The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty under Section 270A(9)(a) of the Income Tax Act, 1961 as the taxpayer provided books of accounts, vouchers, and evidence of payments subject to Tax Deducted at Source ( TDS ) deduction.
The Facts of the case is that the assessee was carrying on real estate development business. During the previous year it has converted its own 2 acres prime Bangalore site into 117 flats (18 floors high rise building with 3 floors underground parking) and achieved a turnover of Rs. 50,85,11,249. It claimed various expenditures of Rs. 49, 51, 98,852/- including depreciation, incurred wholly and exclusively for business. This was subjected to Tax audit under Section 44AB and the audit report was filed along with the return of income
The CIT (A) observed that it is clear that the assessee made a claim of expenditure not substantiated by any evidence. The assessee was not able to substantiate its expenses with concrete evidence and it is clear that these expenses were wrongly claimed to evade tax. Therefore, its case falls within the purview of Section 270A (9)(a) of the Income Tax Act.
Dr. E. Phalguna Kumar representing the assessee observed that AO has passed penalty order levying penalty under Section 270A(9)(a) of the Income Tax Act, stating that there is a mis-representation or suppression of the facts, thereby misreporting of income. However, in the assessment order, he mentioned the levy of penalty under Section 270A (9)(c) of the Income Tax Act. The CIT (A) has confirmed the penalty under Section 270A (9) (a) of the Income Tax Act, which was not the case of AO.
Further observed that disallowance was made by AO for the reason best known to him cannot qualify for levy of penalty under Section 270A (9) (a) or (c) of the Income Tax Act. He submitted that all the details for the purpose of assessment i.e. bills, vouchers, receipts, etc. were produced by the assessee. At the time of assessment, the ld. AO without specifying the specific discrepancies in the books of accounts of the assessee, he disallowed 10% of the expenditure mentioning that assessee was unable to provide all details in respect of expenses claimed
According to the assessee, all expenses are supported by vouchers recorded in the books of accounts of the assessee and payment through banking channels and due TDS has been made and the books of accounts of the assessee were duly audited by statutory/tax auditors
The two member bench of the tribunal comprising George George K ( Vice President ) and Chandra Poojari ( Accountant member) observed that penalty order, the authorities proceeded merely on the basis of findings in the quantum proceedings and have not independently examined the matter for levy of impugned penalty. Even on this procedural count, penalty levied cannot be sustained
The addition was only on an estimated basis and the AO could not prove that there was no incurring of this expenditure by assessee and there was no positive material to suggest that the assessee misrepresented or suppressed any facts either before AO or before CIT (A).
Hence, The ITAT noted that this was not a fit case for the penalty under Section 270A (9)(a) or 270A(9)(c) of the Income Tax Act. Accordingly, the tribunal deleted the penalty and appeal of the assessee was allowed.
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