ADVIK HI TECH PVT LTD,PUNE vs. DY.COMM..OF INCOMETAX, CIRCLE 8, PUNE

PER RAMA KANTA PANDA, V.P. :

This appeal filed by the Assessee is directed against

the order dated 21.05.2024 of the learned CIT(A)-NFAC, Delhi

relating to assessment year 2017-2018.

company and filed it’s original return of income on 28.11.2017

declaring total income of Rs.36,98,30,710/-. Subsequently,

the case was reopened within the meaning of sec.147 of the

Act as the assessee had received Rs.32,20,796/- on account of

interest on income tax refund and had not offered the same for

tax. In response to the notice u/sec.148 dated 25.07.2012, the

assessee filed its ITR declaring total income at

2 ITA.No.1344/PUN./2024

Rs.38,31,53,640/- by enhancing it by Rs.1,33,22930/-. The

reassessment was completed by the Assessing Officer on

11.02.2023 u/s 147 of the Act and no addition/disallowance

was made in the order. However, it was noted by the AO that

the assessee has offered an additional amount of

Rs.21,22,930/- under the head 'income from other sources' in

the return of income filed against notice issued u/s.148 of the

Act. The Assessing Officer, accordingly, levied penalty of

Rs.3,27,993/- u/s 270A of the Act being 50% of tax

determined for under-reporting in consequence of

misreporting.

by the Assessing Officer by observing as under :

“4. Decision: I have considered the facts and the

circumstances of the case, grounds of appeal, penalty

order, written submission and the cited case laws made

by the appellant during the appellate proceedings. The

sole issue in this appeal is levy of penalty of Rs.3,27,993/-

u/s 270A of the Act.

4.1. The penalty of Rs.3,27,993/- u/s 270A of the Act

was levied being 50% of tax determined for under-

reporting of income by not disclosing the interest in IT

refund. The AO has noted that the appellant has shown

additional amount of Rs.21,22,930/- in the return filed

3 ITA.No.1344/PUN./2024

against the notice uis 148 of the Act being interest on

income tax refund. This amount was not offered to tax in

the return filed u/s 139(1) of the Act. The appellant has

submitted that there is no difference in income assessed

and income returned by the appellant and therefore, no

penalty can be computed u/s 270A(7) or section 270A(10).

Further the appellant has contended that no clauses of

sub section (2) of sec 270A is applicable and therefore,

there is no under reported income. Further, it has

submitted that if an assessee offers bona fide explanation

and the assessee discloses all the material facts to

substantiate the explanation offered, the penalty cannot

be levied in the light of provision 270A(6) of the Act.

4.2. The matter has been examined and it is observed

that the appellant filed its original return of income u/s

139(1) of the Act on 28.11.2017 declaring total income of

Rs.36,98,30,710/-. The case of the appellant was

reopened within the meaning of sec 147 of the Act on

basis of the details available on record that appellant did

not offer to tax on account of interest received on income

tax refund. In response to the notice u/s 148 of the Act,

the appellant filed its return of income declaring total

income of Rs.38,31,53,640/-, which was more than the

returned income u/s 139(1) of the Act. The reassessment

was completed without any addition made to the total

4 ITA.No.1344/PUN./2024

Income of the appellant. However, it was noted by the AO

that the appellant has offered an additional amount of

Rs.21,22,930/- under the head income from other sources'

in the return of income filed against notice issued u/s 148

of the Act. The AO levied penalty of Rs.3,27,993/- u/s

270A of the Act being 50% of tax determined for

underreporting of income.

4.3. On perusal of sec 270A, it is observed that the sub-

section 2 of sec 270A prescribes the persons falling under

the category of under reported his income and one of the

clause (c) of sub-section (2) prescribed that "the income

reassessed is greater than the income assessed or

reassessed immediately before such reassessment shall

be considered to have under-reported income. It is

observed that the appellant had filed its original return of

income declaring income at Rs. 36,98,30,710/- and

subsequently filed return against notice issued u/s 148 of

the Act declaring income at Rs. 38,31,53,640/- and

reassessed completed at the same. income. So the total

income has been increased in reassessment order u/s 147

of the Act in comparison to the income declared by the

appellant in the return u/s 139(1) of the Act. The appellant

contended that the return filed u/s 139(1) of the Act was

neither processed u/s 143(1) nor scrutinized u/s 143(3) in

earlier occasion. In support of this, the appellant

5 ITA.No.1344/PUN./2024

reproduced screen shot of filing tab of e-filing portal,

wherein it is seen that the appellant had filed return u/s

143(1) and 148 of the Act. However, the appellant failed to

see the e-proceeding tab on e-filing portal, which is

reproduced as under-

From the above screen shot, it is clear that the return

of income for AY 2017- 18 was scrutinized by the AO and

therefore, the clause (c) of sub-section 2 of section 270A of

the Act is applicable in the present case. It is also seen

from the e- proceeding tab of e-filing portal that notices u/s

143(2) as well as 142(1) of the Act were issued for AY

2017-18 and the appellant had furnished its written

submission and various document on the e-filing portal,

however, the appellant failed to disclose these material

facts during the appellate proceedings. Therefore, it is

crystal clear that the appellant's case shall fall under the

ambit of under-reported income as the statute has

prescribed various criteria in this regard and one of the

criteria is applicable in the case of the appellant.

Therefore, the contention of the appellant that no clauses

6 ITA.No.1344/PUN./2024

of sub section (2) of sec 270A is applicable, is factually

incorrect.

4.4. With regard to the explanation furnished by the

appellant regarding receipt of interest on income tax

refund, the appellant has submitted that the said refund

was never received by it and was directly adjusted

against the outstanding demand. In this regard, it is clear

that the appellant has not disputed the receipt of interest

on IT refund during FY 2016-17. Further, the contention of

the appellant that it was not in its knowledge cannot be

relied upon as the appellant itself has declared the interest

amount on IT refund in the return filed against the notice

u/s 148 of the Act which it failed to declare in the original

return, which was filed much after the adjustment of the

interest on IT refund against the outstanding demands for

earlier years. Apart from this, it is a practice that the CPC

always adjust the refund against outstanding demand

under intimation to the appellant and also after

determining the refund including interest thereon, a letter

of adjustment u/s 245 of the Act is issued to the appellant

seeking any objection or acceptance. Hence, the

explanation offered by the appellant is not bonafide and

the appellant is not entitled for the benefit of section

270A(6) of the Act.

7 ITA.No.1344/PUN./2024

4.5. Considering the above facts and circumstances of

the case, I am of the considered view that the appellant is

liable to be penalised for under-reporting of its income u/s

270A of the Act. Therefore, the penalty levied by the AO is

hereby confirmed. Thus, the sole issue of levy of penalty

hereby dismissed.

assessee carried the matter in appeal before the Tribunal by

raising the following grounds :

penalty u/s 270A of Rs.3,27,993/-.

applicable to the present case & therefore, Ld. AO & CIT-A

ought to have appreciated the fact that there is no under-

reporting of income. Thus, the levy of penalty be quashed.

as there is neither intimation order passed [u/s 143(1)] nor

there is assessment order passed u/s 143(3) & thus the

levy of penalty be deleted.

Penalty u/s 270A (9) imposed by the AO is without

specifying the limb u/s 270A (a) to (f).

8 ITA.No.1344/PUN./2024

of objections at any time before or during the Course of the

hearing of the case.

submitted that penalty in the instant case has been levied on

account of non-disclosure of interest on income tax refund in

the original return of income. He submitted that the refund

along with interest thereon was adjusted by the department

against the outstanding demand of earlier years and therefore,

inadvertently the interest element of the income tax refund

could not be included in the total income of the assessee.

Since this is a non-intentional and technical defect, penalty

should not have been levied u/sec.270A of the Act. The

Learned Counsel for the Assessee drew the attention of the

Bench to sub-section (2) of sec.270A according to which, a

person shall be considered to have under-reported his income

if the following conditions are satisfied.

a. “the income assessed is greater than the income

determined in the return processed under clause (a) of

sub-section (1) of section 143;

b. the income assessed is greater than the maximum amount

not chargeable to tax, where no return of income has been

furnished or where return has been furnished for the first

time under section 148;

9 ITA.No.1344/PUN./2024

c. the income reassessed is greater than the income

assessed or reassessed immediately before such

reassessment;

d. the amount of deemed total income assessed or

reassessed as per the provisions of section 115JB or

section 115JC, as the case may be, is greater than the

deemed total income determined in the return processed

under clause (a) of sub-section (1) of section 143;

e. the amount of deemed total income assessed as per the

provisions of section 115JB or section 115JC is greater

than the maximum amount not chargeable to tax, where

no return of income has been furnished or where return

has been furnished for the first time under section 148;

f. the amount of deemed total income reassessed as per the

provisions of section 115JB or section 115JC, as the case

may be, is greater than the deemed total income assessed

or reassessed immediately before such reassessment;

g. the income assessed or reassessed has the effect of

reducing the loss or converting such loss into income.

5.1. Referring to the above clauses, he submitted that

assessee does not fall under any of the above clauses. He

submitted that once it is to be held that there is no under-

reporting of income, the question of mis-reporting of income

does not arise. He accordingly submitted that the penalty

levied by the Assessing Officer and sustained by the Ld. CIT(A)

10 ITA.No.1344/PUN./2024

is liable to be deleted. In his second plank of argument he

submitted that the penalty u/sec.270A(9) imposed by the

Assessing Officer is without specifying the limb as per clauses

(a) to (f) of sec.270A(9). Relying on various decisions, he

submitted that in absence of specifying the limb, the penalty

levied by the Assessing Officer and upheld by the CIT(A) is not

in accordance with law and therefore, has to be deleted.

5.2. Referring to the decision of the Hon’ble Supreme

Court in the case of Price Waterhouse Coopers Pvt. Ltd., vs.

CIT [2012] 348 ITR 306 (SC), he drew the attention of the

Bench to para-19 of the order which reads as under :

“19. The contents of the Tax Audit Report suggest

that there is no question of the assessee concealing its

income. There is also no question of the assessee

furnishing any inaccurate particulars. It appears to us that

all that has happened in the present case is that through a

bona fide and inadvertent error, the assessee while

submitting its return, failed to add the provision for

gratuity to its total income. This can only be described as a

human error which we are all prone to make. The calibre

and expertise of the assessee has little or nothing to do

with the inadvertent error. That the assessee should have

been careful cannot be doubted, but the absence of due

care, in a case such as the present, does not mean that the

11 ITA.No.1344/PUN./2024

assessee is guilty of either furnishing inaccurate

particulars or attempting to conceal its income.

of this case, that the imposition of penalty on the assessee

is not justified. We are satisfied that the assessee had

committed an inadvertent and bona fide error and had not

intended to or attempted to either conceal its income or

furnish inaccurate particulars.”

5.3. He accordingly submitted that the penalty levied by

the Assessing Officer and upheld by the CIT(A) be deleted.

order of the Assessing Officer and the Ld. CIT(A). He submitted

that assessee cannot take plea of an inadvertent error for not

disclosing the interest on income tax refund. Therefore, the

assessee has misreported and thereby under-reported the

income for which the CIT(A) was fully justified in confirming

the penalty levied by the Assessing Officer u/sec.270A of the

Act.

6.1. So far as the ground taken by the assessee that

return was not processed u/sec.143(1) is concerned, the

Learned DR filed the following report from the Assessing

Officer :

12 ITA.No.1344/PUN./2024

“In this connection, the facts of the case as verified

from the system are submitted hereunder:-

(i) The assessee company had filed its original return of

income for AY 2017-18 u/s 139(1) declaring (1) Income at

Rs.36,98,30,710- on 28-11-2017. The said return of

income was not processed by CPC hence became invalid

as per the ITBA system-ITR Processing-View RRR Entries.

(ii) Further the case was selected for scrutiny u/s.143(3)

of the Act through CASS. Notice u/s.143(2) was issued to

the assessee on 17-08-2018. It is pertinent to mention that

with regards to the invalid return, Central Board of Direct

Taxes, New Delhi vide Circular No.F.No.225/333/2019/

ITA-II dated 29.11.2019 had issued guidelines for scrutiny

of invalid return selected through CASS Cycle-2018

wherein, it has been stated that as the scrutiny of such

invalid return(s) will pose a challenge for the AO and is

bad in law, Assessing Officer shall drop the proceedings

u/s.143(2) of the I.T. Act in such cases and reopen the

same by issue of notice u/s.148 of the Act. In view of the

said Circular dated 29.11.2019, the proceedings so

initiated were dropped on 28.12.2019.

(iii) Accordingly, after recording due reasons and

taking necessary approval from the Competent Authority,

the case of the assessee was re-opened u/s.147 of the Act

13 ITA.No.1344/PUN./2024

and notice u/s.148 of the I.T.Act, 1961 was issued on

25/07/2022 which was duly served on the assessee

through E-mail thereby requiring the assessee to file his

ITR within 30 days of receipt of the notice. In compliance

thereto, the assessee had filed its ITR on 19/08/2022

declaring total income at Rs.38,31,53,640 by enhancing

the same by Rs.1,33,22,930. Thereafter, assessment

proceedings u/s.147 r.ws.144B of the Act were completed

by the Faceless Assessing Officer on 11/02/2023

assessing the total income at Rs.38,31,53,640/-.

(iv) Further, under para 3.5 of the order u/s.147

rws.144B of the Act dated 11.02.2023, it has been clearly

mentioned that penalty proceedings u/s.270A is

separately initiated for under reporting of income in

consequence of misreporting of income.

(v) The penalty so initiated was levied u/s.270A of

the Act vide order dated 22/08/2023 by the Faceless

Assessing Officer.

assessee company regarding not passing of intimation

Order u/s.143(1) and assessment order, it is submitted

that there seems a typographical error in para 4 (S.No.2) of

the assessment order u/s.147 r.ws.144B of the Act dated

11.02.2023 ‘Income as computed u/s.143(1)(a)’ which

should be 'Income computed u/s 147 rws.144B of the Act.

14 ITA.No.1344/PUN./2024

Similarly, there are two typographical mistakes in final

para of penalty order dated 22.08.2023 as follows:-

(i) For Total taxable liability as per intimation u/s

143(1) it should be 'Income declared as per original

ITR.

(ii) For Taxable liability as per 143(3) order it should

be "Taxable liability as per 147 r.w.s.144B.

desires to take benefit of the above mentioned

typographical errors in the orders. Therefore, it is

requested that the ground taken by the assessee company

may kindly be disallowed as the penalty has been levied

rightly on the income which is under reporting of income in

consequence of misreporting of income.”

submitted that assessee could not have concealed anything

from the department since the interest on income tax refund

was granted by the Income Tax Department only.

parties and perused the material available on record. It is an

admitted fact that assessee in it’s original return of income

has not disclosed the interest on income tax refund which was

disclosed only in the return filed in response to notice

u/sec.148. We find the return was accepted by the Assessing

15 ITA.No.1344/PUN./2024

Officer without making any addition vide order dated

11.02.2023 passed u/sec.143(3)/147 of the Act. We find the

Assessing Officer levied the penalty of Rs.3,27,993/-

u/sec.270A of the Act being 50% of tax sought to be evaded on

such undisclosed income. We find the Ld. CIT(A) sustained the

penalty so levied by the Assessing Officer, the reasons of

which have already been reproduced in the preceding

paragraph. It is the submission of the Learned Counsel for the

Assessee that assessee does not fall under any of the clauses

of sec.270A(2) which deals with under-reporting of income. It

is also his submission that in view of the decision of Hon’ble

Supreme Court in the case of Price Waterhouse Coopers Pvt.

Ltd., vs. CIT (supra), no penalty is levaible for an inadvertent

error on the part of the assessee for not disclosing the interest

on income tax refund.

8.1. We find some force in the arguments advanced by

the assessee. The provisions of sec.270A(2) gives the

circumstances under which a person shall be considered to

have under-reported his income. From the report of the

Assessing Officer, it is crystal clear that neither any intimation

was passed u/s.143(1) nor any order u/s.143(3). Under these

circumstances, the assessee, in our opinion, does not fall

under any of the categories i.e., clauses (a) to (g) of sub-sec.(2)

of sec.270A of the Act. Once it is held that assessee has not

16 ITA.No.1344/PUN./2024

under-reported his income, the question of mis-reporting does

not arise.

8.2. It is also an admitted fact that the income tax

refund along with interest on such refunds were adjusted

against the outstanding demand for earlier years and no

amount was received by the assessee in it’s bank account. We,

therefore, find merit in the arguments of the Learned Counsel

for the Assessee that it is an inadvertent and bonafide error in

not disclosing the interest on income tax refund. We find the

Hon’ble Supreme Court in the case of Price Waterhouse

Coopers Pvt. Ltd., vs. CIT (supra) observed that a bonafide and

an inadvertent error does not attract penalty u/sec.271(1)(c) of

the Act. In view of the above discussion, we hold that the Ld.

CIT(A), in the instant case, is not justified in sustaining the

penalty levied by the Assessing Officer u/sec.270A of the Act.

We, therefore, set aside the order of the Ld. CIT(A) and direct

the Assessing Officer to delete the penalty. The grounds raised

by the assessee are allowed.

Order pronounced in the open Court on 05.12.2024.

Sd/- Sd/- [MS. ASTHA CHANDRA] [RAMA KANTA PANDA] JUDICIAL MEMBER VICE PRESIDENT Pune, Dated 05th December, 2024 VBP/-

17 ITA.No.1344/PUN./2024

Copy to 1. The appellant 2. The respondent 3. The Pr. CIT, Pune concerned 4. D.R. ITAT, “A” Bench, Pune. 5. Guard File.

//By Order//

//True Copy //

Sr. Private Secretary, ITAT, Pune Benches, Pune.