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Facts
The assessee failed to file an income tax return for the assessment year 2017-18 and later filed a return in response to a notice under section 148, declaring an income of Rs. 28,43,830. The Assessing Officer (AO) enhanced this income by Rs. 3,98,806 on account of interest income not offered to tax, determining the total income at Rs. 32,42,636. Penalty proceedings were initiated under section 270A for misreporting income.
Held
The Tribunal held that the penalty to the extent of Rs. 28,43,830 was not leviable as this income was already disclosed by the assessee before detection. However, for the enhanced income of Rs. 3,98,806, the assessee was liable for penalty under section 270A for underreporting of income, as no cogent reason was provided to challenge this addition.
Key Issues
Whether the penalty under section 270A is leviable for underreporting of income when the income was already disclosed by the assessee and subsequently enhanced by the AO.
Sections Cited
139(1), 139(4), 148, 147, 270A, 119(2)(b), 144B, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K & SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 04/04/2023 in DIN No. ITBA/ NFAC/ S/ 250/2024-25/1063898571(1) for the assessment year 2017-18.
The only issue raised by the assessee is that the ld. CIT(A) erred in confirming the penalty levied by the AO for Rs. 16,43,446/- under the provisions of sec. 270A of the Act on account of misreporting of income.
2.1 In the present case, the assessee has not filed any return of income u/s 139(1)/139(4) of the Act. The assessee filed the return of income in response to the notice issued u/s 148 of the Act declaring an income of Rs. 28,43,830/- dated 15/04/2021. The AO during the proceedings enhanced the income declared by the assessee by a sum of Rs.3,98,806/- on account of interest received on the savings bank account and FDs maintained with the Bharath Co-operative Bank which was not offered to tax. Thus, the total income of the assessee was determined at Rs. 32,42,636/- only. As the assessee did not file the return of income u/s 139 of the Act, the AO initiated the penalty proceedings u/s 270A of the Act on the income determined in the assessment framed u/s 147 of the Act at Rs. 32,42,636/- only on account of under reporting of income in consequence of misreporting of income which came to be confirmed at Rs.16,43,446/- being 200% of the amount of tax sought to be evaded.
On appeal, the ld. CIT(A) was pleased upholding the penalty levied by the AO under section 270A of the Act.
Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. AR before us filed a appeal book running from pages 1 to 57 and contended that the assessee has moved an application u/s 119(2)(b) of the Act for condonation of the delay in filing the return of Income tax return. The petition was supported by the computation of income declaring an income of Rs. 28,43,830/- and proof of payment of tax thereon. Such application was filed dated 22/3/2019, which is placed on pages 1 to 9 of the paper book. Thus, it was contended by the ld.AR . that the income of Rs. 28,43,830.00 was already disclosed by the assessee before detection of the same by the AO and before issuance of notice issued u/s 148 of the Act. Therefore, the penalty on account of under reporting of income cannot be attracted.
Likewise, the ld. AR also submitted that the income enhanced by the AO by Rs. 3,98,806/- on account of interest from Bharath Co- operative Bank was already included in the total income disclosed by the assessee. However, the assessee did not challenge the addition made by the AO to avoid any further litigation and to buy peace of mind. Therefore, there was no under reporting of income as alleged by the revenue. Accordingly, it was prayed that no penalty u/s 270A of the Act is leviable in the given facts and circumstances of the case.
The ld. DR vehemently supported the orders of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee has filed the return of income in response to the notice issued under section 148 of the Act dated 29 March 2021 declaring total income of ₹ 28,43,830.00 only. However, during the assessment proceedings an addition of ₹ 3,98,806.00 on account of interest income on the saving bank account and fixed deposits from M/s Bharat co-operative bank was made to the total income of the assessee. As such, the income was determined under the provisions of section 147 read with section 144B of the Act at the total income of ₹ 32,42,636.00 only. Subsequently the penalty proceedings were initiated by issuing show cause notice under section 274 read with section 270A of the Act dated 24th of March 2022 . which came to be confirmed at ₹ 16,43,446 being 200% of the amount of tax sought to be evaded on account of underreporting of income which is in consequence of misreporting of income vide order dated 10th of September 2022 which was subsequently confirmed by the ld. CIT-A.
8.1 Admittedly, the assessee has not filed the return of income for the year under dispute within the time permitted under section 139(1) or 139(4) of the Act i.e. 31-03-2018. However, the assessee has made an application under section 119(2)(b) of the Act before the Hon’ble Principal Commissioner of Income Tax Bangalore vide letter dated 22 March 2019 placed on pages 1 to 9 of the paper book for condonation of the delay in filing the income tax return. The assessee along with the condonation petition has also attached the computation of income declaring an income of ₹ 28,43,830.00 after making the payment of due taxes on such income vide dated 6 March 2019 whereas the notice under section 148 of the Act was issued on account of escapement of income dated 29 March 2021. Furthermore, the income disclosed by the assessee along with the condonation petition filed under section 119(2)(b) of the Act was duly admitted in the assessment proceedings carried out under section 147 of the Act by the revenue after making the enhancement of income of ₹ 3,98,806.00 on account of interest on the saving bank account and fixed deposits with the M/s Bharat cooperative bank. Thus, from the above this is transpired that the assessee has already offered an income of ₹ 28,43,830.00 before the detection of the same by the Revenue. Accordingly, we are of the considered opinion that there cannot be any penalty to the extent of the income disclosed by the assessee for ₹ 28,43,830.00 under the provisions of section 270A . of the Act on account of under reporting of income which is in consequence of misreporting of income.
8.2 However, as far as the addition made by the revenue during the assessment proceedings to the extent of ₹ 3,98,806.00, we find that the assessee has misreported the income which is liable to the penalty under section 270A of the Act. Even at the time of hearing, the ld. AR appearing on behalf of the assessee has not brought any cogent reason suggesting that the addition to the extent of ₹ 3,98,806.00 not does not fall under the charge of underreporting of income. Accordingly, we hold that the assessee is liable for the penalty on account of under reporting of income to the extent of ₹ 3,98,806 only. Hence, the ground of appeal of the assessee is hereby partly allowed.