ITAT deletes Penalty u/s 270A due to defective notice u/s 274 not specifying penalty

ITAT deletes Penalty u/s 270A due to defective notice issued u/s 274 for not specification of penalty

In a recent judgment, the Bombay ITAT has deleted Penalty u/s 270A due to defective notice u/s 274 for not determination of penalty and for not mentioning in penalty order why the reply of assessee was not acceptable.

ABCAUS Case Law Citation:
ABCAUS 4021 (2024) (05) ITAT

In the instant case, the Income Tax Department had challenged the order passed by the CIT(A) in deleting the penalty u/s 270A of the Act being 200% of the amount of tax sought to be evaded by the assessee on the addition made by the Assessing Officer (AO).

The assessee was an individual. The case was taken up for scrutiny. The points for examinations were (i) foreign bank account; (ii) security transaction; and (iii) foreign assets. The notice under section 143(2) was issued.

The notice under section 142(1) was issued and the assessee submitted the details, and the due tax was already paid related to its capital gains from share of foreign companies. The assessee revised the computation and filed with details in response to the notice under section 142(1) and paid the self assessment tax and the assessment was completed.

Subsequently, the AO, the initiated the proceedings of penalty under section 270A for under reporting of income in consequence of misreporting of income. Accordingly, the revenue has determined that tax was evaded amount and the penalty was levied @200% of the tax.

The assessee filed an appeal before the CIT(A). After acceptance of the submissions from the assessee, CIT(A) allowed the ground of the appeal and the penalty under section 270A was quashed.

Before the Tribunal, the Revenue argued that CIT(A) deleted the penalty without appreciating the fact that the assessee had under reported its foreign income by suppression of facts, which amounts to misreporting of income, while filing the return of income u/s 139(1) by failing to report his foreign income and paid the due taxes only after knowing the reasons for limited scrutiny via receipt of notice u/s 143(2) of the Act.

The assessee, apart from merit also raised a legal ground related to the defective issuance of notice and in penalty order, the proper reason being not mentioned for levying of penalty.

In support of the legal ground of defective notice for imposing penalty u/s 270A, assessee relied on the orders of different Tribunals and the High Courts.

The Tribunal observed that the assessee pointed out that specific determination of penalty clause was not mentioned during the issuance of notice of penalty under section 274.

The Tribunal observed that the show cause notice issued under section 274 for imposing penalty u/s 270A read was under:

“Whereas in the course of the proceedings before me for the Assessment Year 2017-18, it appears to me Under-reporting of income in consequence of misreporting..”

It was observed that the AO had not mentioned the specific section for levying of penalty to assessee in the notice issued U/s 270A/274 of the Act.

Further the Tribunal noted that the assessee had relied on the order of Co-ordinate Bench in which the penalty u/s 270A was deleted as the Assessing Officer had not recorded what the reply was furnished by the assessee against the show-cause notice issued under section 270A of the Act and why it was not acceptable. Also, the Assessing Officer had not mentioned any reason for levying penalty at 200%. The Assessing Officer had simply recorded that 200% of penalty had been levied for the tax payable on misreporting of income.

It was also noted that the Co-ordinate Bench had opined that when the assessee had furnished his explanation in response to the show-cause notice, it is the duty of the Assessing Officer to consider and record as to why the reply is not acceptable. However, in the penalty order, the Assessing Officer had not discussed anything and simply stated that “the reply of the assessee was considered and was not acceptable”.

The Tribunal held that perusal of the notice U/s 270A/274 showed that notice was defective and not acceptable for lacking specific determination of penalty. Also following the decision fo the Co-ordinate Bench the Tribunal upheld the impugned appeal order and the appeal of the revenue was dismissed.

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