2024 (7) TMI 1618 - AT - Income Tax

Penalty under Section 270A deleted for expenditure revision made to correct bonafide mistake without tax implications

Asstt. Commissioner of Income Tax, Exemption, Circle Pune Versus Kedari Redekar Shikshan Sanstha

ITAT Pune upheld CIT(A)'s deletion of penalty u/s 270A imposed for alleged intentional misrepresentation of expenditure. The assessee had claimed excess ... Penalty imposed u/s 270A - intentional misrepresentation of expenditure in the profit and loss account by the assessee - CIT(A) deleted penalty levy - as argued by the DR is that there was intentional misrepresentation of expenditure in profit and loss account resulting in under-reporting of income and attempted tax evasion. HELD THAT:- Since the assessee has pleaded that fresh loan has been obtained for capital expenditure on assets which has been claimed as capital expenditure in the ITR and now assessee submits request to reduce its claim of capital expenditure for the assets on which loan has been taken in next years. According to the Ld. AO, the plea of the assessee is found acceptable. Not only this the Ld. AO went on to observe further that in this way, the assessee had saved itself from the double deduction on same capital assets on which loan is availed in coming years whose repayment may have been claimed by the assessee in subsequent AYs. It was in the above backdrop of the factual matrix that the Ld. AO disallowed the excess claim of capital expenditure. There is no intentional misrepresentation of expenditure as alleged. By no stretch of imagination it can be said to be a case of attempted tax evasion as even after revision of computation, the taxable income remained Nil which is same as returned income of the assessee. In the assessment order there is no whisper that there is underreporting on total income as a consequence to misreporting as envisaged u/s 270A(8) and (9) of the Act. We are inclined to agree with the submissions of the Ld. AR that a revision in computation of income was made with a view to correct bonafide mistake which did not have any tax implication so as to cause misrepresentation resulting in misreporting. Misrepresentation is often willful or intentional done with the intention of gaining wrongfully. Nothing of the sort has been done by the assessee. It only corrected an inadvertent mistake. Appeal of the Revenue is dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:1. Whether the penalty imposed under Section 270A of the Income Tax Act, 1961, for misreporting of income by the assessee was justified.2. Whether the deletion of the penalty by the Commissioner of Income Tax (Appeals) was appropriate, given the alleged intentional misrepresentation of expenditure by the assessee.3. Whether the conditions under Section 270A(9) for imposing a higher penalty due to misreporting were satisfied.ISSUE-WISE DETAILED ANALYSIS1. Justification of Penalty under Section 270ARelevant legal framework and precedents: Section 270A of the Income Tax Act deals with penalties for underreporting and misreporting of income. Subsection (9) outlines scenarios that qualify as misreporting, warranting a higher penalty.Court's interpretation and reasoning: The Tribunal examined whether the assessee's actions constituted intentional misrepresentation or a bona fide mistake. It noted the lack of evidence from the Assessing Officer (AO) pinpointing which specific scenario under Section 270A(9) applied to the assessee's case.Key evidence and findings: The assessee, a charitable trust, initially claimed a capital expenditure that included a loan amount disbursed in the subsequent assessment year. Upon scrutiny, the assessee revised its computation, excluding the loan amount, which did not alter its tax-exempt status.Application of law to facts: The Tribunal found that the revision was a correction of an inadvertent mistake rather than a deliberate misrepresentation. The assessed income remained nil, consistent with the returned income.Treatment of competing arguments: The Revenue argued that the CIT(A) failed to consider the intentional misrepresentation. In contrast, the assessee contended that the revision was a bona fide correction without tax implications.Conclusions: The Tribunal concluded that the penalty was not justified as there was no evidence of intentional misrepresentation or tax evasion.2. Deletion of Penalty by the CIT(A)Relevant legal framework and precedents: The CIT(A) has the authority to delete penalties if the conditions for imposing them are not met. Section 270A requires clear evidence of misreporting for a penalty to be valid.Court's interpretation and reasoning: The Tribunal agreed with the CIT(A) that the AO failed to specify the exact scenario under Section 270A(9) that justified a higher penalty.Key evidence and findings: The CIT(A) noted that the AO did not record satisfaction regarding the alleged misrepresentation, and the penalty was based on suspicion rather than concrete evidence.Application of law to facts: The Tribunal found that the AO's failure to specify the misreporting scenario and the absence of underreporting of income invalidated the penalty.Treatment of competing arguments: The Revenue's claim of intentional misrepresentation was not substantiated by the AO's findings, while the assessee's explanation of a bona fide mistake was accepted by the CIT(A).Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the penalty, as the conditions for imposing it were not met.SIGNIFICANT HOLDINGSThe Tribunal's significant holdings include:Preserve verbatim quotes of crucial legal reasoning: 'In our considered view there is no intentional misrepresentation of expenditure as alleged. By no stretch of imagination it can be said to be a case of attempted tax evasion as even after revision of computation, the taxable income remained Nil which is same as returned income of the assessee.'Core principles established: The Tribunal emphasized the distinction between a bona fide mistake and intentional misrepresentation. It highlighted the necessity for the AO to specify the exact misreporting scenario under Section 270A(9) for a penalty to be valid.Final determinations on each issue: The Tribunal determined that the penalty under Section 270A was not exigible due to the lack of evidence of intentional misrepresentation and the failure of the AO to specify the applicable misreporting scenario. The Revenue's appeal was dismissed.