Assessee wins appeal, penalty under section 270A deleted. Tribunal ruling on 25.07.2023.

The Tribunal ruled in favor of the assessee, deleting the penalty imposed under section 270A. The appeal was allowed, and the decision was pronounced in open court on 25.07.2023.

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Issues involved:
The issues involved in the judgment are the disallowance of depreciation by the Assessing Officer, penalty proceedings initiated under section 270A, and the appeal against the penalty order.

Disallowance of Depreciation:
The assessee, an educational society, filed its Income-tax Return for the assessment year 2018-19 declaring a total income of Rs. Nil. The Assessing Officer disallowed depreciation of Rs. 4,93,672 on a building, stating that it was not put to use during the year. Consequently, the total income was determined at Rs. Nil. The AO initiated penalty proceedings under section 270A, treating the disallowed depreciation as 'underreported income' and imposed a penalty of Rs. 3,05,090.

Penalty Proceedings under Section 270A:
The assessee filed an appeal against the penalty order, contending that there was no variation in the total income as the return and assessment both showed Rs. Nil. The AR argued that to attract penalty under section 270A, there must be a situation of underreported income falling within the specified clauses, none of which applied in this case. The AR highlighted that the penalty was not justified as the total income remained unchanged, and there was no reduction of loss or conversion of loss into income. The AR urged for the deletion of the penalty.

Analysis and Decision:
Upon considering the submissions and scrutinizing the ITRs for the relevant years, the Tribunal observed that although the assessee declared a loss under 'Income from Other Sources,' it did not claim set off or carry forward of the loss. Further examination revealed that the loss could not be set off or carried forward due to specific provisions of the Income-tax Act. The Tribunal noted that the software utility did not allow for set off or carry forward in this scenario. Ultimately, the Tribunal concluded that as the total income remained Nil, and there was no benefit of set off or carry forward, the penalty under section 270A was not applicable. Therefore, the penalty imposed on the assessee was deleted, and the appeal was allowed.

Conclusion:
The Tribunal ruled in favor of the assessee, deleting the penalty imposed under section 270A. The appeal was allowed, and the decision was pronounced in open court on 25.07.2023.

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