There is no under reporting of income when tax paid u/s 115JB is more than normal tax – ITAT
In a recent judgment, the ITAT Delhi has deleted penalty u/s 270A(9) holding that there is no underreporting of income when tax is paid on deemed MAT income u/s 115JB and tax under normal provisions after addition is far less than deemed income.
ABCAUS Case Law Citation:
ABCAUS 4049 (2024) (05) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in confirming levy of penalty u/s 270A for under reporting of income.
The assessee filed the return of income for the assessment year under consideration declaring income under the normal provisions and paying taxes on MAT income under section 115JB of the Income Tax Act, 1961 (the Act).
The assessee was registered in SEZ and was manufacturing. The relevant Assessment year was the 7th year of claim of deduction u/s 10AA of the Act.
Though the assessee claimed deduction under section 10AA of the Act correctly at 50% of profit for the earlier previous year being 6th year of claim of deduction, by mistake, it claimed 100% deduction of the profit of the undertaking for the year under consideration.
On being asked, the assessee admitted that it is eligible for 50% deduction under section 10AA of the Act for this year also, but stated that there would not be any change in the tax values, by submitting comparative computation of income with 100% deduction and 50% deduction under section 10AA of the Act, wherein the final tax was calculated on MAT income.
Assessment was, therefore, complete under section 143(3) of the Act by making an addition on account of excess deduction claimed. Penalty proceedings under section 270A of the Act were initiated.
In penalty proceedings, the assessee pleaded inadvertent mistake due to software problem. But the Assessing Officer concluded the proceedings by levying penalty at 200% of the tax on the underreporting income, holding that when once misreporting/under reporting under section 270A(9) of the Act is admitted, no other view could be taken.
On similar lines, the CIT(A) also confirmed the levy of penalty.
Before the ITAT, the assessee submitted that for levy of penalty under section 270A(8) of the Act, as a pre-condition, Revenue has to prove that the case of the assessee falls in any of the categories mentioned in (a) to (f) of 270A(9) of the Act, but in this case, the Assessing Officer did not spell out any such category being attracted and, therefore, in terms of the decision of the Hon’ble Delhi High Court and decisions of the Co-ordinate Bench of the Tribunal the penalty cannot be sustained.
Further it was submitted that it was only due to the software problem, the unintended lapse occurred and as a matter of fact, the assessee did not stand to gain by under reporting the income because the deemed income under section 115JB of the Act was more than the income computed after reducing the claim under 10AA of the Act by 50%.
The Tribunal observed that as held by the Hon’ble Delhi High Court, the consistent view taken is that in order to levy penalty under section 270A(8) of the Act, the Assessing Officer has to bring the omission or commission of the assessee in the ken of sub-section (9) of section 270A of the Act, without which the penalty cannot be sustained.
The Tribunal further observed that there was no dispute that the assessee declared the income under the normal provisions and a higher income under section 115JB of the Act. It was also undisputed that even after making the addition under section 143(3) of the Act, the income under normal provisions was far less than the deemed income under section 115JB of the Act, on which the assessee paid the taxes. In this sense, there was no loss to the Revenue and at the same time, it cannot be said that there is any under reporting of income. Accordingly, the Tribunal deleted the penalty under section 270A(9) of the Act.
In the result, appeal of the assessee was allowed.
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