9911796707
TMI Blog2025 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ting evidences seized during the search proceedings. 2. On the facts and circumstances of the case, the Ld CIT(A) erred in allowing the appeal of the assessee without appreciating the fact that the Managing Director of the assessee, in his sworn statement, admitted undisclosed sales @30% of total sales and admitted the additional income to the extent of 3% of the total undisclosed sales. 3. On the facts and circumstances of the case, the Ld CIT(A) erred in allowing the appeal of the assessee without appreciating the fact that the penalty of Rs. 1,79,27,172/- was levied for misreporting of income as per provisions of Sec 270A(1) rws 270A(9) of the IT Act 1961 for misreporting of income due to suppression of sales and the AO while initiating penalty in the assessment order clearly mentioned the term 'misreporting of income' in order to distinguish the said concealment of income by the assessee from falling under the category of 'under-reporting'. 4. For the above grounds and any additional grounds that may be urged during the course of hearing it is prayed that the order of the Ld. CIT(A)-2, Panaji may be quashed and that of the AO restored. 3. Before leaping s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a return of income for the AY 2019-20 on 26.03.2021 declaring a total income of Rs. 3,96,17,950/- as admitted during the course of assessment proceedings. Thereafter, the assessment was completed on 27.07.2021 on a total assessed income of Rs. 3,96,17,950/- u/s. 143(3) r.w.s. 153C of the Act. 4.4 On or before the completion of assessment proceedings u/s. 143(3) r.w.s. 153C of the Act, the AO initiated penalty proceedings with the following observation: "Penalty notice u/s. 274 read with 270A is directed to be issued for underreported income in consequence of misreporting of income." 4.5 The AO, thereafter issued notice dated 27.07.2021 u/s. 274 r.w.s. 270A of the Act for the AY 2019-20 directing the assessee to show cause as to why an order imposing a penalty should not be made u/s. 270A of the Act for under-reporting of income in consequence of mis-reporting. 4.6 Considering the penalty reply submitted by the assessee filed on 25.03.2022, the AO levied the penalty with the following observation which are reproduced below for the ease of reference and record: "8. Conclusions drawn on the basis of material facts The case was selected for scrutiny consequent upon search a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in levying penalty u/s. 270A(1) and Rs. 1,79,27,172 (200% of undisclosed tax of Rs. 89,63,586) is hereby levied as penalty for misreporting of income as per provisions of section 270A(1) read with section 270A(9) of the Income tax Act, 1961." 5. Aggrieved by the penalty order passed u/s 270A of the Act dated 30.03.2022, the assessee had preferred an appeal before the ld. CIT(A). 6. The Ld. CIT(A) allowed the appeal of the assessee by deleting the penalty levied u/s 270A of the Act by AO amounting to Rs. 1,79,27,112/- mainly on the following grounds /observations :- 6.1 The ld. CIT(A) could not find any specific reference to the applicability of clause (a) to (g) of Sec 270A(2) to the present case. Further, when the AO invoked sub-section (8) of section 270A, he did not point out the specific clause in section 270A(9) that applies to the action of the appellant. Without making a reference to section 270A(9) or the clauses (a) to (f) of section 270A(9), the AO determined that there was under-reporting of income which is in consequence of mis-reporting. 6.2 Further, ld. CIT(A) examined the case on merits to check if the impugned order is otherwise sustainable and noted that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DR submitted that the penalty of Rs. 1,79,27,172/- was levied for mis-reporting of income as per provisions of sec. 270A(1) r.w.s. 270A(9) of the Act due to the suppression of sales and the AO while initiating the penalty in the assessment order clearly mentioned the term mis-reporting of income. 9. The ld. AR of the assessee on the other hand supported the order of the ld. CIT(A)-2, Panaji and reiterated the same grounds as placed before the lower authorities. Further, the AR submitted that no penalty for under-reporting can be imposed on the assessee in accordance with clause (a) of sub-section (6) of section 270A of the Act as the assessee had duly provided the details and explanations called for by the AO during the assessment proceeding and the return of income was accepted without any additions. Further AR of the assessee submitted that there are plethora of decisions in which it is held that penalty u/s. 270A cannot be levied when the income is arrived at based on estimation. Lastly, the AR submitted that the AO did not specify any specific limb under which under-reporting as well as mis-reporting of the assessee's case falls which is a clear gross violation of prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 270A of the Act herein below: 270A. Penalty for under-reporting and misreporting of income. (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 or where return has been furnished for the first time under section 148; (c)the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d)the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed. (4)Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter referred to as "preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. (8)Notwithstanding anything contained in sub-section (6) or sub-section (7), where underreported 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 account; (e)failure to record any receipt in books of account having a bearing on total income; and (f)failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply. (10)The tax payable in respect of the under-reported income shall be- (a)where no return of income has been furnished or where return has been furnished for the first time under section 148 and the income has been assessed for the first time, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be levied. 10.4 Now coming to section 270A of the Act, on plain reading of the same, we are of the opinion that when a notice u/s 270A of the Act is issued the following stepladder should to be followed by the AO while levying penalty u/s 270A of the Act- 1. Underreporting - First the onus is on the AO to establish whether any of the contingency spoken of in clauses (a) to (g) of Section 270A(2) in the case of the assessee are attracted or not. If Yes, under which clause (limb) the assessee has underreported the income? 2. Now the onus shifted on the assessee to refute by establishing that the assessee falls within any of the clauses (a) to (e) of section 270A(6) of the Act & hence there is no underreporting of income & the proceedings end there. Section 270A(6) is a window given by the legislature to give a leave to the Assessee. 3. If the assessee is not able to controvert the charge of under reporting, the under reporting gets confirmed. 4. Once the charge of underreporting is confirmed, then the AO has to establish whether the underreporting is in consequence of any of the clauses (a) to (f) of Section 270A(9) of misreporting. If Yes, under which clause (limb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in its return of income amounting to Rs. 3,96,17,950/- u/s. 143(3) r.w.s. 153C of the Act. Considering the totality of the case, we are of the considered opinion that ld. CIT(A)-2, Panaji has rightly observed that no adverse findings / additions have been recorded by the AO with regard to income offered during the course of assessment proceedings. Further, we also agree with the view of the ld CIT(A)-2, Panaji that the AO dejectedly failed to identify or determine and then communicate either through assessment order or through notice of the specific circumstance or incidence i.e. specific clause (a) to clause (g) of s/s (2) of section 270A within which the case of the appellant falls so as to hold income as under-reported to trigger the said penal provisions. The failure continued further in identifying or determining the show casing the specific action of the assessee in terms of clause (a) to clause (f) of s/s (9) of section 270A within which the such action of assessee falls so as to jacket or categorize such under-reported income is in consequence of misreporting. We are of the view that unless the person has been communicated the specific incidence vis-à-vis acti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
