The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) deleted a penalty of Rs. 5.28 lakh levied under Section 270A of Income Tax Act,1961 for underreporting income.
Baroda Gujarat Gramin Bank ,appellant-assessee,filed its income tax return for the year 2018-19 on 18-08-2018, showing an income of Rs. 13,30,38,090/-. The return was selected for review, and after some disallowances, the final assessed income was Rs. 13,90,42,220/-. Since there was a difference between the reported and assessed income, the Assessing Officer(AO)imposed a penalty of Rs. 5,28,949/- under Section 270A for underreporting income.
The assessee appealed against the penalty order, but the CIT(A) upheld it, stating that the assessed income was higher than the returned income. The CIT(A) allowed a brought forward loss, which reduced the returned income, but the difference remained. The assessee’s claim was dismissed, and the penalty of Rs. 5,28,949/- for underreporting income was confirmed.
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Aggrieved by the order of the CIT(A) the assessee appealed before the tribunal.
The assessee’s counsel stated that, after the CIT(A)’s order on 21-09-2023, the AO revised the total income to Rs. 12,84,93,150/-, which was lower than the returned income of Rs. 13.30 crores. Therefore, the counsel argued that the penalty under Section 270A should not apply and should be removed.
In response, the Revenue’s counsel stated that the penalty under Section 270A was imposed because the assessee claimed Rs. 59,54,126/- as exempt dividend income, which was disallowed and added as Short Term Capital Gain(STCG).
The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Narendra Prasad Sinha (Accountant Member) reviewed the case and the materials on record. In response to the Section 142(1) notice, the assessee explained that Rs. 59,54,126/- declared as dividend income should be treated as STCG or business income. The assessee also requested the carried forward loss of Rs. 1,05,49,069/- from A.Y. 2017-18 to be set off against the current year’s income.
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On appeal, the CIT(A) allowed the carried forward losses, reducing the revised income to Rs. 12,84,93,150/-, which was lower than the returned income. Therefore, the tribunal ruled that the penalty under Section 270A was not applicable and directed the AO to delete the penalty of Rs. 5,28,949/-.
In short, the appeal filed by the assessee was allowed.
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