SAS FASHIONS P. LTD.,NEW DELHI vs. DCIT, CIRCLE-22(2), NEW DELHI

The ld. counsel for the assessee has filed an application for condonation of delay. delay of nine months in filing the appeal. We find that the reason for delay in filing the appeal is that the Director of the assessee company expired and the CA entrusted with the affairs of the assessee got afflicted with cancer. Hence the assessee has sufficient cause for not filing the appeal in time. Accordingly, we condone the delay and admit the appeal.

The solitary grievance raised by the assessee is against the confirmation of penalty imposed by the assessment unit of the NFAC u/s 270A of the Income-tax Act, 1961 [the Act, for short].

Briefly stated, the facts of the case are that the assessment proceedings in the case of the assessee were completed by the Assessing Officer vide his order u/s 143(3) r.w.s 144B of the Act dated 19.04.2021 after disallowing the claim of depreciation of Rs. 79,12,860/- and other expenses of Rs. 1,53,053/- claimed by the assessee against his income from house property.

During the course of assessment proceedings, the Assessing Officer noted that the only asset available with the assessee in his statement of Fixed Assets was a property at B-70-73, Sector 83, Gautam Budh Nagar, Noida, UP, which was rented out during the financial year under Page 2 of 7 The assessee, apart from claiming standard deduction of 30% thereon, also claimed depreciation of Rs. 79,12,860/- on the said building and other expenses of Rs. 1,53,053/- against the said rental income which was offered by the appellant under the head 'income from house property'.

After taking into account the submission filed by the assessee, the Assessing Officer disallowed the claim of depreciation and other expense against rental receipts of the assessee and assessed the total income of the assessee at Rs. 165,42,243/-. Penalty proceedings u/s. 270A of the Act was separately initiated for misreporting of income. Notice u/s. 274 r.w.s 270A of the Act was issued on 19.04.2021.

During the course of penalty proceedings, further show cause notice dated 01.07.2021 was issued to the assessee for under reporting of income. The assessee contended that there is no misreporting or underreporting of income from its side and there is only difference of opinion between the assessee and the Assessing Officer. It was also contended that an appeal has been preferred before first appellate authority against quantum addition made by the Assessing Officer. Since there was no appearance from the side of the assessee, the Assessing

The assessee in quantum appeal before the ld. CIT(A), got part relief on account of other expense of Rs. 1,53,053/-. The balance disallowance of depreciation Rs. 79,12,860/- was upheld by the CIT(A) which was not contested further by the assessee.

Now the aggrieved assessee is in appeal against the penalty order on disallowance of depreciation of Rs. 79,12,860/- before us and has contended that the penalty levied u/s 270A is not applicable to the facts of the assessee as the claim of depreciation is a legal issue and there is no misrepresentation of facts. The ld. counsel for the assessee relied on the decision of the Hon'ble Delhi High Court in the case of Prem Brothers Infrastructure 288 Taxmann.com 768.

Per contra, the ld. DR vehemently argued that the case of the assessee falls within the provisions of section 270A(9)(a) of the Act as it has misreported facts about its total income when the claim of Page 4 of 7 ITR filed. Accordingly, the penalty was correctly levied.

We have heard the rival submissions and have perused the relevant material on record. We find that on the facts and circumstances of the case, the term ‘under reporting’ and ‘misreporting’ u/s 270A has been loosely applied by the AO. Furthermore, the penalty was initiated in the assessment order for ‘misreporting’ apparently u/s 270A(9) whereas in the penalty proceedings, the AO issued notices for both ‘under reporting’ apparently u/s 270A(1) as well as ‘misreporting’, apparently under 270A(9) of the Act. The CIT(A) has upheld the penalty considering the same as ‘misreporting’.

We find that the assessee has furnished all the documents regarding the transactions involved in its claim and hence there is no misreporting of any income. The issue is whether penalty for ‘misreporting’ is applicable on the claim of depreciation being allowable against “House property” income or not. The hon’ble Delhi High Court in Prem Brothers Infrastructure LLP v. NFAC (supra) quashed the penalty u/s 270A on the ground that there was no misreporting and that in absence of details as to which limb of section 270A was attracted and how ingredient of sub-section (9) of section 270A was satisfied, mere

In the instant case also, we are of the considered view that there is no misreporting of facts. We further find that the AO has not transparently provided the details as to which limb of section 270A was attracted and how ingredient of sub-section (9) of section 270A was satisfied. There is mere reference to word ‘misreporting’ by the AO in penalty order to deny immunity from imposition of penalty which renders the impugned order being considered as manifestly arbitrary.