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Facts
The Assessing Officer (AO) assessed the assessee's income at ₹ 5,64,00,808 against a returned income of Nil, disallowing the 'Any Other Income' claim due to lack of verification. Penalty proceedings under Section 270A were initiated for under-reporting of income due to misreporting. The CIT(A) reduced the penalty from 200% to 100%.
Held
The Tribunal held that the penalty order lacked specification of the relevant sub-clause of Section 270A(2) and that there was no provision for a 100% penalty. Therefore, the penalty sustained by the CIT(A) was quashed, and the assessee's grounds were allowed.
Key Issues
Whether the penalty levied under Section 270A for under-reporting due to misreporting of income was justified in its quantum and procedural correctness.
Sections Cited
270A, 144, 143(1), 115JB, 115JC, 271
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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 03/03/2025 Date of Order – 21/03/2025
O R D E R PER K.M. ROY, A.M.
Captioned cross–appeals are against the impugned order dated 10/09/2024, passed by the National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2018–19.
./2024 Assessee’s Appeal – A.Y. 2018–19 2. In its appeal, the assessee has raised following grounds:–
2 Sant Shankar Maharaj Aashram ITA no.504/Nag./2024 ITA no.573/Nag./2024
“1. Whether the learned CIT(Appeals) was justified in upholding the penalty levied u/s 270A to the tune of Rs. 1,98,19,933/- for under reporting of income. e to add or after any other ground at the 2. Assessee craves leave to add or alter ) time of hearing. hearing.”
In this case, the Assessing Officer, on 23/04/2021, passed order under section 144 of the Income Tax Act, 1961 ("the Act") for the year under consideration, duly assessed the assessee’s income at ` 5,64,00,808, against return income shown by the assessee at ` Nil. As held by the Assessing Officer, during the year under consideration, since no relevant details were provided by the assessee to any of the queries raised in respect of the other income reported in the Schedule-Al of the return of income, the Assessing Officer held that the same could not be verifiable. The Assessing Officer further held that the onus of proof lies on the assessee to prove its claim to the satisfaction of the Assessing Officer. Since the assessee had failed to furnish any kind of supporting evidence to prove the claim of other income reported in the Schedule Al, the same could not be verified and hence liable to be disallowed. Accordingly, the total amount of ` 5,64,00,808, claimed as “Any other Income” in Schedule-Al was disallowed and added back to the total income of the assessee. Resultantly, penalty proceedings under section 270A of the Act were also initiated in respect of this issue for under reporting of income which is in consequence of misreporting thereof.
The assessee filed no reply to the notice dated 23/04/2021, issued under section 270A of the Act to show cause as to why an order imposing a penalty should not be made under section 270A of the Act for under reporting
3 Sant Shankar Maharaj Aashram ITA no.504/Nag./2024 ITA no.573/Nag./2024 of income, despite expiry of the stipulated time. In view of the non–compliant attitude of the assessee, the case was sent to DVU (Designated Verification Unit) for service of notice. In spite of this, the assessee chose to remain silent as it had no explanation to offer to the notices. Therefore, the Assessing Officer passed the order levying penalty ex-parte based on material facts available on record.
The Assessing Officer observed that the provisions of section 270A(2) of the Act clearly states that if the income assessed is greater than the income determined in the return processed under clause (a) of subsection (1) of section 143 of the Act, a person shall be considered to have under reported his income. Therefore, the Assessing Officer being satisfied that there was under reporting of income, penalty was levied under section 270A of the Act for ` 5,54,00,808, which was in consequence of misreporting by wilful wrong claim. Therefore, the Assessing Officer held that the penalty shall be equal to two hundred per cent of the amount of lax payable on underreported income, which comes to ` 3.96,39,866.
On appeal, the learned CIT(A) brought down the percentage of penalty from 200% levied by the Assessing Officer to 100% for the reasons stated below:–
“4.2 Section 270A, introduced by the Finance Act 2016 and effective from April 1, 2017. replaced the earlier Section 271, which imposed penalties for concealing income and failing to comply with notices. The new section aims to rationalize penalty provisions by clearly distinguishing between under- reporting and misreporting of income. Under Section 270A, a person can be penalized 50% of the tax on under-reported income and 200% in cases of misreporting. The section defines what constitutes under-reporting and provides specific instances where higher penalties apply, such as failure to 4 Sant Shankar Maharaj Aashram ITA no.504/Nag./2024 ITA no.573/Nag./2024 record investments or false entries in books. The law also includes exclusions where penalties may not apply if the taxpayer can provide a bona fide explanation and disclose all material facts. The Finance Minister's speech during the 2016 Budget highlighted the intention to reduce discretionary powers of tax officers and provide graded penalties, thereby minimizing disputes. This new provision, focusing solely on income reporting, contrasts with the broader scope of the repealed Section 271, which included non- compliance issues. Let us discuss the new section along with the Memorandum explaining the clause and also the FM's speech to understand better. 4.3 Penalty for under-reporting and misreporting of income. 270A. (1) The Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. A person shall be considered to have under reported his income, if-
1. 1. Income assessed is greater than income returned after processing under section 143(1).
2. Income assessed is greater than maximum amount not chargeable to tax, where no return of income has been furnished.
3. The income reassessed is greater than income assessed.
4. Deemed Tl u/s 115.JB or 115JC is greater than deemed TI after processing under section 143(1).
5. Deemed Tl u/s 115.JB or 115JC is greater than deemed TI is greater than maximum amount not chargeable to tax where no return has been furnished.
6. Deemed TI u/s 115JB or 115JC is greater than deemed TI assessed or reassessed.
7. Income assessed or reassessed has effect of reducing the loss or converting loss into income. 44 In the case of the taxpayer income assessed for the 1st time is greater than income returned, the penalty calculated is the tax on the under reported income at the maximum rate. Penalty levied can range from 50% to 200%. 200% is for misreporting of income. In this case there is 200% levy of penalty which is wrong. As has been held it is a case of under reporting of income were taxpayer failed to bring to tax an item of income under other sources which was disclosed in the IT Return under Al - any other item of income disclosed. The amount of Rs 56400808 was brought to tax by the assessing authority as income from other sources and the appeal against it was upheld by this office vide order dt 9/9/2024. But the quantum of penalty levied is brought down to 100% instead of 200% levied. Penalty levied is restricted to 100% at Rs 19819933.”
5 Sant Shankar Maharaj Aashram ITA no.504/Nag./2024 ITA no.573/Nag./2024 7. The cases of misreporting of income under section 270A(9) of the Act are as under:–
“
It is avert that the issue before us is not encapsulated within the circumstances as above, because there is a conspicuous omission to specify any of the above sub–clause of section 270A(2) of the Act anywhere in the penalty order. The rate of penalty is 50% of tax payable on underreported income. The diability of penalty is 200% of the tax payable on misreported income. There is no scope of penalty being levied @100%. So, the penalty sustained by the learned CIT(A) is hereby quashed. Even on merits also, the penalty is not exigible. Hence, the levy of penalty is hereby directed to be directed. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal by the assessee stands allowed.
./2024 Revenue’s Appeal – A.Y. 2018–19
The Department has raised following grounds:
–
1. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred In considering the addition of Rs. 5,64,00,808/- as under reporting of income without appreciating the fact that the same is mis-reporting of income under the provisions of section 270A(8) and section 270A(9) of the Act.
2. On the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate the fact that the AO has correctly levied penalty for under reporting in consequence of mis-reporting of the income as assessee has misrepresented the income as per the clause a of sub section 9 of section 270A of the Act.
3. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in restricting the penalty levied u/s. 270A for under reporting in consequence of mis-reporting of income to 100% ignoring the provisions of 6 Sant Shankar Maharaj Aashram ITA no.504/Nag./2024 ITA no.573/Nag./2024 section 270A sub-section 8 wherein the amount of penalty to be levied has been specified as equal to two hundred per cent of the amount of tax payable on under-reported income.
4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in not considering the fact that penalty u/s. 270A of the Act was imposed since the assessee had failed to furnish any supporting evidence to prove its claim of "Other Income' of Rs. 5,64,00,808/- disclosed by the assessee in 'Schedule Al' in the IT return filed by it for А.У. 2018-19 and, therefore, the same was disallowed and brought to tax by the AO, as 'Income from Other Sources' and such addition had been upheld by the Ld.CIT(A) NFAC vide appeal order No. NFAC/2017-18/10098360 dated 09/09/2024.
5. On the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate the fact that no provisions of section 270A empowers him/her to reduce percentage of penalty.”
The Revenue has filed its appeal in support of the appeal filed by the assessee, which we have allowed on merits. Consequently, the appeal by the Department rendered infructuous hence dismissed.
In the result, Revenue’s appeal stands dismissed. Order pronounced in the open Court on 21/03/2025