TaxTMI 
TaxTMI 
2026 (1) TMI 1031
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....018-19. 2. The assessee has raised the following grounds of appeal: 1. The penalty order U/s. 270A dated 7/12/2021 imposing a sum of Rs. 54,45,894/- for under reporting of income is bad in law and under which limb of provisions of section 270A (2) is not specified. 2. Ld. AO and Ld. CIT(A), NFAC failed to appreciate that there was no under reporting of income of Rs. 3,27,09,605/- which was the interest on bank deposits recorded in the regular books of account and reported in the financial statements. Levy of penalty u/s. 270A is not automatic and is discretionary. 3. Ld. AO and Ld. CIT(A), NFAC failed to appreciate that the assessee treated the interest income as business income and claimed the same as deductio....
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....come under normal provisions and book profit of Rs. 31,32,51,966/- under MAT provisions of the Act. The case of the assessee was selected for complete scrutiny under CASS and accordingly, notice under section 143(2) of the Act dated 23.09.2019 was issued by the Learned Assessing Officer ("Ld. AO") to the assessee. During the assessment proceedings, the Ld. AO noticed that the assessee had earned interest income of Rs. 3,27,09,605/- on bank deposits, on which the deduction under section 10AA of the Act was claimed by the assessee. The Ld. AO held that such interest income was taxable under the head Income from Other Sources and, therefore, not eligible for deduction under section 10AA of the Act. He accordingly completed the assessment under....
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....tion and in the audited accounts. The Ld. AR also submitted that the assessee claimed deduction under section 10AA of the Act under a bona fide belief, relying on the judgment of the Hon'ble Karnataka High Court in the case of CIT v. Hewlett-Packard Global Soft Ltd. 403 ITR 453, wherein it was held that interest on bank deposits formed part of the business income of the eligible unit for the purpose of deduction under sections 10A/10B of the Act. He again explained that, although this decision pertained to section 10A/10B of the Act, the assessee reasonably believed that the same principle extends to section 10AA of the Act, which is also an incentive provision. It was further submitted that section 270A(6)(a) of the Act provides that where....
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....ents (page no. 30 of the paper book). Therefore, there is a complete disclosure of income by the assessee in its return of income. We observe that the assessee has claimed deduction under section 10AA of the Act based on the judgment of the Hon'ble Karnataka High Court in the case of CIT vs. Hewlett- Packard Global Soft Ltd. (Supra), forming a bona fide belief that the principle applicable to sections 10A/10B of the Act would also apply to section 10AA of the Act. The assessee has also fully disclosed the nature of income, source of income, and computation of income. On the contrary, the Ld. DR relied on the decision of CIT vs. Menon Impex Private Limited (Supra) to contend that interest income is not eligible for 10AA deduction. In our con....
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....on of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB." 8. Perusal of Section 270A(6)(a) clearly provides that an addition shall not be treated as under-reporting where the assessee offers a bona fide explanation, and all material facts neces....