TMI Blog2023 (8) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition u/s. 43CA was not sustainable in view of Jai balaji Business Corporation (P.) Ltd. v. ACIT [ 2023 (2) TMI 421 - ITAT PUNE] . But as assessee before us is for penalty issue only and matter of quantum issue is not before us that are of no use to assessee in present appeal. In the result grounds of appeal raised by assessee is allowed. - Shri Kuldip Singh, Judicial Member And Shri Gagan Goyal, Accountant Member For the Appellant : None For the Respondent : Shri Manoj Kumar Sinha, Sr. AR ORDER PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of National Faceless Appeal Centre (for short NFAC ) dated 23.12.2022 u/s. 250 of the Income Tax Act, 1961 (in short the Act ) for A.Y. 2018-19. The assessee has raised the following grounds of appeal:- 1. THE PENALTY ORDER SO FRAMED IS BAD IN LAW AND WITHOUT JURISDICTION 1.1 It is submitted that in the facts and the circumstances of the case, and in law, the penalty order so framed is bad, illegal and void as well as without jurisdiction as the same is not framed in accordance with the provisions of the Income-tax Act, 1961 ['the Act']. 2. NATURAL JUSTICE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is otherwise not warranted as ample time for this action is already there with AO u/s 275. 3. We have gone through the order of AO imposing penalty u/s 270A, order of Ld. CIT (A) and submissions of the assessee alongwith grounds of appeal taken. It is observed that quantum addition in the case of the assessee was made u/s 43CA r.w.s. 56 (2) (x) i.e. deeming sections. For ready reference we are reproducing herein below the provisions of section 270A 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. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income; C = the total income assessed as per the provisions contained in section 115JB or section 115JC; D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under-reported income: Provided further that where the amount of under-reported income on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D. Explanation. for the purposes of this section, (a) preceding order means an order immediately preceding the order during the course of which the penalty under sub-section (1) has been initiated; (b) in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under-reported incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB. (7) The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income. (8) Notwithstanding anything contained in sub-section (6) or sub-section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on 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; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from deeming sections vis-a-vis figures disclose by assessee. In that situation, case of the assessee does not fall in the category of under reporting of the income. In the cases where deeming provisions applied for addition of income neither concealment of income nor under reporting of income can be established against the assessee as there is no active participation of the assessee can be established in doing so. 5. Penalty was initiated and imposed under section 270A of the Act for misreporting of income is not only 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. We also found 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 Revenue in the assessment order, for imposition of penalty makes the impugned order manifestly arbitrary. We are of the opinion that the entire edifice of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The question therefore, arises whether this amendment effective from 1-4-2021 can even apply to prior assessment years as well. The assessee had relied on Pune Tribunal decision in ITA No. 923/PUN/2019 (supra) where the Tribunal has given retrospective effect in regard to section 43CA first proviso where the tolerance margin of 10% has been held to be applicable even for the prior assessment years. However, in this decision, reliance was placed on another decision of Bombay Tribunal in the case of Maria Fernandes Cheryl v. ITO (International Taxation) [2021] 123 taxmann.com 252/187 ITD 738 (Mum) which relates to section 50C of the Act. It was contended that section 43CA and section 50C of the Act are pari materia provisions and therefore, holding of retrospective application of section 50C is even applicable making retrospective application to section 43CA of the Act as well. The ld. A.R was unable to place on record before us any direct decision where the first proviso of section 43CA which has been brought into effect from 1-4-2021 was held to be applicable retrospectively. In such scenario, we place reliance on the doctrine enshrined in the judgment of the full bench decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of tax or because of persons from whom the tax has to be collected, in such case the persons should not be fastened with any liability to pay tax. It was further observed that though the Chief Commissioner in their Conference suggested that there should be retrospective amendment to section 113 of the Act, the Legislature chose not to do so even though for other provisions in which the legislature in its wisdom felt the need to do so has brought in amendments made with retrospective effect. The CBDT circular No. 2002 dated 27-08-2002 also makes it clear that the amendment to section 113 is prospective. Consequently, the conclusion reached in N. Suresh Gupta (supra) treating the proviso to section 113 of the Act as clarificatory and having retrospective effect was held to be incorrect and was over-ruled. 7. In view of above discussion and case laws in favour of assessee, we are of the considered view that no penalty can be imposed in this case, as there is no misreporting is there by assessee for the purposes of section 270A. Even addition u/s. 43CA was not sustainable in view of [2023] 147 taxmann.com 333 (Pune - Trib.) Jai balaji Business Corporation (P.) Ltd. v. AC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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