Penalty under Section 270A(9) deleted for mis-reporting income without malafide intent in expenditure claim

ITAT Delhi held that penalty u/s 270A(9) for mis-reporting income due to excess claim of ineligible expenditure u/s 35(2AB) was not justified. The assessee received DSIR certificate disallowing part expenditure on 05.12.2019, after AO commenced enquiry. CIT(A)/NFAC acknowledged no malafide intention existed, yet imposed 100% penalty. ITAT found this contradictory and deleted the penalty entirely, ruling in assessee's favour as mis-reporting lacked malafide intent.

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Issues:
1. Penalty under section 270A(9) of the Income Tax Act, 1961 for misreporting of income.
2. Reduction of penalty imposed by the Assessing Officer by the Ld. CIT(A)/NFAC, Delhi.

Issue 1: Penalty under section 270A(9) of the Income Tax Act, 1961 for misreporting of income:

The appellant filed an appeal against the order of the Ld. CIT(A)/ National Faceless Appeal Centre (NFAC), Delhi, challenging the penalty imposed under section 270A(9) of the Income Tax Act, 1961. The appellant claimed a business loss of Rs. 3,28,29,990/-, but the Assessing Officer disallowed a portion of this claim related to expenditure under section 35(2AB). The AO initiated penalty proceedings for misreporting of income and imposed a penalty of Rs. 1,09,39,526/-, which was later reduced to 100% by the Ld. CIT(A)/NFAC, Delhi. The appellant contended that the penalty was unjustified as the claim was based on the tax audit report and not made deliberately or with malafide intention. The Ld. CIT(A) also acknowledged that there was no misreporting of income with malafide intention. Consequently, the tribunal held that the penalty deserved to be deleted, and the appeal was allowed.

Issue 2: Reduction of penalty imposed by the Assessing Officer by the Ld. CIT(A)/NFAC, Delhi:

The appellant argued that the penalty imposed by the Assessing Officer under section 270A(9) for misreporting of income was not justified as the claim for deduction under section 35(2AB) was based on the tax audit report and was revised after receiving DSIR approval disallowing a part of the expenditure. The tribunal noted that the appellant revised the claim during assessment proceedings upon learning about the disallowed expenditure. The Ld. CIT(A) acknowledged that the claim was not made with malafide intention and that the DSIR had approved the R&D facility and expenditure. The tribunal agreed that there was no misreporting of income with malafide intention and, therefore, ruled in favor of the appellant, directing the deletion of the penalty.

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