TaxTMI 
TaxTMI 
2025 (3) TMI 2054
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....K. Madanlal engaged in the business of pawn broking. A search and seizure operations u/s.132 of the Act was carried out in the case of Lotus G Square Group on 29.01.2019. Pursuant to which, assessment u/s.153C r.w.s.143(3) of the Act was completed for AYs 2017-18 & 2018-19 on 29.09.2021 by making an addition of Rs. 14,23,547/- & Rs. 14,58,678/-respectively. Thereafter, the penalty proceedings u/s.270A of the Act was initiated separately for AYs 2017-18 & for AY 2018-19 and penalty of 200% was levied and thereby penalty of Rs. 4,39,876/- & Rs. 3,85,353/- was imposed respectively for the said years. 3. Aggrieved by the penalty levied by the AO, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to confirm it by passing the impugned orders. 4. Aggrieved, the assessee is in appeal before this Tribunal and raised several grounds including the legal issue 5. The Ld.AR, assailing the action of Ld.CIT(A), submitted that he erred in confirming the penalty levied by the AO u/s.270A of the Act for underreporting its income in consequence of misreporting of income, by levying, 200% of total tax. The first and foremost argument of Ld. AR is that no specific charge ha....
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....l transaction or any specified domestic transaction, to which the provisions of Chapter X apply. 7. The Ld.AR submitted that the AO was bound by law to specify in the notice, which clause of sub-section (9) of section 270A has been attracted for levying of the penalty under misreporting of income. According to the Ld.AR, in the present case, it can be seen that the notice issued (supra) before levying penalty u/s.270A is vague, because of which the assessee was confused and couldn't comprehend as to what fault assessee committed to attract such a penalty. In other words, the assessee was in the dark and wondered as to what kind of violation/fault, assessee has committed which assessee needs to defend while answering the show-cause notice issued by the AO. 8. We find force in the submissions of the assessee and note that the notice of penalty issued by the AO is vague and doesn't spell out the specific fault for which assessee has been called upon to defend the proposed penalty viz 'underreporting and misreporting of income' which the AO might have proposed as "under-reporting of income its income in consequent of misreporting of income" which falls under sub-section (9) of se....
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....tement recorded from the Director of the assessee company and also enquiries conducted with suppliers of 'gift articles' during the course of assessment proceedings. The AO further observed that had search was not taken place u/s.132 of the Act, 'under reporting of income and under reporting as a consequence of misreporting of income' would not have come to light. Therefore, the AO opined that it is a clear case of 'under reporting of income and under reporting as a consequence of misreporting of income' which attracts provisions of Sec.270A(9) of the Act, and thus, levied penalty for both the assessment years for 'under reporting of income and under reporting as a consequence of misreporting of income'. 13. The fact with regard to seizure of huge unaccounted cash during the course of search on 6-12-1018 was not disputed. It is also an admitted fact that the assessee company has offered additional income of Rs. 16.39 Crs. & Rs. 23.62 Crs. towards disallowance of estimated marketing expenses @ 1/3rd of total expenses incurred under the head 'marketing expenses' for both the assessment years. The cash seized during the course of search was telescoped against additional incom....
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....hereof and in the present case, the AO invoked second limb of provisions of Sec.270A of the Act. Admittedly, these provisions have been substituted by the Finance Act, 2016 w.e.f.01.04.2017 and applicable for AY 2017-18 onwards. Prior to insertion of Sec.270A of the Act, a similar provision was existed in the statue by way of sec.271(1)(c) of the Act, for concealment of particulars of income or furnishing of inaccurate particulars of income. Provisions of Sec.271(1)(c) of the Act, was also having two limbs or two charges i.e. i) for concealment of particular of income and ii) furnishing of inaccurate particulars of income. If you go by provisions of Sec. 271(1)(c) of the Act & Sec.270A of the Act, and wordings therein both provisions are similar and para materia to each other. Although, the term 'tax evasion' has been redefined by way of 'under reporting of income and under reporting as a consequence of misreporting of income' but it is synonymous to concealment of particular of income or furnishing of inaccurate particulars of income. Therefore, it is necessary to examine whether penalty proceedings u/s.270A of the Act, is mandatory in nature and further, such penalty can be invok....
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.....2021. In our considered view, notice u/s.274 r.w.s.270A of the Act, is not a valid notice for the reason that the AO did not specify the satisfaction as to whether assessee had either 'under reporting of income' or 'misreporting of income'. In absence of proper notice, which is mandatory, the AO cannot impose penalty, because, it is a clear violation of principles of natural justice, because, issuing a vague notice without specifying the charge under which limb the proposed penalty proceedings is initiated, would vitiate the entire proceedings, because, the assessee was not given an opportunity to explain its case on specific charge. Therefore, in our considered view, penalty levied on the basis of invalid or vague notice is invalid and void ab initio. 17. The concepts of 'under reporting of income' and 'misreporting of income' are two different charges with very clear boundaries. As we have already discussed in earlier part of this order, sub-section 2 to 6 of sec Sec.270A of the Act, deals with concept of 'under reporting of income' and for this, separate rate of penalty is provided. Sub-sec.9 deals with concept of 'misreporting of income' and for this, separate rate of....
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.... position is strengthened by the decision of the Hon'ble Delhi High Court in the case of Prem Brothers Infrastructure LLP (supra), where the Hon'ble Delhi High Court by following the earlier decision in the case of Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT, International Taxation in WP (C) No.5111 of 2022 dated 28.03.2022, held that in view of vague notice without any whisper as to which limb of section 270A of the Act is attracted and how ingredients of sub-section 9 is specified, initiation of penalty u/s.270A of the Act for 'misreporting of income' is not only erroneous, but also arbitrary and bereft of any reason and consequently, penalty order passed by the AO, cannot be sustained. The relevant findings of the Hon'ble Delhi High Court are as under: 6. This court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. Vs. ACIT, International Taxation Circle 3(1)(2), New Delhi and Ors. W.P.(C) No. 5111/2022 vide judgment dated 28.03.2022 observed as under:- "6. Having perused the impugned order dated 9th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty wa....
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....isreporting as the assessee had furnished all the details of the transactions relating to disallowance made under Section 14A of the Act and the AO as well as assessee has used the same details to arrive at different conclusions i.e. differing quantum of disallowances under Section 14A of the Act. This by no stretch of imagination can be held to be 'misreporting'. 8. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. W.P.(C) 9. Consequently, the impugned penalty order dated 28th March, 2022 passed by Respondent No.1 under Section 270A of the Act is quashed and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner. 18. At this stage, it is relevant to consider the decision of Hon'ble Madras High Court in the case of Babuji Jacob v. ITO reported in [2021] 430 IT....