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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the Assessee are directed against the separate orders of ld.Commissioner of Income Tax (Appeal)National Faceless Appeal Centre, Delhi both dated 31.01.2023 emanating from the penalty order both dated 17.01.2022 under section 270A of the Income Tax Act, 1961 for the A.Y.2017-18 & 2018-19 respectively. The Assessee for A.Y.2017-18 has raised the following grounds of appeal :
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A]
“1. The learned CIT is not justified in raising penalty u/s 270A of Rs.1,34,632/- on the ground that the assesses has furnish inaccurate particulars of Income without appreciating that the said levy of penalty was not justified in law.
2. The learned CIT failed to appreciate that before the CIT, the assesses had duly explained that reporting of income in his case was attributable to wrong action of tax consultant and all the material facts relating thereto along with substantiating evidences in form of complaint filed against Tax Consultant before Economic Wing of Police Department etc. were also furnished by the assesses and therefore, the raised penalty u/s 270A without rebutting the explanation offered by the assesses was not justified in view of provisions of the said Act.
3. The learned CIT ought to have appreciated that the bona fides of the explanation offered by assesses were established from the fact that the assesses, being salaried employee from technical background, was totally dependent upon the tax consultant for filing income tax return and no such incorrect claim was ever made by the assesses either in past years or in subsequent years and therefore, the levy of penalty u/s 270A was not justified in view of the explanation offered by the assesses.”
The Assessee for A.Y. 2018-19 has raised the following grounds of appeal:
1. The learned CIT is not justified in raising penalty u/s 270A of Rs.78,892/- on the ground that the assesses has furnish inaccurate particulars of Income without appreciating that the said levy of penalty was not justified in law.
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A]
2. The learned CIT failed to appreciate that before the CIT, the assesses had duly explained that reporting of income in his case was attributable to wrong action of tax consultant and all the material facts relating thereto along with substantiating evidences in form of complaint filed against Tax Consultant before Economic Wing of Police Department etc. were also furnished by the assesses and therefore, the raised penalty u/s 270A without rebutting the explanation offered by the assesses was not justified in view of provisions of the said Act.
The learned CIT ought to have appreciated that the bona fides of the explanation offered by assesses were established from the fact that the assesses, being salaried employee from technical background, was totally dependent upon the tax consultant for filing income tax return and no such incorrect claim was ever made by the assesses either in past years or in subsequent years and therefore, the levy of penalty u/s 270A was not justified in view of the explanation offered by the assesses.”
Brief facts of the case (ITA No.365/PUN/2023) : 3. In this case, assessee is an individual filed Return of Income for A.Y. 2017-18 on 21.07.2017 declaring total income of Rs.2,88,820/- and claimed deduction under Chapter VI-A of Rs.2,42,540/-; house property loss of Rs.1,72,560/- and refund of Rs.67,760/-. The case was reopened u/s 147 of the I.T. Act. In response to the notice appellant filed return declaring total income at Rs.7,10,990/- claiming deduction under chapter Vl-A
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A] of Rs.1,50,590/-. However, appellant did not claim any deduction u/s 80D and 80GG as claimed in the original return of Income. Appellant also did not claim any house property loss. Assessment was completed on 22.09.2021 determining total income at Rs.7,10,990/-.
3.1 It is mentioned in the assessment order that ITO(Inv.), Nashik has conducted a survey u/s 133A of the IT Act at the premises of Kishor Patil, who files IT returns of the salaried employees of various companies and PSUs. That survey collectively revealed calming of bogus deductions under Chapter Vl-A, i.e. deductions under section 80D, 80DDE, 80G, 80GG, 80E and 80EE and also claiming of bogus house property loss i.e. payments towards interest for borrowing loan by Mr. Patil in the IT Returns filed. The ITO (Inv.), along with his report also submitted a list of cases in which Mr. Patil admittedly filed IT returns making bogus claims. In that list, the name of the assessee was also mentioned. So it is ascertained that the assessee had filed return of income through Shri Kishor Patil and indulged in obtaining fraudulent refund by claiming deductions without making actual investment.
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A] 3.2 Assessing Officer(AO) initiated penalty proceeding u/s.270A of the I.T. Act. Accordingly, AO levied penalty u/s.270A for concealment of income of Rs.1,34,632/- (being 200% of concealed tax). Aggrieved by the penalty order, the assessee filed appeal before the ld.CIT(A). The ld.CIT(A) upheld the penalty order.
Submission of ld.AR : 5. The ld.AR stated that AO has failed to specify the limbs of section 270A(9) of the Act. The ld.AR explained that in the assessment order there is no addition and AO had accepted the Return of Income shown in the Return filed in response to notice under section 148. Once the AO has accepted the Return of Income, there cannot be any under reporting or mis-reporting. The ld.AR relied on the order of this Co-ordinate Bench in the case Kishor Digambar Patil Vs. ITO in ITA No’s.54 & 55/PUN/2023 and ITAT Mumbai decision in Saltwater Studio LLP Vs. NFAC in ITA No.13/Mum/2023. Ld.AR submitted that penalty may be deleted. Submission ld.DR : 6. The ld.DR relied on the order of the Lower Authorities. The ld.DR submitted that assessee consciously filed Return of ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A] Income claiming deduction under Chapter-VIA fraudulently. It was only because of the survey, the fraudulent act was detected.
Findings &Analysis : 7. In this case, in the assessment order dated 22.09.2021 the AO has accepted Return of Income shown in the Return filed in response to notice under section 148. Nowhere in the assessment order, the AO has discussed how the assessee has mis-reported the income. The AO has not identified the specific limb of section 270A(9) of the Act, either in the penalty order or in the assessment order which is applicable in the case of assessee. We find that ITAT Pune in the case of Kishor Digambar Patil(supra) has held that failure on the part of the AO to showcase which of the specific action of the assessee from Clause(a-f) of section 270A(9) was determinant before imposing the impugned penalty under section 270A of the Act has rendered the entire proceedings invalid and untenable. Similarly, ITAT Mumbai in the case of Saltwater Studio LLP(supra) has held as under : “The question is whether the AO’s action to levy penalty u/s 270A(9) of the Act is sustainable in the given facts of the case. In order to examine that let us have a look at relevant provisions of Section 270(8) &(9) of the Act which reads as under: -
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A]
“Penalty for under-reporting and misreporting of income. 270A. (1) …………………… (8) Notwithstanding anything contained in sub-section (6) or sub- section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub- section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income. (9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:—
(a)misrepresentation or suppression of facts; (b)failure to record investments in the books of account; (c)claim of expenditure not substantiated by any evidence; (d)recording of any false entry in the books of account; (e)failure to record any receipt in books of account having a bearing on total income; and (f)failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.”
The AO has levied the higher penalty of 200% of tax payable of misreporting income. Then in such a scenario, the AO has to bring the action/omission on the part of the assessee in the ken of sub- section (9) of section 270A of the Act which are given (supra), viz (a) to (f) of section 270A(9) of the Act. However, a reading of the reasons given by the AO to levy penalty for misreporting (supra) it is discerned that he has failed to spell out as to how the assessee’s case/additions falls within the ken of instances given in clause (a) to (f) of sub-section (9) of section 270A of the Act. Since AO failed
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A] to bring the addition/disallowance he made in quantum assessment, under the ken of (a) to (f) of the sub-section(9) of section 270A of the Act, the penalty levied for misreporting @ 200% cannot be sustained because it is trite law that penalty provisions have to be strictly interpreted. And therefore, taking into consideration, the facts and circumstances of the case, we find that the levy of penalty by the AO u/s 270A of the Act suffers from the vice of non- application of mind as well as violates principles of natural justice. And therefore, the penalty levied on addition of sustained quantum addition of Rs.67,970/- cannot survive. And therefore, it is directed to be deleted.”
In the case under consideration, the AO has failed to identify the specific Clauses from Clause (a-f) of section 270A(9) of the Act. Therefore, respectfully following ITAT Pune and ITAT Mumbai decisions the AO is directed to delete the penalty under section 270A of the Act. Accordingly, grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
A.Y.2018-19 : 10. The facts for A.Y.2018-19 are identical to A.Y.2017-18, therefore, our decision in would apply
ITA No’s.365 & 366/PUN/2023 Shashikant Sukdeo Ambekar [A] mutatis-mutandis to , accordingly, appeal of the assessee is allowed.
To sum up, both appeals of the assessee are allowed. Order pronounced in the open Court on 20th July, 2023.