The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) found the Commissioner of Income Tax ( Appeals )[CIT(A)]’s decision premature in upholding the initiation of penalty proceedings under section 270A of Income Tax Act,1961.
MSC Agency ( India ) Private Limited, appellant-assessee, filed its return of income on 29.03.2019, declaring Rs. 3,30,07,37,660/-. The return was processed under section 143(1), and the case was selected for scrutiny. Notices under sections 143(2) and 142(1) were issued and served.
The Assessing Officer(AO) passed the assessment order on 10.12.2019, raising the total income to Rs. 3,33,40,09,098/-, after disallowing Rs. 3,32,71,436/- for education cess claimed in the revised return. Penalty proceedings under section 270A were also initiated for underreporting income.
Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here
The assessee, aggrieved by the assessment order, appealed to the CIT(A), challenging it on several grounds but withdrew the issue related to education cess. The CIT(A) only considered the penalty proceedings under section 270A for underreporting income and upheld their initiation.
The assessee appealed before the tribunal aggrieved by the decision of the CIT(A) on considering the penalty proceedings.
Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here
The assessee’s counsel argued that the claim for education cess deduction was based on the belief that it was allowable under section 37(1), supported by court decisions in the assessee’s favor. The counsel stated that the claim was made in good faith, and thus penalty proceedings under section 270A were not justified. While the AO did not levy penalty, the CIT(A) upheld its initiation, which the counsel argued was beyond the CIT(A)’s authority and should not stand.
The two member bench comprising Kavitha Rajagopal(Judicial Member) and Om Prakash Kant(Accountant Member) considered the submissions and reviewed the case. It found that the AO had initiated penalty proceedings under section 270A but did not levy a penalty after completing the assessment. The AO failed to issue a show cause notice or specify the clause under which the penalty was being imposed. The CIT(A) upheld the penalty initiation despite this.
Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here
The appellate tribunal held that the CIT(A)’s decision was premature, as it was up to the AO to decide whether to levy the penalty. Without a proper notice, the CIT(A) had no authority to rule on the issue. The ITAT therefore allowed the assessee’s ground, deeming the CIT(A)’s decision premature and unnecessary.
In short,the appeal filed by the assessee was partly allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
