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Income Tax Act, 1961, Section 270A(9)(e)

Penalty under section 270A(9)(e)--Leviability--No failure on part of assessee to record any receipt in books of account

Conclusion: Since there was no failure on the part of assessee to record any receipt in his books of account, penalty under section 270A(9)(e) was not leviable.

AO levied penalty under section 270A(9)(e). CIT(A) confirmed the said penalty. Assessee contended that sub-clause (e) of section 270(9) is for failure to record any receipt in books of account, however, in his case, AO disallowed deductions claimed under Chapter-VIA and section 24, therefore, penalty was levied under wrong section and hence it was not maintainable. Held: In assessment order, AO disallowed assessee's claim of deduction under section 24 and Chapter-VIA deduction as false claims and no other addition was made. However, in penalty order, AO invoked section 270A(9)(e) for levying penalty. Sub-section 9(e) of section 270A is for failure to record any receipt in books of account. However, in case of assessee, there was no such failure to record any receipt in books of account. Additions were made was on account of disallowances of certain deductions claimed under Chapter-VIA and section 24. Therefore, AO levied penalty under incorrect section and hence, penalty levied under section 270A(9)(e) was deleted.

Decision: In assessee's favour

IN THE ITAT, PUNE BENCH

S.S. GODARA, J.M. & DIPAK P. RIPOTE, A.M.

Popat Karbhari Bhalerao v. ITO

ITA Nos. 1323 & 1324/PUN/2023

26 March, 2024

Assessee by: Sanket Joshi – A.R.

Revenue by: Sourabh Nayak – Addl. CIT (D.R.)

ORDER

Dipak P. Ripote, A.M.

This is an appeal filed by the assessee against the order of learned Commissioner (Appeals)(NFAC) for assessment year 2017-18 dated 2-9-2022 under section 250 of the Income Tax Act, 1961, emanating from penalty order under section 270A of the Act, dated 30-12-2021. The assessee raised the following grounds of appeal:

“1. The learned Commissioner (Appeals) erred in confirming the penalty under section 270A of Rs. 2,60,874 levied by the assessing officer without appreciating that the said levy of penalty was not justified on facts and in law.

2. The assessee submits that in the reassessment order, the assessing officer has initiated penalty under section 270A on a vague charge of 'furnishing inaccurate particulars of income' also in the notice under section 274 read with section 270A, the exact limb of section 270A(9) which has been allegedly violated by the assessee has not been specified and hence, the penalty order passed under section 270A inconsequence of such illegal notice may be declared as null and void in law.

3. The learned Commissioner (Appeals) failed to appreciate that the underreporting of income in this case was attributable to wrong actions of the tax consultant who had misguided large number of salaried taxpayers like the assessee by filing incorrect ITRs and this fact was also substantiated by police complaints filed against the said tax consultant subsequently and therefore, the levy of penalty under section 270A was also not justified on merits.

4. The appellant craves leave to add/ alter/ amend any of the grounds of appeal.”

Submission of learned Authorized Representative:

2. The learned Authorized Representative (ld. A.R.) for the assessee invited our attention to penalty Order dated 30-12-2021 passed under section 270A of the Act. The learned Authorized Representative explained that the assessing officer (AO) has levied penalty under section 270A(9)(e) of the Act. The learned Authorized Representative explained that the sub-clause (e) is for failure to record any receipt in books of accounts. However, in the case of assessee, in the assessment order, the assessing officer has disallowed assessee's claim of Chapter-VIA deduction and has disallowed deduction claimed under section 24. Therefore, penalty has been levied under wrong section and hence it is not maintainable.

Submission of learned Departmental Representative:

3. The learned Departmental Representative (ld. D.R.) for the Revenue relied on the order of the assessing officer & learned Commissioner (Appeals).

Findings & Analysis:

4. We have heard both the parties and perused the records. In this case, in the assessment Order dated 4-9-2021 passed under section 147 read with section 144 of the Act the assessing officer has disallowed the assessee's claim of deduction under section 24 of Rs. 2,00,000 and Chapter-VIA deduction of Rs. 3,52,000 as false claims. No other addition is made in the assessment order. However, in the penalty order, the assessing officer has invoked section 270A(9)(e) of the Act for levying penalty. The section 270A(9)(e) is reproduced here as under:

(Penalty for under-reporting and misreporting of income.

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.

………………..

9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:—

(a) Misrepresentation or suppression of facts;

(b) Failure to record investments in the books of account;

(d) Recording of any false entry in the books of account;

(e) Failure to record any receipt in books of account having a bearing on total income; and”

4.1 Thus, sub-section 9(e) is for failure to record any receipt in books of accounts. However, in the case of the assessee, there is no such failure to record any receipt in the books of assessee. The addition is on account of disallowance of certain deductions claimed under Chapter-VIA and section 24 of the Act. Therefore, assessing officer has levied penalty under incorrect section. Therefore, the penalty is not-maintainable. Hence, we direct the assessing officer to delete the penalty of Rs. 2,60,874 levied under section 270A(9)(e) of the Act. Accordingly, appeal of the assessee is allowed.

ITA No.1324/PUN/2023:

5. In the case of the assessee for assessment year 2018-19 assessing officer has levied penalty of Rs. 4,10,974 under section 270A(9)(e) of the Act. However, the addition is made on account of disallowance of Chapter-VIA deduction and deduction under section 24 of the Act.

6. Since we have already discussed the issue at length and the facts of ITA No. 1323/PUN/2023 are similar to the facts of ITA No. 1324/PUN/2023, therefore, our decision in ITA No. 1323/PUN/2023 shall apply mutatis mutandis to this appeal also, accordingly, grounds of appeal raised by the assessee in ITA No. 1323/PUN/2023 are allowed.

7. In the result, appeal of the assessee is allowed.

8. To sum up, both appeals of the assessee i.e. ITA No. 1323 & 1324/PUN/2023 are allowed.

Order pronounced in the open Court on 26-3-2024.