Penalty u/s 270A @ 200% upheld for claiming fake deductions under Chapter VIA

Penalty u/s 270A @ 200% upheld for claiming fake deductions under Chapter VIA

In a recent judgment, ITAT Pune has upheld penalty u/s 270A @ 200% for levied for claiming fake deductions under Chapter VIA which were later withdrawn on notice.

ABCAUS Case Law Citation:
4813 (2025) (10) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) / NFAC for two consecutive Assessment Years confirming the levy of penalty under section 270A of the Income Tax Act, 1961 (the Act) for claiming wrong deductions under Chapter VIA.

The appellant assessee was an employee in a Multinational Company and has filed his original return of income for the impugned assessment year claiming large amount of deductions under Chapter VI-A.

The case was reopened u/s 147 of the Act.  In response to the notice u/s 148 of the Act, the assessee filed the revised return admitting increasing gross total income and reducing Chapter VI-A deductions by Rs. 75,000/-.

The Assessing Officer completed the assessment accepting at the income returned in revised return. Since the assessee had mis-reported income by excess deduction claimed, the Assessing Officer initiated penalty proceedings u/s 270A of the Act for mis-reporting of income.

The Assessing Officer accordingly issued notice u/s 274 r.w.s. 270A of the Act.  The assessee was also show caused as to why the order imposing penalty should not be made u/s 270A of the Act. 

The explanation given by the assessee was rejected by the Assessing Officer on the ground that the assessee had claimed excess deduction and had the department not detected the under-reporting income in this particular case, then the assessee might not have submitted his revised income and enjoyed the benefit of relevant underreporting income. 

Therefore, due to under-reporting in consequence of misreporting his income within the meaning of section 270A(1) r.w.s. 270A(8) and 270A(10), the Assessing Officer levied penalty @ 200% of the amount of tax payable on under-reported income.

The Tribunal noted that it was an admitted fact that the assessee had made wrong claim of deductions under Chapter VI-A which was detected by the department and on being detected only the assessee filed his revised return of income withdrawing the claim of deductions under Chapter VI-A and paid the correct taxes.

The Tribunal further observed that it was also an admitted fact that had there been no detection by the department, the assessee would not have filed the revised return of income and paid the due taxes.

The Tribunal opined that the assessee was not truthful and it was clear that the act of cover up was illegitimate in nature.  The nature of concealment made by the assessee established the fact beyond doubt that the assessee had concealed the taxable income intentionally and deliberately.  Further, the assessee had not come forward on his own to correct the wrong doings and it was only due to the act of the department that the malady was removed.  The assessee had not given any reasonable explanation that the previous improper act undertaken in omitting to offer a true and correct income in the return of income filed u/s 139(1) of the Act was executed in good faith so as to protect himself against action u/s 270A(9) of the Act.  

Accordingly, the penalty was upheld and the grounds raised by the assessee were dismissed.

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