SHRIKANT GAJANAN VYAVAHARE,NASHIK vs. INCOME TAX OFFICER, NASHIK

ORDER PER DR. DIPAK P. RIPOTE, AM: These two appeals filed by the assessee are against the separate order of Ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250 of the Income Tax Act, 1961 both dated 15.02.2023, emanating from penalty order under section 270A of the Act dated 19.01.2022 and 20.01.2022 for A.Y.2017-18 & 2018-19 respectively. Since issue involved is & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] same, both these appeals were heard together and decided by this consolidated order. We treat appeal in ITA No.915/PUN/2023 for A.Y.2017-18 as a lead case. The assessee for A.Y.2017-18 has raised the following grounds of appeal : “1. The learned CIT is not justified in levying penalty u/s 270A of Rs. 50,299/- on the ground that the assesses has furnish inaccurate particulars of Income without appreciating that the said levy of penalty was not justified in law.

3. The learned CIT ought to have appreciated that the bona Tides of the explanation offered by assesses were established from the fact that the assesses, being salaried employee from technical background, was totally dependent upon the tax consultant for filing income tax return andno such incorrect claim was ever made by the assesses either in past years or in subsequent years and therefore, the levy of penalty u/s 270A was not justified in view of the explanation offered by the assesses.” Brief facts of the case :

2. There was a survey in the case of Mr.Kishore Patil. Mr.Kishore Patil admitted that he had been filing Return of Income for various salaried employees and claimed bogus deductions under Chapter VIA of the Act, without any evidence or actual investment. Assessee Mr.Shrikant Gajanan Vyavahare is one of ITA Nos.915 & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] the persons whose Return of Income was filed by Mr.Kishore Patil. After verification of the facts, AO observed that assessee had claimed bogus deduction under Chapter VIA of the Act. Therefore, AO issued notice under section 148 of the Act, dated 05.03.2020 which was duly served on assessee. The assessee filed Return of Income in response to the notice under section 148 on 13.03.2020 declaring a Total Income of Rs.8,73,080/- and claimed deduction of Rs.1,60,818/- under Chapter VIA of the Act. However, in the original return which was filed on 13.07.2017 assessee had claimed deduction under Chapter VIA of Rs.1,98,602/- which was increased to Rs.3,52,500/- by filing the Revised Return of Income. The facts emerging from the Assessment Order are tabulated as under: Return of Date of return Total income Deduction Income filed declared claimed in the return Rs.1,98,602/- Original return 13.07.2017 Rs.7,55,900/- Rs.1,58,817/- Revised return 28.08.2017 Rs.8,64,630/- Rs.3,52,500/- Revised return 28.11.2017 Rs.4,02,000/- Rs.1,60,818/- Return filed in Response to 13.3.2020 Rs.8,73,080/- notice u/s 148

3. The Assessing Officer(AO) passed re-assessment order assessing the total income at Rs.8,81,897/-. The AO initiated & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] penalty under section 270A(10) of the Act. The AO during the penalty proceedings gave opportunity to the assessee and held that assessee has under reported his income, accordingly, levied penalty under section 270A for under reporting.

Submission of the ld.AR : 4. The ld.Authorised Representative for the assessee submitted that there was no mis-reporting of the income. The ld.AR relied on the following decisions of ITAT Pune Bench :  Dinsesh Sitaram Patil Vs. ITO in for A.Y. 2016-17.  Kishor Digambar Patil Vs. ITO in ITA No.54 & 55/PUN/2023 for A.Y.2017-18 & 2018-19.  Shashikant Sukdeo Ambekar Vs. ITO in ITA No.365 & 366/PUN/2023 for A.Y. 2017-18 & 2018-19. Submission ld.DR : 5. The ld.DR explained the facts. The ld.DR explained that the racket of claiming bogus deduction was un-earthed only because of survey under section 133A of the Act in the case of Mr.Kishore Patil, who was instrumental in filing Returns of various individuals. The ld.DR vehemently relied on the order of ld.CIT(A) and Assessing Officer. The ld.DR submitted that the penalty has been levied for under reporting and not for mis- ITA Nos.915 & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] reporting. In the assessment order, as well as in the penalty order the AO has specifically mentioned that penalty is for under reporting. Therefore, the case laws relied by the ld.AR are distinguishable.

Findings and Analysis : 6. We have heard both the parties and perused the records. It is observed that the AO in the assessment order categorically recorded satisfaction that penalty under section 270A(10) of the Act was initiated for under reporting of income. Similarly, the AO after giving opportunity to the assessee levied penalty under section 270A for under reporting of income, at the rate of 50 percent of tax on the under reported income. The assessee has accepted that there was under reporting of income. The only plea taken by the assessee was that the Return of Income was filed by Tax Practitioner Mr.Kishore Patil and assessee did not understand anything about tax laws. However, it is also a fact that the assessee filed original return then revised return claiming excess deduction under Chapter VIA. The Return of Income has been duly signed by the assessee. Thus, assessee was well aware about the fact that Return of Income has been revised and revised return claimed excess deduction under Chapter VIA amounting to Rs.3,52,500/- & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] whereas assessee had not made any such investment to claim deduction. In fact the Assessee had made only following investments for which Assessee had filed evidence before the AO during the Assessment Proceedings : Chapter VI Amount for which Evidence was deductions filed before AO 80C Rs.1,45,200/- 80CCC Rs.4800/- 80TTA Rs.2001/- Total Rs.1,52,001/- 6.1 The assessee was eligible to claim deduction under Chapter VIA of only Rs.1,52,001/-. This explains that the assessee was well aware of the facts. This explains that Assessee has consciously claimed excess deduction under Chapter VIA. Be it as it may be, menserea is not required for penalty under Income Tax Act. Section 270A has defined the word “under reporting”. The Section is reproduced here as under : 270A. (1) The Assessing Officer 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. (2) A person shall be considered to have under-reported his income, if— (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; (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; & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A]

(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 filed; (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. 6.2 Thus, Section 270A has defined Under Reporting means the case where Income Reassessed is greater than the Income Assessed. In this case it is fact that Income Reassessed is Greater than the Income Assessed. The Income Tax Department had passed an order u/s 143(1) on 04/01/2018 with reference to the revised return filed on 26/11/2017 by the assessee claiming excess deduction. As per the said order u/s 143(1) dated 04/01/2018 the Total Income assessed was at Rs.4,02,000/- , deduction claimed under chapter VIA were 3,52,000/-. The Assessee received Refund of Rs.91,710/- vide order u/s.143(1) dated 04/01/2018. Whereas the Income re-assessed u/s.143(3) r.w.s 147 is Rs.8,81,897/-. Therefore as per the definition provided in Section 270A(2) of the Act, the assessee has “Under-reported ”the income, hence the Assessee is liable for the penalty under section 270A of the Act.

6.3 Section 270A has specified penalty for under reporting. Before us, ld.AR has not made any pleading with reference to under reporting of income. Therefore, in these facts and & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] circumstances of the case, we are convinced that there was under reporting of income and hence penalty under section 270A of the Act is confirmed. In Ground No.1 assessee has raised the ground that the ld.CIT(A) was not justified in confirming penalty under section 270A on the ground that assessee has furnished inaccurate particulars of income. This Ground No.1 is factually incorrect as the Assessing Officer has levied penalty under section 270A of the Act for “under reporting of income”. Therefore, Ground No.1 is dismissed.

6.4 We have discussed at length in earlier paras and accordingly Ground No.2 and 3 are dismissed. Accordingly, grounds of appeal raised by the assessee are dismissed.

2. The learned CIT failed to appreciate that before the CIT, the assesses had duly explained that reporting of income in his case was attributable to wrong action of tax consultant and all the material facts relating thereto along with substantiating evidences in form of complaint filed against Tax Consultant before Economic Wing of ITA Nos.915 & 916/PUN/2023 for A.Y’s.2017-18 & 18-19 Shrikant Gajanan Vyavahare [A] Police Department etc. were also furnished by the assesses and therefore, the levy of penalty u/s 270A without rebutting the explanation offered by the assesses was not justified in view of provisions of the said Act.

3. The learned CIT ought to have appreciated that the bona fides of the explanation offered by assesses were established from the fact that the assesses, being salaried employee from technical background, was totally dependent upon the tax consultant for filing income tax return andno such incorrect claim was ever made by the assesses either in past years or in subsequent years and therefore, the levy of penalty u/s 270A was not justified in view of the explanation offered by the assesses.”

9. Since we have already discussed the issue at length and the facts of ITA No.915/PUN/2023, therefore, our decision in ITA No.915/PUN/2023 shall apply mutatis mutandis to this appeal also, accordingly, grounds of appeal raised by the assessee in ITA No.916/PUN/2023 are dismissed.