M/S. BROTHERS OF THE SACRED HEART OF JESUS,TIRUNELVELI vs. ACIT, EXEMPTIONS,, COIMBATORE

ITA 1584/CHNY/2026Status: DisposedITAT Chennai29 September 2026AY 2018-197 pages
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What were the facts?

The assessee, M/s. Brothers of the Sacred Heart of Jesus, a public charitable trust, filed its return of income for Assessment Year 2018-19 declaring NIL income. The Assessing Officer completed the assessment at a total income of Rs. 3,70,37,054/-, disallowing the claim for depreciation as application of income under Section 11(6). Subsequently, the Assessing Officer levied a penalty of Rs. 64,69,511/- under Section 270A for under-reporting income. The assessee appealed against both the assessment order and the penalty order to the Commissioner of Income Tax (Appeals) [NFAC]. The NFAC confirmed the penalty order. The assessee then appealed to the ITAT against the NFAC's order confirming the penalty.

What did the Tribunal hold?

The Tribunal held that the NFAC was not justified in confirming the penalty under Section 270A. The Tribunal noted that the appeal against the original assessment order had been restored to the Assessing Officer by the NFAC for verification of the correct computation of application of funds. The Tribunal observed that the NFAC, despite taking cognizance of the remand order in the quantum proceedings, confirmed the penalty in 'blatant ignorance' of the provisions of Section 275(1A) of the Act. The Tribunal reasoned that when the original assessment order is set aside in appeal, there is no subsisting assessment order until a fresh assessment is completed. Therefore, the penalty cannot be sustained independently. The Tribunal reversed the order of the NFAC and restored the matter to the file of the Assessing Officer for re-computation of the penalty as mandated by Section 275(1A).

What were the issues?

1. Whether the National Faceless Appeal Centre (NFAC) erred in confirming the penalty under Section 270A, given that the quantum addition, which formed the basis of the penalty, was set aside for fresh verification by the NFAC itself. Assessee's Arguments: - The NFAC confirmed the penalty order without due application of mind to the facts. - The issue arose from a bona fide and debatable claim of depreciation treated as application of income, which does not fall under 'misreporting' as per Section 270A(9). - The penalty under Section 270A cannot survive independently when the quantum addition has been set aside for fresh verification, making the penalty premature. - The NFAC erred in confirming the penalty without appreciating that the quantum issue was restored to the Assessing Officer for fresh adjudication. Revenue's Arguments: - No specific arguments for the revenue are recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 11(6),Section 12AA,Section 143(3),Section 143(3A),Section 143(3B),Section 250,Section 270A,Section 270A(9),Section 274,Section 275(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES,

Before: SHRI GEORGE GEORGE K, VICE- & SHRI INTURI RAMA RAO

Pronounced: 29.09.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This is an appeal filed by the Assessee directed against the order passed by learned Commissioner of Income Tax(Appeal)[NFAC], dated 27.01.2026 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2018-19. 1 M/S. BROTHERS OF THE SACRED HEART OF JESUS [A]

2.

The Assessee raised these following grounds of appeal :

“1. The order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre

The order continues below.

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