Assessment Year 2018-19: Tribunal Overturns Penalty Imposed Under Section 270A of the Income Tax Act

Introduction: 

• This article discusses a recent appeal filed by an individual assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi. The appeal challenges the penalty imposed under Section 270A of the Income Tax Act, 1961 ["Act"] for the assessment year 2018-19. The Tribunal, after thorough consideration, has decided in favor of the assessee, highlighting procedural irregularities in the penalty imposition.

Background:

• The assessee, an individual with salary income, filed the income tax return for the relevant year using ITR-1. The return declared gross salary income from Fidelity Business Services India Pvt. Ltd. and claimed Chapter VI-A deduction, resulting in a total income of ?4,11,100/-. The return was processed, and a refund of ?28,760/- was issued. However, the case was later selected for scrutiny.
• During the scrutiny, it was discovered that the assessee had not disclosed income received from Aitken Spence Hotel Management Pvt. Ltd. and HDFC, amounting to ?2,72,769/-. The Assessing Officer issued a show-cause notice, and the assessee promptly paid the taxes. Subsequently, a notice under Section 270A of the Act was issued, leading to the imposition of a penalty of ?1,68,569/- by the Assessing Officer.

The Appeal:

• Challenging the penalty, the assessee contended that the Assessing Officer failed to discuss the reply furnished by the assessee against the show-cause notice. The penalty order lacked justification for levying a penalty at 200%, and no reasons were recorded for the same.

Tribunal's Observations:

• Upon reviewing the case, the Tribunal noted that the Assessing Officer did not adequately address the assessee's reply to the show-cause notice. The penalty order lacked a proper discussion on why the provided explanation was deemed unacceptable. Additionally, the Assessing Officer failed to provide any reasoning for imposing a penalty at 200%.

Tribunal's Decision:

• Considering these procedural lapses, the Tribunal concluded that the penalty order, both by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals), was not sustainable. The Tribunal held that the penalty levied under Section 270A of the Act should be deleted.

Conclusion:

• This case underscores the importance of proper documentation and reasoning in penalty orders under Section 270A of the Income Tax Act. The Tribunal's decision highlights the necessity for tax authorities to thoroughly consider and address the assessee's responses to show-cause notices. The decision in favor of the assessee serves as a reminder that procedural irregularities can lead to the nullification of penalties, emphasizing the need for a fair and well-reasoned approach in tax assessments.

Topic- Chitra Ramanathan Versus Income Tax Officer

Court-ITAT-Chennai

Date29/11/2023

Team Taxonation

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