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Facts
The assessee, a hotelier, filed an original return and later a revised return after a survey revealed suppressed business receipts. The Assessing Officer re-opened the assessment, making additions and disallowances. Subsequently, penalty proceedings were initiated.
Held
The tribunal noted that the assessee did not appear and had not filed any adjournment application. The tribunal found that the CIT(A) had valid reasons for levying the penalty under Section 270A of the Income Tax Act for underreporting income due to misreporting.
Key Issues
Whether the penalty levied by the CIT(A) under Section 270A for underreporting of income due to misreporting is justified, especially when the assessee remained absent before the Tribunal.
Sections Cited
270A, 133A, 147, 148, 143(3), 68, 36(1)(va), 274, 271AAC, 271(1)(c)
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 25.06.2024 of the Ld. CIT(A)-11, Pune levying penalty of Rs.3,12,880/- u/s 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for assessment year 2017-18.
This appeal was fixed for a number of times but was getting adjourned from time to time due to non-appearance from the side of the assessee. When the name of the assessee was called today, neither anybody appeared nor there was any application for adjournment. Under these circumstances, we deem it proper to dispose of this appeal based on the material available on record and after hearing the Ld. DR.
Facts of the case, in brief, are that the assessee is a partnership firm carrying on the business of running a hotel with restaurant, lodging and banquet hall under its umbrella. It filed its original return of income on 11.10.2017 declaring total income of Rs.3,07,370/-. Subsequently, a survey u/s 133A of the Act was conducted on 24.01.2019 against the assessee during which certain documents were impounded. Some registers impounded by the survey party i.e. Sr. No.23, 24 & 27 are handwritten cash books of Chaitali Hotel for F.Ys. 2016-17, 2017-18 & 2018-19. The Authorised Officer recorded the statement of Shri Lahu Mane, Manager of the Hotel, who is also maintaining basic records, such as receipts/income & payments/expenditure. With respect to entries mentioned at credit and debit sides of the above impounded cash books, Mr Lahu Mane, Manager of Chaitali Hotel, in his statement dated 24.01.2019 confirmed in answer to Q. No.26 that cash receipts and expenses received on account of non-checking customers, banquet hall party receipts, etc. are not recorded in regular books of accounts of Chaitali Hotel for relevant Assessment Years. In view of the above survey findings, the assessment of the assessee was re-opened u/s 147 of the Act and the notice u/s 148 of the Act was issued on 24.03.2021. In response to this, the assessee filed its return of income by declaring total income of Rs.8,13,640/-. Thus, the assessee declared an additional income of Rs.5,06,267/- in the return filed in response to notice u/s 148. The assessment u/s 147 r.w.s. 143(3) of the Act was completed at Rs.10,59,500/- after making the addition of Rs.5,06,167/- which was declared in the 148 return u/s 68 of the Act and disallowance on account of PF paid on late payment u/s 36(1)(va) of Rs.1,62,967/-.
The assessee filed an appeal before the Ld. CIT(A) who vide order dated 05.04.2024 held that the assessee has suppressed its sales in order to reduce the taxable income and the additional income of Rs.5,06,267/- declared by the assessee in its return filed in response to notice u/s 148 of the Act is taxable as business income. Since the assessee failed to record certain cash receipts in its books of account, penalty proceedings u/s 270A of the Act were initiated by the Ld. CIT(A). The assessee in response to the same filed the reply. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee and levied the penalty of Rs.3,12,880/- being 200% of tax payable on underreported income in consequence of misreporting by recording as under: “6.1 In the present case, while completing the assessment u/s 143(3) of the Act, the Assessing Officer initiated the penalty proceedings u/s 271AAC of the Act on the income of Rs.5,06,267/- assessed u/s 68 of the Act. During the appeal proceedings, this income was held to be taxable as suppressed business income and therefore, penalty proceedings were separately initiated by issue of a Notice u/s 274 r.w.s. 270A of the Act on 05/04/2024. It is also seen that the assessing officer had separately initiated penalty proceedings u/s 270A on some other addition. Thus, there are two separate penalty proceedings in this case, one by the assessing officer and one by the CIT(A). Now, the issue arises as to who can levy the penalty u/s 270A of the Act, and on which portion of underreported income. This issue has been elaborately discussed by the Pune Bench of Hon'ble ITAT in the case of Shri Ajit Ramchandra Jadhav vs ACIT in wherein the Hon'ble Tribunal has held as under: 22. The Hon'ble High Court very clearly laid down that the levy of penalty can be two stages i.e. during the course of assessment by the Assessing Officer or during the course of appeal or revision proceedings, where if the authority is satisfied regarding concealment and furnishing of inaccurate particulars, it is then that authority, which is satisfied, has to initiate penalty proceedings and thereafter pass orders in respect of the penalty to be imposed. The Hon'ble High Court also elaborated that the imposition of penalty may be done at the stage of assessment or at the stage of an appeal. At the assessment stage, the Assessing Officer has to issue notice to the assessee to show cause as to why penalty should not be levied and this notice has to be issued in the course of assessment proceedings. Thereafter, the imposition of penalty has also to be done by the Assessing Officer within prescribed time. Where the penalty proceedings are initiated during
the course of appeal or revision proceedings, the authority who has to be satisfied is the authority in whose proceedings, the issue is examined and not any other authority. Further, levy of penalty has also to be done by the same authority, but by different proceedings. The Hon'ble High Court very clearly held the authority in whose proceedings, there is satisfaction of concealment or furnishing inaccurate particulars of income alone, can levy the penalty and not any other authority. Applying the above said principles laid down by the Hon'ble High Court of Karnataka (supra), it is clear that there are two stages i.e. first stage of initiation of penalty proceedings during the course of assessment proceedings and/or appeal or revision proceedings, as the case may be and thereafter, levy of penalty for concealment by a separate order passed under section 271(1)(c) of the Act. The person who is making the assessment in the hands of a person, is the person authorized to give the satisfaction as to whether the addition made in the hands of the said assessee justifies initiation of penalty proceedings. The exercise of initiation of penalty proceedings is at the stage of assessment by the Assessing Officer or at the stage of an appeal against the quantum appeal, by the CIT(A) or in the revision proceedings. Thereafter, the person who has initiated the penalty proceedings is only the competent person to levy the penalty proceedings and not any other authority" (Emphasis supplied) 6.2 Thus, it is clear from the above decision that the authority who is satisfied about the initiation of penalty proceedings, is required to initiate the penalty proceedings and only that authority can levy the penalty. In the present case, the satisfaction for initiation of penalty u/s 270A, with regard to the amount of Rs.5,06,267/- was of the Commissioner (Appeals). Therefore, levy of penalty u/s 270A of the Act corresponding to this income can be done by the Commissioner (Appeals) only. Therefore, the penalty u/s 270A corresponding to the income of Rs.5,06,267/- being levied by this office. As far as, the penalty proceedings u/s 270A of the Act, initiated by the AO on another addition, while completing the assessment is concerned, the AO can separately decide about the same. 7.1 The facts of the present case are that the original return of income for AY 2017-18 was filed on 11/10/2017 by declaring total income of Rs. 3,07,370/-. Thereafter a survey was conducted on 24/01/2019 wherein it was found that the appellant was suppressing its business receipts and accordingly the partner of the appellant admitted an additional income of Rs. 5,06,267/- on account of suppressed business receipts. Subsequently, a notice u/s 148 of the Act was issued on 24/03/2021 and in response to this notice, the appellant filed return of income on 14.04.2021 by declaring income of Rs.8,13,640/- which includes the surrendered additional income of Rs.5,06,267/-. Since the additional income of Rs.5,06,267/- was not declared in the original return of income and was deducted only during the survey and declared for the first time in the return filed u/s. 148 of the Act, therefore this case clearly falls u/s. 270A(2)(a) of the Act. Hence the present case is a case of under reporting of income.
7.2 Furthermore it is an undisputed fact that the appellant failed to record certain business receipts in its books of accounts and therefore the case clearly falls in the provisions of section 270A(9)(e) of the Act. Hence it is a case of under reporting of income in consequence of misreporting. 8.1 During the appellate proceedings, the appellant has relied on various case laws. In this connection, it is seen that the decisions in the cases CIT vs. Suresh Chand Mittal (supra), Sir Shadilal Sugar and General Mills Ltd. (supra) and M.G. Contractors Pvt. Ltd. (supra), etc. are in the context of penalty u/s. 271(1)(c) of the Act which shall not be applicable to the present case as the present case deals with penalty u/s. 270A of the Act. 8.2 The decisions of Hon'ble Tribunal Ahmedabad Bench in shall not be applicable because as mentioned by the appellant, in that case the surrendered income was shown in the regular income tax return. On the other hand, in the present case, the additional income is shown only in the return filed in response to notice u/s. 148 of the Act. 8.3 The appellant has further relied on the decision of Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. vs. ACIT in WPC 5111/2022. However, this will also not be applicable to the facts of the present case because specific limb "under- reporting of income in consequence of misreporting is clearly mentioned in the order u/s. 250 as well as in the penalty notice dated 05/04/2024.
In view of the above discussion, I am satisfied that it is a case of underreporting of income which is in consequence of misreporting, I, therefore, levy a penalty of Rs.3,12,880/- u/s 270A r.w. sub-clause (e) of sub-section (9) to section 270A of the Act, being 200% of the amount of tax payable on the income of Rs.5,06,267/-……”
Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:
1. The Ld. CIT(A) erred in levying penalty u/s 270A of ₹ 3,12,880/- at 200% of tax payable.
2. The Ld. CIT(A) failed to appreciate that the fact that the return filed under section 148 replaces the original return and the revised computation has been accepted as it is and therefore there was no cause for levy of penalty.
3. The Ld. CIT(A) in distinguishing the case laws cited by the assessee failed to appreciate that the ratio laid down various courts in respect of penalty levied u/s 271(1)(c) still hold good even in the impugned penal proceedings under section 270A of the Act.
4. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
We have heard the Ld. DR and perused the record. We find the Ld. CIT(A) in the instant case has initiated penalty proceedings u/s 270A of the Act on the amount of Rs.5,06,267/- which was determined by him as underreported income in consequence of misreporting. He has given valid reasons for levying of penalty, which in our opinion, is very exhaustive and in detail and does not call for any interference from our side. We therefore, uphold the same. The grounds raised by the assessee are accordingly dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 10th June, 2025.
Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 10th June, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune
S.No. Details Date Initials Designation 1 Draft dictated on 04.06.2025 Sr. PS/PS 2 Draft placed before author 05.06.2025 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to the Head 9 Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order