The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the penalty under Section 270A of Income Tax Act,1961 cannot be imposed when the assessed income matches the income determined in the return processed. Thus, it quashed the penalty on disallowances made under Section 43B.
Om Minerals, the respondent-assessee,filed a return on October 30, 2017, declaring a loss of Rs. 3,47,97,855. The return was processed on March 9, 2019, with the assessed income adjusted to Rs. 16,92,495. This assessed income was confirmed following a scrutiny assessment conducted on December 26, 2019.
During the assessment, the Assessing Officer (AO) identified that payments for interest on R & R charges, royalty, Mines and Geology charges, and R & R charges were not made by the due date as per section 139(1) of the Income Tax Act. Consequently, the AO disallowed Rs. 3,64,90,350 under section 43B of the Act.
Get a Copy of Income Tax Refunds (Law & Procedure), Click here
Furthermore, the AO imposed a penalty under section 270A for underreported income, attributing this to misreporting by the assessee. The penalty was challenged by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)].
The CIT(A) stated that under section 270A(2), a person is deemed to have underreported income if the assessed income exceeds the income determined in the return processed under section 143(1). In this case, the income assessed under section 143(3) was the same as that in the return processed under section 143(1)(a). Thus, there was no underreporting, and the penalty under section 270A was not applicable.
Get a Copy of Income Tax Refunds (Law & Procedure), Click here
In the cross-objection, the assessee argued that the disallowance under section 43B was an unfair technical adjustment and that the payments in question were genuine and recorded in the books. The assessee also contended that the penalty under section 270A was unjustified, as there was no intention of misreporting or concealment of income.
The Tribunal reviewed the case and observed that while the disallowance under section 43B was valid due to the delayed payments, the penalty under section 270A was not warranted and also noted that there was no misreporting or concealment by the assessee, and the disallowance was merely a result of technical non-compliance.
The bench upheld the disallowance under section 43B, acknowledging that the delayed payments did not meet the requirements. However, it found the penalty under section 270A to be unjustified, as there was no evidence of intentional misreporting.
Get a Copy of Income Tax Refunds (Law & Procedure), Click here
The two-member bench comprising Sudhir Kumar (Judicial Member) and Dr. B. R. R. Kumar(Accountant Member) partly allowed the appeal in favor of the assessee, confirming the genuine nature of the payments and addressing the penalty issue based on the absence of intentional misreporting.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
