ITAT Deletes Rs.22.93 Lakh Penalty on Builder, Cites Auditor’s Mistake & Lack of Intent to Evade Tax [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has cancelled a penalty of Rs.22.93 lakh that was imposed on Silver Oak Buildcon Private Limited, a construction company based in Pune. The penalty was levied under Section 270A of the Income Tax Act for alleged under-reporting of Rs.37 lakh related to unpaid service tax and Rs.11,556 related to delayed Provident Fund payments.

The company had disclosed these liabilities in its tax audit report. The ITAT observed that the omission from the income tax return was not an act of concealment or misreporting but a genuine mistake by the tax auditor. All dues were paid later, and the company accepted the tax demand without dispute, indicating no intention to evade tax.

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The tribunal also highlighted that the penalty notices issued by the Assessing Officer did not specify which clause under Section 270A was being invoked, rendering the notices legally defective. Furthermore, the ITAT emphasized that a technical disallowance cannot form the basis of a penalty unless there is proof of willful default or malafide intent.

In reaching this decision, the ITAT relied on the Supreme Court’s ruling in Price Waterhouse Coopers Pvt. Ltd. v. CIT (2012), which held that penalties cannot be imposed for genuine errors if all information is already disclosed in audit records. The tribunal also referred to the Delhi High Court’s decision in Prem Brothers Infrastructure (P) Ltd. v. CIT (2022), where it was held that audit-based discrepancies do not amount to misreporting.

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The bench, comprising Vice President R.K. Panda and Judicial Member Vinay Bhamore, stated that when unpaid liabilities are openly disclosed in audit documents, they do not imply intentional wrongdoing. The penalty, in this case, was a result of procedural lapses and lacked legal justification.

To Read the full text of the Order CLICK HERE

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