270A is arbitrary, unjustified and is itself bad in law.

For that the penalty assessment U/s.270A is made on the assessment made by estimation of income by the Assessing Officer is unlawful and unjustified. As per AO in his order the assessee furnished all ledger copies as asked during the 2 course of assessment proceedings. The AO without looking into the books had just rejected the books of accounts and estimated the income.

For that the explanation given by the assessee should have been accepted as there is no under reporting or misreporting of any income as such section 270A is not attracted.

Brief facts of the case are that the assessee is a firm and derives

During the course of hearing, the ld. AR submit that while initiating

Per Contra, ld. Sr DR vehemently supported the order of lower

We have heard the rival submissions and perused the material

From the perusal of the above observation of the Assessing Officer,

From the perusal of the above notice also it is seen that the AO has simply mentioned that “whereas in the course of proceedings before us

ITAT Pune Bench of the Tribunal in the case of Kishor Digambar

In this admitted factual matrix, our indulgence is called to adjudicate the legal ground and in doing so, without reproducing provision of section 270A of the Act in verbatim, it shall be purposive to state that, from AY 2017-18 Ld. AO, CIT, CIT(A) and PCIT are severally empowered at a discretion to initiate and levy a penalty @50% and @200% of tax sought to be evaded respectively on under-reported income and when such underreported income is in consequence of mis-reporting. Here it is apt to note that, unlike section 271(1)(c) the present penalty provision of section 270A of the Act clearly enumerates seven exclusive circumstances or incidences in clause (a) to clause (g) of s/s (2) which gives rise to under-reported income of a person. And once the incidence of under-reported income is identified or determined, the sub-section (9) of section 270A lineally list outs six actions to tests whether such under-reported income is in consequence of mis-reporting or not for the purpose of imposition of accelerated rate of penalty @200% of tax sought to be evaded under s/s (8) in place of empathetic rate of penalty @50% for sheer under-reporting us/s (7) of section 270A of the Act.

We are mindful to the evolution of present penalty law, whereby the legislature in his highest wi om has brought-in this new simplified penalty scheme through insertion of section 270A with a 7 pre-dominant intent to end highly debated and litigated provision of section 271(1)(c) of the Act. And in this context it shall be apt to note the ‘Explanatory Memorandum’ to the provisions of Finance Bill, 2016 which explains the objective behind inserting this section 270A vide para

1 CBDT Circular 3/2017 (F. No. 370142/20/2016-TPL) as; “Under the existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under section 271(1)(c) of the Income-tax Act. In order to rationalise and bring objectivity, certainty and clarity in the penalty provisions, it is proposed that section 271 shall not apply to and in relation to any assessment for the assessment year commencing on or after the 1st day of April, 2017 and subsequent assessment years and penalty be levied under the newly inserted section 270A with effect from 1st April, 2017. The new section 270A provides for levy of penalty in cases of under-reporting and misreporting of income.” (Emphasis supplied)

Coming back to present appeal we observed that, the Ld. AO after having clearly analysed facts and circumstances of the case has dejectedly failed to identify or determined and then communicate either through reassessment order or through notice the specific circumstance or incidence i.e. specific clause (a) to clause (g) of s/s (2) of section 270 within which the case of the appellant falls so has to hold income as under-reported to trigger said penal provision. The failure continued further in identifying or determining and showcasing the specific action of the appellant in terms of clause (a) to clause (f) to s/s (9) of section 270 within which such action of the assessee falls so has to jacket or categorise such under-reported income is in consequence of mis- reporting. We note that without adhering to aforestated exercise, the Ld. AO precipitately culminated penal proceedings imposing a penalty @200% of the tax sought to be evaded. We further note wistfully that, in an appeal the Ld. NFAC exercising plenary, coterminous and coextensive juri iction could have rightly dealt with this provision; however it too perfunctory ceased the proceedings echoing in line with the Ld. AO.

Albeit it is true that present section 270A unlike section 271 does not require the Ld. AO to record satisfaction for invocation of penal provision, but unless the person has been communicated the specific incidence vis-à-vis action triggering the imposition of penalty in his case, he could never be able to refute the charge brought out against him.

Thus non identification or determination vis-à-vis communication of specific clause lineally from sub-section (2) and sub-section (9) would drastically obstruct an assessee from 8 enforcing his right to dismantle the charge alleged against him, thus resulting into violation of principle of natural justice.

We understand a traffic constable when catch holds of a rider entering into ‘no-entry or one-way’, before he draws a challan on him, he first shows a traffic signboard indicating ‘no entry’ and then demonstrates how that rider has entered into ‘no entry or one-way’ path violating traffic rules and only after hearing him decides to make a penalty challan. So if a traffic constable scrupulously follows a principle of natural justice even before imposing a petty penalty, then we are unable to comprehend as to what stopped the lower tax authorities in outstepping from principle of natural justice while dealing with impugned penalty proceedings.

In adjudicating the issue under consideration we are heedful to state that, the penalty provisions of section 270A like provision of section 271(1)(c) are detrimental, albeit commercial consequences and being mandatory brooks no trifling or dilution therewith. Thus a contravention of a mandatory condition or requirement is fatal with no further proof and as a result in our considered view the ratio decidendi laid in context of section 271(1)(c) of the Act by the Hon’ble Supreme Court in ‚Dilip N Shroff Vs JCIT‛ reported in 291 ITR 519 (SC) and ‚Ashok Pai Vs CIT‛ reported at 292 ITR 11(SC), further by Juri ictional Bombay High Court in plethora judgements including ‚CIT Vs Samson Pericherry‛, ‚PCIT Vs Goa Dorado‛ and ‚PCIT Vs New Era Sova Mine‛ shall still hold good even in impugned penal proceedings of section270A of the Act.

Having aforesaid, in our opinion, the non-application of mind by tax authorities while dealing with the penal provisions cannot at this stage be improved by remanding the matter back for denova consideration, hence prayer of the Ld. DR stands meritless.

In the light of aforestated reasoning and discussion, we observed that, the notice initiating the penal proceedings is silent on the circumstance or incidence triggering the very initiation in this case. Further the order of penalty did neither mention the circumstance or incidence nor make a mention of alleged action in reaching the final imposition. In the event respectfully applying similar analogy as laid in aforestated judicial precedents to the case in hand, we find force in the argument of the appellant that, the failure on the part of lower tax authorities to identify and communicate the specific circumstance or incidence from clause (a) to (g) of s/s (2) of section 270A by virtue of which the income of the appellant held as under-reported and further failure on the part of lower tax authorities to showcase which of the specific action of the appellant from clause (a) to (f) of s/s (9) was determinant before imposing the impugned penalty u/s 270A of the Act has rendered the entire proceedings invalid and thus untenable in the eyes of law. Consequently the penalty imposed u/s 270A of the Act being bad in law deserves to be quashed, ergo we order accordingly.

The Hon’ble Delhi High Court in the case of Schneider Electric

Having perused the impugned order dated 09 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 Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated.

This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting.

In the instant case as observed above, the ld. Assessing Officer has not recorded any satisfaction at the time of initiation of penalty

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 25/11/2024. (GEORGE MATHAN) (MANISH AGARWAL) "याियक सद"य "याियक सद"य / JUDICIAL MEMBER लेखा सद"य/ ACCOUNTANT MEMBER "याियक "याियक सद"य सद"य कटक कटक Cuttack; "दनांक Dated 25/11/2024 कटक कटक Prakash Kumar Mishra, Sr.P.S.