2023 (10) TMI 35 - AT - Income Tax

Tribunal directs deletion of penalty under Income Tax Act for non-intentional misreporting

The Tribunal allowed the appeal, directing the Assessing Officer to delete the penalty imposed under section 270A of the Income Tax Act, 1961. The ... Penalty proceedings u/s. 270A for underreporting of income - misreported or suppressed facts with regard to income from house property which resulted in computation of excessive loss under the head ‘income from house property’ - HELD THAT:- The concept of underreporting of income should be understood in the context of claiming any deduction or expenses, which is otherwise not allowable for computing loss, which is not otherwise as per law, which resulted in reduction in taxable income for relevant assessment year. Even if you want to apply sub-clause (a) of sub-section (9) of section 270A of the Act, same needs to be understood with the context of reduction in income or reduction in loss computed by the assessee for relevant assessment year. In the present case, parameters prescribed for levy of penalty u/s. 270A is not satisfied, because the assessee neither claimed excessive loss, which resulted in reduction in taxable income or reduction in loss to be adjusted against income either in the impugned assessment year or subsequent assessment years. Therefore, explanation offered by the assessee that he has computed excessive loss under the head ‘income from house property’ in respect of self-occupied house property needs to be understood in the above context of underreporting of income. Since, the assessee has neither claimed any benefit of loss against any other income for the impugned assessment year, nor has taken set off of said loss against income from house property in subsequent assessment years, in our considered view, the Assessing Officer has completely erred in considering loss computed by the assessee as underreporting of income on account of mis reporting of income. Thus, we are of the considered view that the AO has completely erred in levying penalty u/s. 270A(8) in respect of loss computed under the head ‘income from house property’. The ld. CIT(A) without appreciating relevant facts has simply sustained penalty levied by the AO and thus, we set aside order passed by the Ld.CIT(A) and direct the Assessing Officer to delete penalty levied u/s. 270A - Appeal filed by the assessee is allowed. Issues involved:The appeal challenges the order passed by the Commissioner of Income Tax (Appeals) regarding the levy of penalty under section 270A of the Income Tax Act, 1961.Summary:1. Grounds of Appeal:The appellant contested the penalty imposed under section 270A, arguing that the misreporting of income was inadvertent and did not warrant such penalty.2. Assessment Proceedings:The Assessing Officer identified that the appellant had wrongly claimed total interest paid on a loan for a self-occupied property, leading to a misreporting of income. The penalty proceedings were initiated under section 270A.3. First Appellate Authority's Decision:The First Appellate Authority upheld the penalty, stating that the misreporting was evident from the excessive loss claimed under 'income from house property.'4. Appellant's Arguments:The appellant contended that the penalty was unjustified as there was no intention to misreport income, and the loss was not set off against any other income.5. Respondent's Response:The Respondent supported the penalty, citing misreporting and suppression of facts under section 270A(9) of the Act.6. Tribunal's Decision:The Tribunal found that the Assessing Officer misunderstood the provisions of section 270A(9) and erred in levying the penalty. The appellant's computation of loss did not constitute underreporting of income, as it was not set off against any other income.7. Conclusion:The Tribunal allowed the appeal, directing the Assessing Officer to delete the penalty imposed under section 270A of the Income Tax Act, 1961.Judgment Date:The order was pronounced in the open court on 27th September 2023.