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Facts
The appellant's AY 2020-21 assessment under Section 143(3) resulted in a disallowance of interest expenditure under Section 57 and subsequent levy of penalty under Section 270A for misreporting of income. The CIT(A) upheld the penalty. The Tribunal later allowed the appellant's quantum appeal related to this disallowance.
Held
Given that the quantum addition, which formed the basis of the penalty, was set aside by the Tribunal in a separate order, the penalty proceedings under Section 270A were remitted back to the Assessing Officer to be decided afresh in terms of Section 275(1)A of the Act.
Key Issues
Whether a penalty levied under Section 270A for misreporting of income can be sustained when the underlying quantum addition has been allowed by the Income Tax Appellate Tribunal.
Sections Cited
143(3), 57, 274, 270A, 275(1)A
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SOUNDARARAJAN K., JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 27.12.2023 for Assessment Year (AY) 2020-21.
Brief facts of the case are that the appellant is an individual deriving income under the head ‘business’. The return of income for AY 2020-21 was filed on 31.12.2020 declaring Nil. Against the said return of income, the assessment was completed by the ACIT, Ward -1, Thriuvalla (hereinafter called "the AO") vide order dated 28.09.2022 passed u/s. 143(3) of the Income Tax Act, 1961 (the Jacob Thomas Act) at a total income of Rs. 59,34,921/-. While doing so, the AO made disallowance of interest expenditure claimed of Rs. 89,73,412/- u/s. 57 of the Act. Accordingly, a show cause notice was issued u/s. 274 r.w.s 270A of the Act. The appellant had failed o respond to the above show cause notice. In the circumstances the AO had proceeded with levy penalty of Rs. 57,24,630/- u/s. 270A by holding that the appellant is guilty of misreporting income.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before us in the present appeal.
At the time of hearing of the appeal the learned counsel for the assessee submits that the quantum appeal of the assessee in respect of which penalty was levied u/s. 270A of the Act was already disposed of by this Tribunal in dated 27.03.2025, therefore the penalty appeal may be remanded back to the file of the AO.
On the other hand, the learned CIT-DR had not raised any serious objection for remand of the matter to the file of the AO.
We have heard the rival contentions and perused the material available on record. The issue in the present appeal relates to levy of penalty u/s. 270A of the Act. The AO had levied penalty u/s. 270A Jacob Thomas in respect of additions made in the assessment by disallowing interest claimed u/s. 57 of the Act. We are told at the Bar that this Tribunal had allowed the quantum appeal vide order dated 27.03.2024 in ITA No. 137/Coch/2024. In this circumstance the penalty proceeding were remitted to the file of the AO to decide levy of penalty in terms of section 275(1)A of the Act.
In the result, appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 14th May, 2025.