Relief for UCIL: ITAT Finds No Penalty Warranted u/s 270A for Missed CSR Disallowance Due to Accountant’s Error [Read Order]

The Revenue-appellant appealed against the order passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the Assessment Year 2018-19 dated 20/07/2023. In this case,Uranium Corporation of India Limited, respondent-assessee, filed its return declaring a loss of ₹75.86 crore.

The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS), and assessment was completed under Section 143(3) read with section 143(3A) and 143(3B) determining the loss at ₹73.85 crore. The Assessing Officer (AO) levied a penalty of ₹1.28 crore under Section 270A, citing under-reporting of income.

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The assessee challenged the penalty before the CIT(A), who deleted it after noting that the assessee had accepted the mistake, fully cooperated in the assessment, and disclosed all material facts without any suppression. The CIT(A) also observed that there was no impact on revenue loss.

The department filed an appeal against this deletion before the ITAT.

The assessee counsel submitted that the company, being a public sector unit under the Department of Atomic Energy, had incurred CSR expenses as per mandatory government guidelines. These were claimed as allowable deductions before such expenses were specifically disallowed under Section 37 from AY 2015-16.

It was pointed out that similar disallowance made in A.Y. 2009-10 was allowed by the ITAT, and the department did not appeal. In AYs 2012-13 and 2014-15, the AO again disallowed CSR expenses, which were still pending before the ITAT.

From AY 2015-16 onwards, the company started disallowing CSR expenses on its own, except in AY 2018-19, where the disallowance was missed due to an error by the accountant. The error was later corrected in subsequent years.

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The counsel argued that penalty under Section 270A should not be imposed for an unintentional mistake, especially when there was no concealment and no loss to the revenue, as income was assessed on book profits under Section 115JB. It was also submitted that the penalty notice lacked clarity and was issued without proper application of mind, making it invalid.

The two member bench comprising George Mathan (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member) observed that the company was a public sector undertaking that regularly filed returns and followed government rules. It noted that the company had incurred losses during the year but still paid tax under Section 115JB of the Act.

Since the mistake was admitted and was due to an error by the accountant or auditor, the tribunal held that the company could not be blamed for under-reporting. As there was no revenue loss and tax was already paid, it found no reason to impose a penalty under Section 270A of the Act.

The ITAT found no fault in the CIT(A)’s order deleting the penalty and upheld the decision.

Accordingly the appeal filed by the revenue was dismissed.

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