SHRI RAM CO.OP. CREDIT SOCIETY LIMITED,DAHOD vs. THE ACIT., PANCHMAHAL CIRCLE,, GODHRA

The appeal filed before the Tribunal mainly pertains to levy of penalty under section 270 without mentioning whether the penalty proceedings were initiated for underreporting or misreporting of the income which is bad in law, and against the tents of legal principles.

The notice issued by the Revenue is as under:

On this issue, I am guided by the decision of the Hon’ble Delhi High Court in the case of Prem Brothers Infrastructure LLP Vs. National Faceless Assessment Centre, (2022) 142 taxmann.com 38 (Delhi), and the following decisions of the Co-ordinate Bench of the ITAT: i) Alrameez Construction P.Ltd. Vs. CIT/NFAC, (2023) 152 taxmann.com 382 (Mum-Trib) ii) Enrica Enterprises P.Ltd. Vs. DCIT, (2024) 163 taxmann.com 105 (Che-Trib); iii) Greenwoods Govt Officers Welfare Society Vs. DCIT, (2024) 160 taxmann.com 237 (Delhi-Trib) iv) Ashok Kumar Gupta, 163 taxmann.com 1022 (Del-Trib) v) SBI Employees Coop Credit & Supply Society Ltd., (Ahd-ITAT)

For the sake of ready reference, the relevant portion of the order of the Co-ordinate Bench of the ITAT, Chennai Bench in the case of Enrica Enterprises P.Ltd. (supra) is reproduced as under:

As regards Clause-(d) of sub-section 9 of section 270A of the Act, which speaks about failure to record investment in the books of accounts. In our considered view, it is not a case of any investment which is not recorded in the books of accounts. Therefore, said Clause is not applicable. In our considered view, the AO is completely erred in invoking said section and levied penalty u/s.270A of the Act. As regards sub-Clause (e) to section 270A(9) of the Act, invoked by the Ld.CIT(A), in our considered view, there is no allegation from the AO regarding failure to record any receipt in books of accounts of the assessee having a bearing on total income in so far as estimated disallowance of proportionate marketing expenses. The additional income has been quantified by the Revenue on the basis of estimated disallowance of marketing expenses and such estimation is ad hoc without there being any specific findings with regard to year for which the assessee has inflated expenditure. There cannot be any reasons for uniformity in inflation of expenditure for all assessment years as alleged by the AO. Further, it cannot be uniformly l/3rd of total expenditure incurred under the head was inflated and further, it cannot be the case of receipt of l/3rd amount from all suppliers. In absence of any findings as to quantification of inflated expenditure qua each assessment year with reference to total purchase from each party, amount of inflated expenditure, actual cash received back by the assessee, in our considered view, merely because addition was made on die basis of voluntary surrender of income by die assessee, penalty for 'under reporting of income' or 'misreporting of income' cannot be fastened on the assessee. Therefore, we are of the considered view that even on merits, penalty levied by the AO u/s 270A of the Act, cannot be sustained.

In this view of the matter and considering the facts and circumstances of the case, we are of die considered view that penalty levied by die AO u/s.270A of the Act, is unsustainable in law on two counts, i.e. for failure to specify in the notice issued u/s.274 r.w.s.270A of the Act, as to under which limb of sub-section, 270A of the Act, penalty is initiated, i.e. 'under reporting of income' or 'misreporting of income', the penalty proceedings are initiated. Further, the AO accepted income admitted by the assessee with categorical statement without any allegation against the income admitted or incorrectness of the books of accounts or evidence for the expenditure. In our considered view, income voluntarily admitted by the assessee does not constitute 'under reporting of income' or 'misreporting of income', and thus, in our considered view, penalty levied u/s.270A of the Act is unsustainable in law on merits, and thus, we quashed the order passed by die AO imposing penalty u/s.270A(9) of die Act.”