ITAT set aside the penalty under s.270A(2) and directed...

ITAT set aside the penalty under s.270A(2) and directed cancellation of the levied penalty, holding that penalty proceedings are distinct from assessment, discretionary, and contingent on adherence to principles of natural justice including a reasonable opportunity to be heard. The AO's attribution of profits to a PE and consequent additions did not mandate automatic imposition of penalty; penalty under s.270A requires exercise of discretion after hearing and on merits. Applying the statutory exception in s.270A(6)(a), ITAT found the taxpayer's case fell within that exception and instructed the AO to withdraw the s.270A penalties previously imposed.

---