TMI Blog2023 (3) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... as been decided by the Hon ble Delhi High Court in the case of Prom Brother Infrastructure LLP Vs. 110 National Face Less Assessment Center [ 2022 (6) TMI 130 - DELHI HIGH COURT ] Appeal of the assessee is allowed. - ITA No. 1162/Bang/2022 - - - Dated:- 8-2-2023 - GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER For the Assessee : Shri H.C Kincha, C.A For the Revenue : Shri Gudimella VP Pavan Kumar, JCIT (DR) ORDER PER : L . P. SAHU A.M. This is an appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, dated 04.11.2022, DIN Order No. ITBA/NFAC/S/250/2022- 23/1046952150(1), u/s 250 of the Income-tax Act 1961 on the following grounds: I. The learned CIT(A) has erred in confirming the penalty order passed u/s 270A of the Act by the Assessing officer. The impugned orders as passed are bad in law and are liable to be quashed in toto. 2. The learned CJT(A) has erred in not appreciating the fact that the penalty order as passed by the Assessing officer lacks jurisdiction and erred in confirming the validity of the penalty order. On the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In a notice dated 03/12/2019, the assessee was asked to provide details of investment made in the form of mutual funds existing in the balance sheet for the asst. year 2017-18 and assessee was also asked to provide computation of expenditure incurred in relation to earning of exempt income not includible in total income under Rule 8D r.w.s 14A of the Act. In response, the assessee replied on 04/12/2019, wherein he calculated the monthly average of Rs.8,20,342/- and 1% of such average worked out at Rs.8,203/-. The assessee made fresh investment of Rs.8,20,300/- during the impugned assessment year. But the AO did not accept the calculation and noticed that the month wise breakup of investments is to be considered and monthly average comes to Rs.5,63,44,440/-. Accordingly 1% of such average being Rs.563440/- was disallowed u/s 14A of the Act r.w. Rule 8D of the IT Rules and initiated penalty u/s 270A of the Act for the misreporting of income as per sec. 270A(9)(a) of the Act. The assessee did not file appeal against the assessment order and the AO initiated penalty proceedings u/s 270A of the Act and show cause notice was issued to the assessee. The assessee submitted reply and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1% of such average which works out at Rs.8,203/- and the assessee has not made any expenditure towards earning of the exempt income. He further submitted that if there is disallowance made u/s 14A of the Act, it does not come under the purview of misreporting or under reporting, hence penalty is not applicable. He further submitted that the assessee s case does not fall in this clause or in clause of sub sec. (9) of sec. 270A including clause (a). The sec. 270A(9)(a) talks about the misrepresentation or suppression of the facts. He further submitted that the entire investments are shown in the balance sheet of the company and it was filed during the course of assessment proceedings. Thus, it shows that all the required facts based on additions made, were fully disclosed and, therefore, there were no suppression of the facts. He further stated that there is no suppression of the facts and not misreporting of income as contemplated in sub sec. 9 of sec. 270(A) of the Act. As there is no suppression of the fact, the penalty levied is not justified. He relied on the following judgments:- 1) Prem Brothers Infrastructure LLP Vs. National Faceless Assessment Centre - (2022) 142 taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D. The similar issue has been decided by the Hon ble Delhi High Court in the case of Prom Brother Infrastructure LLP Vs. 110 National Face Less Assessment Center reported in [2022] 142 Taxman.com 38 [Del]. The issue involved in the case on hand and the decision relied on by the ld.AR cited supra is similar to facts. The relevant part of the judgment is as under. 3. Learned counsel for the Petitioner submits that no independent order under section 270AA(4) of the Act has been passed by the Respondent on the application filed by the Petitioner seeking immunity under section 270AA of the Act. In the impugned penalty order, the Respondent No. 1 has simply rejected the said application which otherwise is barred by limitation in terms of section 270AA(4) of the Act, having been passed well beyond the period of one month from the end of the month in which the Petitioner had filed the application seeking immunity. 4. He further states that in the instant case, the only addition in the assessment order is in respect of disallowance under section 14A of the Act. The Petitioner itself has made a disallowance of Rs. 3,20,14,010/- which was more than the exempt income of Rs. 45,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - underreporting or misreporting of income, under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even a whisper as to which limb of section 270A of the Act is attracted and how the ingredient of sub-section (9) of section 270A is satisfied. In the absence of such particulars, the mere reference to the word misreporting by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No. 1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting. 9. This Court is further of the view that the impugned action of Respondent No. 1 is contrary to the avowed Legislative intent of section 270AA of the Act to encourage/incentivize a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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