TaxTMI 
TaxTMI 
2024 (4) TMI 979
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....ng the penalty imposed by ld. AO @ 200% in respect of excess claim of depreciation by not considering the submission made by assessee that effect of CIT(A) order in earlier year could not be given due to oversight, as depreciation was charged on the balances of fixed assets brought forward from earlier year (as is normal practice), however subsequently, mistake was rectified and fixed assets register was modified giving effect to explanation 5 to section 43(1). Appellant prays that depreciation was charged as per past prevalent practice under bonafide belief and claim so made by assessee, does not ipso facto amounts to under reporting and by no means same amounts to misreporting of income. 3. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the penalty imposed by ld. AO @ 200% in respect of disallowance of interest on TDS. Appellant prays that the issue of allowability of interest on TDS is debatable and therefore disallowance thereof does not amount to misreporting/underreporting of income. 4. On the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in confirming penalty imposed by ld. AO without....
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....ays that order rejecting the application of assessee seeking immunity u/s 270AA as passed by ld. AO is barred by limitation and accordingly assessee is entitled for immunity provided under the Act from levy of penalty. 3. Ld. CIT(A) has grossly erred in confirming the penalty imposed by ld.AO @ 200% by alleging the excess claim of depreciation is misreporting, whereas penalty proceedings were initiated for underreporting of income as is evident from the order passed u/s 143(3) itself where such satisfaction was recorded. Thus, the penalty order so passed deserves to be held void ab initio and the consequent penalty levied at Rs. 12,20,518/- deserves to be deleted. Without prejudice to above and in the alternative, 4. That, Id. CIT(A) has further erred in confirming the penalty imposed by ld.AO, by not considering the submission made by assessee during assessment proceedings itself that effect of CIT(A) order in earlier year could not be given due to oversight, as depreciation was charged on the balances of Fixed assets brought forward from earlier year (as is normal practice), however subsequently, mistake was rectified and Fixed Assets Register modified replaced giving effec....
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....on TDS. During the course of assessment proceedings, penalty proceedings u/s. 270A of the I.T. Act were initiated and accordingly Show cause Notice u/s. 274 r.w.s. 270A of the I.T. Act was issued on 26.11.2029 for under-reporting of income in consequence of misreporting. Further show cause notice u/s. 274 r.w.s. 270A was issued on 26.05.2021 fixing the hearing date on 31.05.2021. In reply to show cause notice dated 26.05.2021, the assessee vide reply uploaded on 31.05.2021. The reply of the assessee has been taken into consideration but not found to be acceptable. Because the assessee has made excess claim of depreciation on building of Rs. 19,59,272/- which is allowable in view of the explanation 5 to section 43(1) of the Act and accordingly was disallowed and added back to the income of the assessee. 5.1 Further, the assessee has wrongly claimed interest paid of Rs. 66,466/- on TDS late payment which is penal in nature and not allowable deduction u/s. 37 of the I.T. Act and accordingly was disallowed and added back to the total income the assessee. In view of the above, it is clear that the assessee has incorrectly and erroneously debited an amount of excess depreciation of Rs. ....
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....13-14, the AO had worked out allowable depreciation on building at Rs. 4,59,572/- instead the appellant has claimed Rs. 24,18,844/- in its ITR for the impugned AY 2017-18. Accordingly, while concluding the assessment proceedings the AO had disallowed the excess claim of depreciation i.e., Rs. 19,59,272/- (Rs.24,18,844 Rs. 4,59,572) and added it to the returned income. Also, a disallowance of Rs. 66,466/- was made u/s.37(1) of the Act, being the interest paid for committing a default in respect of a statutory liability and added to the returned income. 7.4 During the course of penalty proceedings, the appellant had submitted before AO that there was no demand raised by the assessment order for the impugned AY 2017-18 and also the appellant company had not preferred further appeal against the assessment order and accordingly requested to drop the penalty proceedings since there was no malafide intention. 7.4.1 However, the AO had held that the appellant has not preferred an appeal against the assessment order u/s. 143(3) of the Act dated 26.11.2019 and hence, the appellant has no valid explanation and unable to challenge the addition made in the assessment order and has thus, acc....
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....n of the department in AY 2013-14 of changing its method of accounting from income from house property to business income and was expecting an order from CIT(A) in its favour. Accordingly, the appellant has submitted that both the depreciation and interest on TDS were claimed as deduction under bona fide belief as there were judicial pronouncements in favour of assessee and that it's not a case of bogus claim of any expenditure. 7.8 The grounds of appeal and written submission filed by the appellant are considered and examined carefully under the light of facts emanating from the disputed order. 7.9 It is undisputable that the CIT(A) has upheld the order of AO for AY 2013-14 vide order dated 18.09.2017, which was served on the appellant on 11.10.2017. Thus, it is clear that the appellant has got more than three weeks before filing ITR within due date i.e., 30.10.2017 for the impugned AY 2017-18 and claim depreciation in consequent to the CIT(A) Order(supra). However, the appellant has filed ITR for the impugned AY 2017-18 on 29.10.2017 by claiming excess depreciation. 7.10 Even otherwise, the appellant did not prefer further appeal on CIT(A)'s order(supra) and the cas....
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....essment. Details and information as sought by ld.AO were furnished and assessment was completed after making following additions/disallowances. 1. Disallowance on account of Excess Depreciation 19,59,272/- 2. Disallowance of Interest on TDS 66,466/- 20,25,738/- In order to avoid litigation and to buy peace of mind, assessee duly discharged the tax liability arising due to disallowances so made and no appeal was filed. However, penalty proceedings were initiated by ld.AO u/s 270A of the Income Tax Act, for "misreporting and under reporting of income" , which were concluded vide order passed u/s 270A dated 24.7.2021, whereby penalty equivalent to 200%, i.e. Rs. 12,51,906/- was imposed by holding that assessee has underreported income in consequence to misreporting. Aggrieved of the penalty so imposed, assessee company preferred an appeal before ld. CIT(A), which was decided vide order dated 22.11.2023 wherein ld. CIT(A) upheld the penalty imposed by ld. AO. Aggrieved of the order so passed by ld. CIT(A), assesse has preferred present appeal. With this background, ground wise submission is made as under: Grounds of Appeal Nos. 1 to 4: In these grounds of appeal, assess....
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....alty of 200% was imposed on account of underreporting in consequence to misreporting. In this regard, at the outset, it is submitted that depreciation claim of assessee, was based on bona fide belief as the matter was pending before ld. CIT (A) where assessee expected relief. It is also submitted that the order of ld. CIT (A) for AY 2013-14 was passed on 18.09.2017 and dispatched to the assessee only on 11.10.2017 (APB 26-31) and received by the assessee on 13.10.2017 , by when books were already finalized and further assessee was in the process of seeking advice for filing further appeal against such order or not, thus while filing the return of income for the year under appeal which incidentally be fallen due upto 31.10.2017 thus assessee could not modify the claim of depreciation and thereafter the issue skipped the attention of the assessee and meantime case was selected for scrutiny. During the course of assessment proceedings, assessee cooperated with the department and filed the revised calculation of depreciation, giving effect to the order passed by ld.CIT(A) for A.Y. 2013-14, which stood disallowed. It is thus submitted that assessee has duly disclosed all facts in Retu....
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....ts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court. 18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bonafide and inadvertent error, the assessee while submitting....
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.... extent, provisions of section 270A are parimateria with that of section 271(1)(c) as both the sections use the word "may" and not "shall", which itself makes it clear that imposition of penalty is discretionary and not mandatory more particularly when a assessee made a claim on bobafide belief that the same would be allowable and the same is eventually not allowed or claim of assessee is recomputed. It is further submitted that ld.AO has imposed penalty of 200% on allegation of misreporting as per section 270A(9), however nowhere throughout the process, i.e. in assessment order, in show cause notice (APB 35-39) or even in Penalty order, ld.AO has specified as to under which limb of section 270A(9), i.e. (a) to (f), case of assessee falls. As is evident from the assessment order, ld.AO initiated the penalty for "misreporting and under reporting of income". In other words, ld.AO himself was not clear if the case falls under sub section (1) or sub section (8) of section 270A. In fact, in none of the notices issued u/s 270A it was specified as to under which limb penalty proceedings was sought be levied. In all, three notices were issued to the assesse prior to imposition of penalty....
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....in books of account; (v) failure to record any receipt in books of account having a bearing on total income; (vi) failure to report any international transaction or deemed international transaction under Chapter X of the Income tax Act." It is thus clear that in case, AO alleges the misreporting, he has to specifically mention as to under which of the clauses, case of assessee falls before imposing heavy penalty of 200%. Hon'ble Rajasthan High Court very recently in the case of Chambal Fertilizers and Chemicals Ltd. vs PCIT [2024] 158 taxmann.com 184 (Rajasthan) has confirmed the requirement of clearly specifying the sub clause of section 270A(9), prior to concluding that assessee has misreported the particulars of income. INCOME TAX : Where GST Input Credit was mistakenly merged with expenses and same was suomotu surrendered by assessee by revising return, however revenue imposed penalty under section 270A, since revenue wasn't sure whether it was a case of misrepresentation or suppression of facts or claim of expense sub-clauses (a) and (c) of section 270A(9) were not attracted and, thus, assessee was to be granted immunity under section 270AA. In G R Infraproject....
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....g of income (scope of provisions) - Assessment year 2018-19 - Assessee-company filed its return of income - Case of assessee was selected for scrutiny - Assessing Officer made addition under section 43CA read with section 56(2)(x) - By virtue of this addition, penalty proceedings under section 270A was initiated on account of misreporting of income - Whether since additions were being made by virtue of section 43CA r.w.w. 56(2) (x) i.e. deeming provisions, case of assessee did not fall in category of under reporting of income - Held, yes - Whether further since in penalty notice revenue had failed to specify limb "under-reporting" or "misreporting" of income, under which penalty proceedings had been initiated, mere reference to word "misreporting" by revenue in assessment order, for imposition of penalty, made impugned order manifestly arbitrary - Held, yes - Whether further since entire edifice of assessment order framed by Assessing Officer was actually voluntary acceptance by assessee to buy peace and avoid litigation, there was no question of any misreporting - Held, yes [Para 5] [In favour of assessee] Hon'ble Delhi High Court in the case of Prem Brothers Infrastructure LLP ....
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....nt of the appellant that, the failure on the part of lower tax authorities to identify and communicate the specific circumstance or incidence from clause (a) to (g) of s/s (2) of section 270A by virtue of which the income of the appellant held as under-reported and further failure on the part of lower tax authorities to showcase which of the specific action of the appellant from clause (a) to (f) of s/s (9) was determinant before imposing the impugned penalty u/s 270A of the Act has rendered the entire proceedings invalid and thus untenable in the eyes of law. Consequently the penalty imposed u/s 270A of the Act being bad in law deserves to be quashed, ergo we order accordingly. 15. In result, both these appeals stands ALLOWED." Concurrent order of Sh. Satbeer Singh Godara (Judicial Member): 6.2. Faced with the situation and in light of overwhelming material strongly supporting the assessee's case and going by stricter interpretation as per Commissioner of Customs (Imports), Mumbai vs. DilipkumarAnd Co. &Ors. 2018 (9) SCC 1 (SC) (FB), I am of the view that the above stated judicial precedents regarding the "limb theory" would squarely apply even in case of failure of the Asse....
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....ishing details of Revised Depreciation (as required) in Annexure 2 32-34 5. Copy of notice dated 26.11.2019 issued u/s 270A of the Income Tax Act 35 6. Copy of notice dated 24.12.2020 issued u/s 270A of the Income Tax Act 36 7. Copy of show cause notice dated 26.5.2021 issued u/s 270A of the Income Tax Act 37-39 8. Copy of Order dated 23.6.2023 passed by Hon'ble Pune bench of ITAT passed in the case of Kishor Diganbar patil in ITA No. 54 and 55. 40-59 9. Copy of order dated 31.5.2022 passed by Hon'ble Delhi High Court in the case of Prem Brothers Infrastructure LLP reported in [2022]142 Taxmann.com 38 (Delhi) 60-63 10. Copy of Written Submission dated on 26.07.2023 before Id. CIT(A), NFAC 64-71 9. The ld. AR of the assessee relied upon the written submission and paper book filed. The ld. AR of the assessee submitted that in the A. Y. 2013-14 the assessee disputed the disallowance of deprecation and the accounts of the assessee was finalized on 14.06.2017 and were sent to shareholders and order of the ld. CIT(A) could not be given effect as the accounts were finalised and therefore, the contention of the lower authority that the assessee has willingly not....
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....record and gone through findings of the lower authorities recorded in their respective orders as well as gone through the various judicial rulings placed before us to drive home to their respective contentions. The brief facts pertaining to the issue are that the assessee is private limited company engaged in business of lease rental and real estate development. Return of income was filed declaring income of Rs. 2,17,59,670/- and assessment was completed after making disallowance on account of excess claim of depreciation of Rs. 19,59,272/- and disallowance of interest paid on TDS amounting to Rs. 66,466/-. The assessee has contended that with a view to avoid litigation and to buy peace of mind, assessee paid the due tax thereon and no appeal was filed. Thus, the issue was finalized and therefore, ld. AO initiated penalty proceedings u/s 270A for "misreporting and under reporting of income" and consequently passed an order levying penalty @ 200% amounting to Rs. 12,51,906/-. The assessee challenged the levy of the penalty before the ld. CIT(A) who also uphold the finding of the ld. AO. The assessee has challenged that order of the ld. CIT(A) raising as much as four grounds of appea....
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....during assessment proceedings and therefore this act cannot be treated as "misreporting" by any stretch of imagination, more particularly when the issue on which disallowance has been made was debatable. So far as regard to disallowance of interest paid on TDS amounting to Rs. 66,466/-, it is submitted that interest on TDS is paid for the duration for which payment of TDS is delayed and is thus basically compensatory in nature and not penal in nature and therefore same is allowable u/s 37(1) of I.T. Act, 1961. It was also submitted by the ld. AR that there is no allegation about suppression of some facts or misrepresentation of some facts by the assessee and moreover this claim was also based on certain judicial pronouncements in favour of assessee at the time of making the claim. Thus, the claim of depreciation and interest on TDS was made accordingly. It is also submitted that it is not the case that the claimed any bogus or excessive or unrelated expenses or has misrepresented the facts. On this issue our attention was invited to the decision of the apex court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. and M/s Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (supra), whic....
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....ing the appeal before the Income Tax Appellate Tribunal against the past disallowance of depreciation. In the meanwhile, the assessee had to file its return for A.Y. 2017-18 and same was filed on 29.10.2017 claiming the depreciation as the prevalent practice. This conduct of the assessee cannot be considered as malafide so as to arrive at the conclusion that assessee misrepresented the facts. It is further seen that during assessment proceedings, the assessee has submitted revised calculation of depreciation for A.Y. 2017-18 as per the CIT(A)'s order for A.Y. 2013-14 and this difference in depreciation was disallowed by the ld. AO and on the same penalty has been imposed that too considering it to be misreporting of income. Moreover, the ld. AO had not specified anywhere in the penalty order as to under which clause of section 270A (9) the case of the assessee falls. Nor these details were specified in the show cause notice or discussed in the assessment order. Regarding issue of disallowance of interest paid on TDS, on these aspect of the matter there is no allegation of suppression of facts or misrepresentation of the facts. Moreover, ld. AO has not specified in respect of this d....