2024 (6) TMI 150 - AT - Income Tax

Penalty u/s 270A - under reporting of income inconsequence of misreporting - Mandation for AO to record satisfaction about concealment of income or that any inaccurate particulars furnished by the assessee - HELD THAT - As decided in Golden Peace Hotels and Resorts (P.) Ltd. ( 2021 (3) TMI 195 - SC ORDER ) in absence of satisfaction by the assessing officer about concealment of income or that any inaccurate particulars were furnished by the assessee which is sine qua non for initiation of penalty proceedings such proceedings are to be dropped. Penalty imposed on disallowance towards cost of improvement of sold asset and addition by not considering the claim of HRA - On perusal of the original order u/s 147 r.w.s. 144B and the penalty order u/s 270A it is transpired that the penalty imposed on capital gain which was declared by the assessee in its return filed in response no notice u/s 148 was without satisfaction of the Ld. AO in the original assessment order u/s 147 r.w.s. 144B also while framing penalty order u/s 270A the reference was made to both the limbs i.e. under reporting of income which is in consequence to mis reporting similar basis was adopted for the other penalties also therefore respectfully following the analogy drawn from the aforesaid cases we are of the considered view that the penalties imposed dehors recording of satisfaction in the assessment order or the satisfaction is being recorded making a reference to both the limbs i.e. underreporting or misreporting of income without satisfying specific limb under which the penalties imposed in that case entire proceedings of penalties are found to be erroneous arbitrary and bereft of merits. Thus penalties imposed by the jurisdictional AO vide order u/s 270A cannot be approved on account of no satisfaction in the assessment order or with recording of satisfaction but without specifying the relevant reason / Limb for which the penalties have been initiated / imposed. Decided in favour of assessee.

Summary

Issues involved:
The appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) under section 250 of the Income Tax Act, 1961, arising from the order of Assessing Officer under section 270A of the Act.

Issue 1: Rejection of application for immunity from penalty
The Jurisdictional Assessing Officer rejected the appellant's application for immunity from penalty under section 270AA of the IT Act and imposed a penalty of Rs. 1,13,345. The appellant contended that the rejection was arbitrary and unlawful due to delay in application and subsequent penalty imposition. The subsequent penalty proceedings were challenged for being arbitrary, unjustified, and unwarranted.

Issue 2: Penalty on deemed disallowance and HRA claim
The Commissioner of Income Tax-Appeals confirmed the penalty imposed by the Assessing Officer under section 270A of the IT Act on account of deemed disallowance of Rs. 1,73,23 towards cost of improvement and another addition of Rs. 19,512 by not considering the claim of HRA. The appellant argued that the penalties were arbitrary, unjustified, and unwarranted, and sought their deletion.

Issue 3: Penalty on underreporting of income
The Commissioner of Income Tax-Appeals confirmed the penalty imposed by the Assessing Officer under section 270A of the IT Act on account of underreporting of income. The appellant contended that the penalty was arbitrary, unjustified, and unwarranted, as the income was already disclosed in response to a notice under section 148. The appellant sought deletion of the penalty.

The facts of the case involved the reassessment of the assessee's income under section 147 r.w.s. 144B of the Income Tax Act, resulting in certain disallowances and penalties under section 270A. The appeal against the penalty order was dismissed by the Commissioner of Income Tax (Appeals), leading to the present appeal.

The main contention raised by the appellant was that the penalty under section 270A was imposed without proper satisfaction by the Assessing Officer, rendering it unlawful. The appellant relied on relevant case laws to support the argument that penalty proceedings should be dropped in the absence of satisfaction about concealment of income or furnishing inaccurate particulars.

The jurisdictional Assessing Officer's lack of clarity in initiating penalties under section 270A based on deemed disallowance and HRA claim was highlighted as arbitrary and erroneous. The appellant argued that the penalties were imposed without specifying the relevant limb under which they were initiated, making the proceedings arbitrary and lacking merit.

Upon review of the case and relevant judgments, the Tribunal found that the penalties imposed lacked proper satisfaction in the assessment order and were initiated without specifying the relevant reason or limb for penalty imposition. Consequently, the penalties imposed by the jurisdictional Assessing Officer were deemed erroneous, arbitrary, and lacking merit. The impugned order of the Commissioner of Income Tax (Appeals) was set aside, and the penalties imposed on the assessee were directed to be deleted.