2024 (11) TMI 159

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....Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter in short "Ld.CIT(A)"] in DIN & Order No. ITBA/NFAC/S/250/2023-24/1061337077(1) dated 22.02.2024 for the A.Y.2018-19 arising out of order passed under section 270A of the Income Tax Act, 1961 (in short 'Act') dated 12.03.2022. 3. Brief facts of the case are that, the assessee being the society is registered under section 12A r.w.s. 12AA(1)(b) of the Act vide Registration No. H.QRS/III/114/2003-04 dated 28.10.2005 and also registered under section 80G of the Act vide Registration No. F.NO. H.QRS/III/107 80G on 29.01.2010 by the CIT, Rajahmundry. The assessee filed its return of income declaring NIL income after claiming of application of income under section 11 of the Act. The case was selected for complete scrutiny under CASS and accordingly the assessment was completed under section 143(3) r.w.s. 144B of the Act on 15.04.2021 assessing the total income at Rs. Nil. However, during the scrutiny assessment proceedings, Assessing Officer noticed that assessee has mis-reported claim of expenditure on account of depreciation amounting to Rs. 7,95,54,942/- and thereafter initiated penalty proceedings under s....

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.... the permission of the Hon'ble Tribunal." 6. The only contention of the revenue is with respect to deletion of penalty on the mis-reporting of income by the assessee which is not allowed under section 11(6) of the Act. The Ld. Departmental Representative [hereinafter in short "Ld.DR"] by placing heavy reliance on the orders of the Assessing Officer stated that the assessee has furnished false information and mis-reported the application of income while filing the return of income, and therefore pleaded that the penalty levied by the Assessing Officer be upheld. 7. Per contra, Ld. Authorised Representative [hereinafter "Ld.AR"] submitted that assessee has fulfilled obligation of spending 85% of the total receipts even after the disallowance made on account of depreciation. He further submitted that there is no leakage of revenue and no tax is payable or no income has escaped tax. The Ld.AR referring to Sub-Section (2) of section 270A where in it is clearly mentioned that a person shall be considered as under-reported the income, if the following conditions are satisfied. 270 (A) Penalty for under-reporting and misreporting of income. (1) ...... (2) A person shall be cons....

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....tating that even after disallowance of depreciation the assessee has spent more than 85% of the total receipts and therefore the income offered by the assessee at Rs. NIL was accepted while finalising the assessment. However, Assessing Officer resorted to levy penalty under section 270A of the Act stating that the assessee has mis-reported income by computing the tax on the amount disallowed as depreciation and subjected it to the maximum marginal rate and levied the penalty 200% on the amount of tax payable. We find that Assessing Officer has contradicted himself by levying penalty whereas while framing the assessment accepted Rs. Nil as income even after disallowance of depreciation. However, the Assessing Officer has resorted to compute notional tax on the disallowance on which no tax is payable by the assessee. Further as argued by the Ld.AR, the assessee has not under-reported his income as per section 270A sub-section (2) clause (a) to clause (g). Further sub-section (7) of section 270A refers to penalty leviable on the amount of tax on the under-reported income. However, in the instant case there is no tax payable by the assessee as the assessee has spent more than 85% of th....

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....3A) & 143(B) dated 15.04.2021 for the A.Y.2018-19 is neither erroneous nor prejudicial to the interests of revenue. 3. The learned Commissioner of Income Tax (Exemption) erred in holding that the assessing officer allowed deduction both for deprecation on fixed assets and for repayment of loan used for purchase of fixed assets and thereby directing the assessing officer to re-do the assessment. 4. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing officer had already disallowed the claim for deprecation and hence there was no case for redoing the assessment on the same ground. 5. Any other ground that may be urged at the time of appeal hearing." 16. The only issue emanate from the above grounds is with respect to the validity of the order passed by the Ld.CIT(E) under section 263 of the Act wherein the Assessing Officer has already disallowed a sum of Rs. 7,95,54,942/- on account of depreciation claimed as revenue expenditure by the assessee. Ld.Authorised Representative [hereinafter "Ld.AR"] submitted that since the Assessing Officer has already disallowed a sum of Rs. 7,95,54,942/- the order of the Ld.CIT(E) deserves to be quashed. 17....