Penalty u/s 270A for claiming bogus deductions deleted for failure to mention specific clauses

Penalty u/s 270A for claiming bogus deductions deleted by ITAT for failure to identify specific Clauses from (a)to (f) of section 270A(9)

In a recent judgment, ITAT Pune has deleted penalty u/s 270A for claiming bogus deductions for failure to identify in show cause notice the specific clauses from (a-f) of section 270A(9)

ABCAUS Case Law Citation:
ABCAUS 4141 (2024) (07) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A)/NFAC in confirming levy of penalty u/s 270A of the Income Tax Act, 1961 (the Act) on the ground that the assesses has under-reporting in consequence of mis-reporting.

Penalty 270A specific clauses

The appellant assessee was an individual and earning income from salary. The original return of income u/s 139(1) for the year under consideration was filed by him claiming refund of TDS deducted. Later, the Assessing Officer (AO) received information that many employees of the employer company including the assessee, got their returns filed by a tax consultant making bogus/excess claims of deduction.

Accordingly, the Assessing Officer issued notice u/s 148 of the Act calling for the assessee to file the correct return of income. In response to the said notice, the assessee filed the return of income revising upward his taxable income.

The assessment was completed u/s 147/143(3) of the Act. Simultaneously penalty proceedings u/s 270A was also initiated because there was difference in assessed income & income shown in revised return.

Assessee furnished reply to penalty notice but being unsatisfied the Assessing Officer imposed penalty on the assessee u/s 270A(9)(a) of the Act being 200% of the differential tax for underreporting of income in consequence of misreporting.

Before the Tribunal, the assessee submitted that he came to know from other employees in company that the said tax consultant with his expertise is able to legally calculate lower tax, resulting in refund of TDS deducted by employer. The assessee was unaware about the contents of the Income Tax Return filed by the tax consultant & truly believed that the returns were filed legally as per the provisions of the Income Tax Act.

It was contended that the assessee being from technical background does not understand ABCD of Income Tax & therefore completely relied on the said tax consultant, who without informing him & others, claimed excess deduction under chapter VIA of the Act & claimed refund.

It was brought to the notice of the Tribunal that when the fact that this kind of fraud was made in the name of number of persons all of them made complaint to the Economic Offence Wing of Police, against the tax consultant. The news regarding fraud committed by tax consultant also flashed in the daily news paper. It was also submitted that there was no mistake of the assessee but it was the hidden interest of the tax consultant who triggered the gun by using shoulders of the assessee & many more for his own benefit.

It was further submitted by the assessee that in the assessment order only penalty u/s 270A was initiated & no sub section or clause was mentioned. When the notice for imposition of penalty was issued no particular sub section/ clause / limb was mentioned in the notice, instead only penalty u/s 270A was mentioned. Under the above facts & in the circumstances of the case it was submitted that in the absence of mention of particular limb of the relevant sub section of section 270A of the Act in the notice, the assessee was not in a position to reply for the same, because until and unless the assessee knows as to under which limb the penalty is going to be imposed, he is unable to file his specific reply regarding that particular limb which is attracted in his case as per the Assessing Officer. It was accordingly prayed to delete the penalty imposed.

The Tribunal observed that in the show cause notice o sub-section or particular clause/ limb was mentioned herefore it was not possible for the assessee to reply about the particular sub-section/ clause/ limb under which the penalty u/s 270A was initiated & later imposed. The heading of the notice read as “Notice for penalty under section 274 read with section 270A of the Income-tax Act 1961” and in the body it was mentioned, “Whereas in the course of proceedings for assessment year ……., it appears that you have under-reported income which is in consequence of misreporting thereof as per details given in the assessment order. You are required to show cause why an order imposing penalty u/s 270A of the Income-tax Act 1961 should not be passed.”

The Tribunal noted that the Co-ordinate Bench has deleted the penalty u/s 270A where AO failed to identify the specific Clauses from Clause (a) to (f) of section 270A(9) of the Act.

Accordingly, following the decision passed by the Coordinate Bench, the Tribunal deleted the penalty imposed u/s 270A of the Act.

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