TaxTMI 
TaxTMI 
2025 (5) TMI 1495
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.... Act. ITA No.95/Agr/2023 A.Y 17-18 4. The grounds raised by the assessee read as under: "1. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi bas erred in law and on facts in sustaining the Penalty of Rs. 19.381/- arbitrarily imposed by the A.Q. u/s 270A of the Income Tax Act, 1961 for under reporting of income, therefore the said Penalty is unsustainable and liable to be deleted. 2. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the Penalty of Rs. 19,381/- arbitrarily imposed by the A.O. u/s 270A of the Income Tax Act, 1961, without correctly considering and appreciating the facts on records, therefore the same is liable to be deleted. 3. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the Penalty Order passed under section 270A of the Income Tax Act, 1961 by the A.O. is insupportable in law and on facts and is also contrary to the principles of natural justice and equity. 4. That the Ld. Commissioner of Income Tax (Appeals), Nati....
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....AO, on the basis of material on record before him, held that it is a fit case for levy of penalty u/s 270A of the Act for underreporting since the income assessed was greater than the basic exempt income and there was conscious underreporting/ misreporting of income. Accordingly, he levied penalty on the assessee in terms of Section 270A of the Act @ 50% of the tax payable on the underreported income, amounting to Rs. 19,381/-, which was confirmed by the Ld. CIT(A). 6. Having heard both the parties, we are not in agreement with the Ld.CIT(A) that this is a fit case for levy of penalty u/s. 270A of the Act. Reason being that: i. The AO while levying penalty was not sure whether it was a case of under reporting of income inviting penalty @30% in terms of the provisions of Section 270A(7) of the Act or it was a case of misreporting of income as a consequence of under reporting inviting penalty @ 200% of tax sought to be evaded in terms of the provisions of Section 270A(8) of the Act. 7. A perusal of the provisions of section 270A of the Act reveals that it identifies two different set of defaults for attracting penalty, both inviting different quantum of penalty. The se....
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.... loss or converting such loss into income. (3) The amount of under-reported income shall be,- (i) in a case where income has been assessed for the first time,- (a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub-section (1) of section 143; (b) in a case where no return of income has been furnished or where return has been furnished for the first time under section 148,- (A) the amount of income assessed, in the case of a company, firm or local authority; and (B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A); (ii) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order: Provided that where under-reported income arises out of determination of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total under-reported income shall be determined in accordance with the following ....
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....preceding year; and (b) where the amount added or deducted in the first preceding year is not sufficient to cover the receipt, deposit or investment, the year immediately preceding the first preceding year and so on. (6) The under-reported income, for the purposes of this section, shall not include the following, namely:- (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or ^96[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or ^96[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under-reported income determi....
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.... reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported income as if it were the total income; (c) in any other case, determined in accordance with the formula- (X-Y) where, X = the amount of tax calculated on the under-reported income as increased by the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order as if it were the total income; and Y = the amount of tax calculated on the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order. (11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the basis of imposition of penalty in the case of the person for the same or any other assessment year. (12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the Assessing Officer, ^97[the Joint Commissioner (Appeals) or] the Commissioner (Appeals), the Commissioner or the Princi....
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....wing, namely:- (a) ............. (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or ^96[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;" 13. We have noted that in the facts of the present case, the assessee had submitted his complete financial statement to the AO relating to the business of dealing in milk and milk products of Mother Dairy through a booth run by him. These facts stand recorded in the assessment order at Page No.2. Thus, the assessee was in possession of complete books of accounts, from which these financial figures had been derived. But it is revealed from the assessment order that without finding any infirmity in the books of accounts or for that the matter rejecting the books of accounts, the AO has estimated the income of the assessee by applying a net profit rate of 1.30% to the total turnover of the assessee. Therefore, the estimation of income by the AO....
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....)(d) of the Income Tax Act, 1961 for non compliance of notice issued u/s 142(1) of the Income Tax Act, 1961, therefore the said Penalty is unsustainable and liable to be deleted. 2. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the Penalty of Rs. 10,000/- arbitrarily imposed by the A.O. u/s 272A(1)(d) of the Income Tax Act, 1961, without correctly considering and appreciating the facts on records, therefore the same is liable to be deleted. 3. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the Penalty Order passed under section 272A(1)(d) of the Income Tax Act, 1961 by the A.O. is insupportable in law and on facts and is also contrary to the principles of natural justice and equity. 4. That the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi has erred in law and on facts in sustaining the Penalty of Rs. 10,000/- u/s 272A(1)(d) of the Income Tax Act, 1961 is much too high and excessive and deserves to be deleted. 5. That the Ld. Commissioner o....
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....ce personnel, he was not aware of the procedural aspect of the Income Tax Proceedings, even Hon'ble Punjab and Haryana High Court in the case of Munjal BCU Centre of Innovation and Entrepreneurship, Ludhiana Vs. Commissioner of Income Tax Exemptions, Chandigarh in CWP-2102802923 (O&M) has held that assessee is not expected to keep the e-Portal of the department open all the time so as to have knowledge of what the department is supposed to be doing. The Hon'ble Punjab & Haryana High Court considered the provisions of section 282(1) of the Income Tax Act, 1961 and Rule 127(1) of the Income Tax Rules, 1962 and held that simply by placing the communication on the e-portal does not amount to giving of opportunity of being heard. Copy of the said Judgment is enclosed at P.B. No.55-61 As soon as the assessee came to know about the assessment proceedings the assessee has duly complied with the notice issued under section 142(1) of the Income Tax Act, 1961 dated 17.01.2018 and filed return of income along with Audit Report which has duly been acknowledged by the Ld. A.O. in the Assessment Order passed under section 143(3) of the Income Tax Act, 1961(P.B. No.62-65). On Page....
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....7-18 thereby extended the period in which the assessee could e-file the return of income, the return of income was duly acknowledged vide e-filing Acknowledgement No. 172358431240919, copy enclosed at P.B. No.7 therefore the rejection of return of income by the A.O. is unsustainable in law. The above facts clearly show that the default in not complying with the notice under section 142(1) of the Income Tax Act, 1961 dated 17.01.2018 was neither intentional nor deliberate. The assessee was prevented from reasonable and sufficient cause as the notice under section 142(1) of the Income Tax Act, 1961 dated 17.01.2018 addressed at Unit Location at 56 APO never reached to the assessee since he was already retired. The assessee participated in assessment proceedings and filed replies. The assessee reacted bonafidely by complying to notice under section 142(1) of the Income Tax Act, 1961 dined 17.01.2018 albeit after the due date prescribed in notice under section 142(1) of the Income Tax Act, 1961 dated 17.01.2018." 23. We have gone through the submissions demonstrating reasonable cause for not complying with the notice on account of which penalty of Rs. 10,000/- was levied u/....