TaxTMI 
TaxTMI 
2025 (12) TMI 1857
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....d. The assessee has challenged both the assumption of jurisdiction for levy of penalty and the confirmation thereof on merits, contending that the facts of the case do not give rise to any "under-reporting of income" within the meaning of section 270A of the Act. 2. The assessee before us is a public charitable trust, registered under section 12AA(1)(b)(i) of the Act and also approved under section 10(23C)(vi). It is regularly assessed to tax and its income, subject to fulfilment of statutory conditions, is exempt under section 11 of the Act. 3. For the assessment year under consideration, the assessee filed its return of income declaring total income at Nil. Subsequently, a search and seizure action under section 132 and a survey act....
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....ion was bona fide, that there was no concealment or misrepresentation, that its income was otherwise exempt under section 11 of the Act, and that no tax advantage had accrued to it. 7. The Assessing Officer was not convinced with the explanation furnished. He proceeded to pass an order dated 21.06.2023 under section 270A of the Act, levying penalty at the rate of 50% of the alleged tax payable on the so-called under-reported income, amounting to Rs.37,61,672/-. 8. On appeal, the learned CIT(A) confirmed the levy of penalty. The learned CIT(A), in his findings, held that the assessee had made a claim of depreciation which was impermissible in law, being in clear violation of section 11(6) of the Act. According to the learned CIT(A), th....
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....s claim of depreciation, being impermissible under section 11(6), resulted in overstatement of application of income and thus constituted under-reporting of income within the meaning of section 270A(2)(a). While this line of reasoning may appear attractive at first blush, it does not withstand closer scrutiny when examined in the full factual and legal context of the case. 13. It is an admitted and undisputed position that the assessee's income, both as returned and as assessed, is Nil. The assessee is a charitable trust whose income, subject to fulfilment of statutory conditions, is exempt under section 11 of the Act. Even after the disallowance of depreciation, the assessment does not result in any taxable income. The assessed income r....
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....ility itself did not permit any carry forward or set-off in the manner alleged. 17. Thus, this is not a case where the assessment has the effect of reducing a loss or converting a loss into income, nor is it a case where the assessee has secured any present or future tax advantage. In such circumstances, the essential ingredient of "under-reporting of income", as contemplated under section 270A, is conspicuously absent. 18. The reliance placed by the learned CIT(A) on section 270A(2)(a) also does not advance the Revenue's case. Clause (a) of sub-section (2) refers to a situation where the income assessed is greater than the income determined in the return. In the present case, the income determined in the return is Nil and the income ....