PRASHANT PRAFULRAI PANDYA,AHMEDABAD vs. ACIT, CIRCLE-1, JAMNAGAR , JAMNAGAR

Grounds of appeal raised by the assessee are as follows: (1) The grounds of appeal mentioned hereunder are without prejudice to one another. (2) The Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as the "CIT(A)"] erred on facts as also in law in confirming penalty levied of Rs.1,24,800/-, u/s 270A on the alleged ground of under reporting of income in respect of alleged bogus donation to political party Rs. 2,00,000/-. The penalty levied confirmed by Id. CIT(A) is unjustified and uncalled for which deserves to be deleted, may kindly be deleted. (3). Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.

Succinctly, the factual panorama of the case is that assessee before me is an Individual, and has filed his original return of income u/s 139(1) for Assessment Year 2019-20. In this case, on Insight portal, as per Risk Management Strategy (RMS) formulated by CBDT that a search was conducted on certain political parties which revealed that a scam is going on in the form of donations to the political parties for claiming bogus deduction u/s 80GGC/80GGB of the I.T. Act which are routed back to the donors in cash. As per information shared by Investigation Wing, in the same manner, the assessee was found to have made bogus donation aggregating to Rs. 2,00,000/- to Rashtriya Samajwadi Party (Secular) (PAN: AAAAR7090L) during the FY 2018-19 relevant to AY 2019-20. Accordingly, the case was reopened under section 147 of the Act after following the due procedure and notice u/s 148 of the Act dated 12.04.2023 was issued to the assessee. Thereafter, notices u/s 142(1) dated 28.06.2024 was issued to the assessee. In response to the notices, the assessee filed his reply on 04-07-2024 along with supporting evidences. It was noted from the income tax return (ITR) filed in response to the notice issued u/s 148 of Income Tax Act, 1961 that the assessee has filed return declaring total income of Rs.65,04,960/- without claiming deduction of donation made to political party amounting to Rs.2,00,000/- u/s 80GGC, whereas in the original return of income filed for A.Y. 2020-21 u/s 139(1) of Act, the income was shown as Rs.63,04,960/-, claiming the alleged deduction of Rs. 2,00,000/-, u/s 80GGC and paid the tax on this additional income of Rs. 2,00,000/-. Since the assessee has under-reported his income which is in consequence of mis-reporting, therefore, penalty proceedings u/s 270A of I.T. Act for underreporting of income in consequence of mis-reporting was initiated. Hence, a show cause notice u/s 274 r.w.s. 270A of the Act was issued to the assessee on 28.11.2024, requiring the assessee to show cause, as to why an order imposing penalty should not be made u/s 270A of the Act.

During course of penalty under Section 270A of the Income-Tax Act, 1961, the assessee has submitted its reply dated 30/12/2024 and stated that there is no any under reported income, in consequence of mis- reporting. However, assessing officer held that assessee has under-reported his income in consequence of misreported his income to the extent of Rs. 2,00,000/-. Therefore, it was held that this is a fit case for levy of penalty in terms of provisions of section 270A of the Act. Accordingly, assessing officer, levied the penalty under section 270A of the Act, to the tune of Rs.1, 24,800/-.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer, therefore, assessee is in further appeal before this Tribunal.

I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee, vehemently, argued that assessee filed the revised return of income and assessment was done based on the revised return, and in the revised return, the assessee did not claim the deduction amounting to Rs.2,00,000/- u/s 80GGC of the Act, hence, it is neither under -reporting nor mis- reporting, therefore, penalty should not be levied on the assessee. In other words, the assessment was not carried out based on the original return of income filed for A.Y. 2020-21 u/s 139(1) of Act, wherein the assessee claimed the alleged deduction of Rs. 2,00,000/-, u/s 80GGC of the Act and in the revised return of income, the assessee did not claim the deduction of Rs. 2,00,000/-, u/s 80GGC of the Act, and the assessment was completed based on the revised return of income and assessee paid the tax on Rs. 2,00,000/-, hence, it is not treated as under reporting of income, therefore penalty should be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in our earlier para and is not being repeated for the sake of brevity.

I have considered the submissions of both the parties. I find merit in the submissions of learned Counsel for the assessee to the effect that the income tax return (ITR), that is, revised return of income was filed in response to the notice issued u/s 148 of Income Tax Act, 1961 wherein the assessee has filed return declaring total income of Rs.65,04,960/- without claiming deduction of donation made to political party amounting to Rs.2,00,000/- u/s 80GGC of the Act, and assessment was completed based on such revised return of income, hence there is no mis- reporting or under reporting in the assessee’s case under consideration, as the assessee paid the tax on Rs. 2,00,000/-. The penalty was imposed on the assessee based on the original return of income filed, however, later on, the assessee filed the revised return of income, in response to the notice under Section-148 of the Act. Since, the assessee has filed the revised return of income and the assessment was framed based on the revised return of income therefore penalty imposed on account of original return of income filed by the assessee should be deleted, as there is no conscious concealment of income, on the part of the assessee. The Ld. Counsel for the assessee has further submitted that there was no any mistake on the part of the assessee to furnish true and full particulars, therefore, the penalty may not be imposed on the assessee. I note that since the assessee had voluntarily forgone the deduction under Section 80GGC for Rs. 2,00,000/- and paid the corresponding additional tax liability by including the amount in the return of income filed under Section 148 of the Income-tax Act and the assessing officer assessed the return of income filed u/s 148 of the Act, as well as accepted the declared income stated in the return of income, by not making any addition in the assessment order passed u/s 147 of the Act. Considering these facts, I note that there is no loss to the revenue.

I note that voluntary withdrawal of claim does not constitute 'misreporting'. As stated above, the assessee withdrew the claim voluntarily in the return filed u/s 148 as a precautionary measure and to buy peace, in view of flagged information regarding certain political parties and to avoid litigation. It is a well-established legal principal that once an assesses filed his return of income u/s 148 of the Act, the earlier return of income filed u/s 139(1), that is, the original/regular return of income is considered, as redundant and shall no longer be valid, hence, penalty should not be imposed based on original return of income. It is settled law that return filed u/s 148 of the Act, once accepted and replaced the original return of income then it becomes the return of income for assessment purposes. I note that Hon’ble Madras High Court in the case of K Sudhakar vs. ITO (2017) 83 taxmann.com 287 (Madras HC) held that the return filed in response to section 148 takes the place of the original return. In the case of CIT vs Suresh Chandra Mittal [2000] 241 ITR 124 (Madhya Pradesh) wherein the Hon'ble High Court has categorically stated that once the revised assessment was regularized by the revenue and once the assessing authority had failed to take any objection in the matter, the declaration of income made by the assessee in his revised return and his explanation that he had done so to buy peace with the department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. Therefore, considering these facts and circumstances, I delete the penalty and allow the appeal of the assessee.

In the result, appeal filed by the assessee, is allowed.