Income Tax Appellate Tribunal - Delhi
Iskander Atlaf Lalljee, Gurgaon vs Dcit Circle 52(1), New Delhi on 25 September, 2024
P a g e |1
ITA Nos.294 & 295/Del/2023
Iskander Altaf Lalljee Vs. DCIT, Circle 52(1)
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: "C", NEW DELHI
BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER
&
SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER
ITA No.294 & 295/Del/2023
(Assessment Years: 2017-18 & 2018-19)
Iskander Altaf Lalljee DCIT, Circle 52(1)
1611A, Beverly Park-II, DLF Vs. Delhi Civic Centre,
Phase-II, MG Road, Minto Road,
Gurgaon-122009 New Delhi - 110002
PAN No: AADPL0396H
APPELLANT RESPONDENT
Assessee by : Sh. Ravi Pratap Mall, Adv.
Revenue by : Sh. Om Prakash, Sr. DR
Date of Hearing : 14/08/2024.
Date of Pronouncement : 26/09/2024.
ORDER
PER: MS. MADHUMITA ROY, JUDICIAL MEMBER Both the appeals filed by the assessee are directed against the impugned orders passed by the National Faceless Appeal Centre (NFAC) Delhi, under Section 270A of the Income Tax Act, 1961 P a g e |2 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) (hereinafter referred to as 'the Act') dated 25.11.2022 and 24.11.2022 respectively. Since, both the matters relate to the same assessee and the issue involved herein is identical, these appeals are heard analogously and are disposed of by a common order.
ITA No.294 & 295/Del/2023 (AY: 2017-18 & 2018-19)
2. There are delay of 13 and 14 days in filing the appeal before us respectively in both these appeals. The Ld. Counsel appearing for the assessee narrated the reasons of delay by way of an affidavit along with the application contents whereof has not been able to be controverted by the Ld. DR. Thus, considering the submissions made by the Ld. Counsel, the delay is condoned in both the matters.
3. The assessee before us filed the return of income for the year under consideration on 05.08.201 declaring income at Rs.3,95,09,670/- which was selected for limited scrutiny and finalized upon disallowing the claim under Section 80G with regard to donations given to the institutions namely Jidni Ilma Charitable Trust and Ashwin Projects Society to an amount of Rs.1,00,000/- and Rs.1,75,000/- respectively for want of approval of these two institutions. Penalty proceeding under Section 270A of the Act was initiated on account of under reporting of income in consequence of misreporting of issues. Show cause notice dated 25.11.2019 has been issued to the assessee for under reporting in consequence of misreporting of income whereupon the assessee filed its written submission on 01.03.2021. Penalty, thereafter, was levied by the P a g e |3 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) AO on 17.01.2022 under Section 270A of the Act for under reporting of income in consequence of misreporting of income with 200% of tax with the following observations:
"The submission is made by the assessee is perused and not accepted. Section 270A of the I.T. Act, 1961 specifically defines the case of mis-reporting and the assessee's case falls within the ambit of sub-section 8 of section 270A.
The assessee has further sought waiver of penalty proceedings as the mistake had been committed due to bonafide clerical mistake and no attempt had been made to mis-report his income.
The submission of the assessee is not accepted. From the assessment order it is evident that assessee has regular claimed of deduction u/s.80G, admissibly and quantum of which he is totally aware of and does not require elaborate calculation.
Furthermore, immunity from imposition of penalty is clearly laid down in section 270AA of the I.T Act, 1961 and the reasons cited by the assessee does not fall under any of the exception.
In view of the same the submission made by the assessee is rejected Penalty u/s 270A is imposed on the assessee for under reporting of income (which is in consequence of misreporting of income) as under
Tax on mis-reported Income Rs.8,49,027/-.
Penalty U/s 270A (200% of Tax on under-reported Income) : 16,98,054/-
A sum of Rs.16,98,054/- (Rupees sixteen lakhs ninety eight thousand and fifty four only) being Penalty U/s 270A computed at the rate of two hundred percent of the tax payable on mis-reported Income is imposed on the Assessee. Issue copy of the Order along with Demand Notice to the Assessee."
4. Before the First Appellate Authority in appeal such observation made by the Ld. AO while imposing penalty was rejected as not sustainable as the nature of default committed by the assessee has not been specified. However, penalty ultimately was sustained for under reporting of income by the order impugned before us with the following observations:
P a g e |4 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) "4.3 The instances of misreporting of income have been described in clauses (a) to (f) of sub-section (9) of section 270A of the Act. Even if the same are not mentioned in the show cause notice, it is incumbent on the AO to explain in the penalty order that under which clause of sub-section (9) the default committed by the assessee is covered in order to levy penalty @ 200% of the under reported income. The AO is completely silent on this aspect in his penalty order and has only mentioned sub-section (8) of section 270A, which only specifies the rate of 200% and does not deal with the nature of the default committed by the assessee. Considering the stand of the AO in the subsequent year and provisions of the Act, it is certainly not a case wherein penalty could have been levied @ 200% of under reported income.
4.4 The next question arises whether the appellant can go scot-free considering the fact that the same type of excess claim has also been made in the succeeding year and also the fact that the appellant's books of account are audited and he is aided by a tax professional It is also to be noted that the appellant has made wrong/unsubstantiated claim of deduction in case of three institutions, as has been discussed by the AO in his assessment order The argument of the appellant that it was a bonafide error does not stand on legs because the so called error has again been committed in the subsequent year even when the accounts of the appellant are audited and he is getting services of a chartered accountant Bonafide errors may take place in a particular year but they are certainly not repeated. Further, the wrong and unsubstantiated claim of deduction in case of three institutions makes it clear that the hands of the appellant are not clean and argument of the appellant that issuance of show cause notice for initiation of penalty for misreporting of income has prevented him from applying for immunity u/s 270AA, has also no merits. This argument is an afterthought and is not supported by any overt or covert act Further, even if the application for immunity would have been filed, it cannot be presumed that the AO would have allowed the application in the facts & circumstances of the present case wherein the appellant had already claimed excess deduction u/s 80G itself in the subsequent Assessment Year ie. AY 2018-19. Hence, this argument of the appellant is also not tenable and is liable to be rejected.
The appellant has also mentioned in his submission that the AO has initiated penalty for misreporting of income and has levied penalty for under-reporting of income. The submission is not correct for this year and it is correct for the subsequent year 4.5 In view of the discussion made in para 4.3 above, it is held that sub- section (8) of section 270A of the Act is not applicable in the facts and circumstances of the present case However, the explanation of the appellant is far from being bonafide and therefore sub-section (6) of section 270A, taking the case out of the ambit of section 270A of the Act, is also not applicable in the case of the appellant. This is a case of under reporting of income and penalty is required to be levied @ 50% of tax payable on under reported income. The tax payable on under reported income is Rs.8,49,027/-. Therefore the penalty of Rs.4,24,514/ is confirmed and balance quantum-of penalty amounting to Rs. 12,73,540/- is deleted.
P a g e |5 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) In the result, appeal is partly allowed."
5. Under this facts and circumstances of the matter the assessee's counsel joins issue to this effect that the notice issued under Section 270A of the Act does not specify under which limb of Section 270A(9) of the Act penalty has been imposed. Assumption of jurisdiction, therefore, is invalid in law in view of the provision of Section 270A(8) of the Act which provides as follows:
"Where under-reported income is in consequence of any misreporting thereof by any person, then the penalty shall be equal to 200% of the amount of tax payable on under-reported. Section 270A(9) provides the list of cases of misreporting of the income, which are;
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account,
(c) claim of expenditure not substantiated by any evidence,
(d) recording of any false entry in the books of account,
(e) failure to record any receipt in books of account having a bearing on total income, and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply."
6. It was further submitted by him that the above list is exclusive one and in the event the assessee is not falling in any of the clauses mentioned in the said sections from (a) to (f), the penalty cannot be imposed on account of misreporting of assessee. It is further argued that it is the mandatory duty cast upon the AO to state under which limb the penalty proceeding is to be initiated. If it is not specified initiation of proceeding itself is without jurisdiction. He has relied upon the following judgment passed by the different forum in support of the case made out by the assessee:
P a g e |6 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) i. Kishore Digamber Patil vs. ITO in ITA Nos. 54 & 55/PUN/2023 dated 30.03.2023;
ii. Saltwater Studio LLP vs. NFAC [I.T.A No.13/Mum/2023 dated 22/05/2023];
iii. Prem Brothers Infrastructure LLP Vs. NFAC reported in [2022] 288 Taxman 768 (Delhi);
iv. Schncider Electric South East Asia (HQ) PTE Ltd. v.
Asstt. CIT, International Taxation [W.P.(c) No.5111, dated 28.02.2022];
v. CIT vs.Manjunatha Cotton and Ginning Factory: 359 ITR 565 HC (Karnataka);
vi. PCIT vs. Sahara India Life Insurance Co. Ltd. in ITA No.475 of 2019 HC (Delhi);
vii. Commissioner of Income Tax SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar.), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August 2016.
7. Further that since in this case, the notice issued u/s 270A of the Act does not specify under which limb of section 270A(9) of the Act, penalty has been initiated, assumption of jurisdiction itself is invalid in law. The mistake committed by the appellant was a bonafide error and is not under-reporting of income in any manner. Further that, since the appellant has disclosed all the material facts as such in view of section 270A(6)(a) of the Act, no penalty is leviable u/s 270A of the Act.
8. Factually the case of the assessee is this that during the course of the assessment appellant filed replies for both the assessment years, wherein inadvertent mistake in computing the P a g e |7 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) qualifying amount of deduction to be claimed u/s 80G of the Act was accepted by stating as under:
AY: 2017-18 AY: 2018-19 Reply dated 08.11.2019 (Page 27-28) Reply dated 11.12.2020 (Page 50-52) Deductions u/s 80G claimed in excess The claim on donations it appears have of 10% of Adjusted Gross total Income errors and while filling the data in the
has been claimed inadvertently, it is a Income Tax Return (ITR) in the Schedule clerical mistake at the time of filling 80G: the ROW B. Donations entitled for the ITR The mistake is a bonafide 50% deduction without qualifying limit human error, with no intention to has been used instead of D. Donations conceal income or file inaccurate entitled for 50% deduction subject to particulars. qualifying.
It is a clerical mistake at the time of filling the ITR. The mistake is a bonafide human error, with no intention to 3 conceal income or file inaccurate particulars. The ITR forms are complex and lengthy and it requires high skills to understand and put figures in the correct row of the schedule, in such scenario human errors are possible.
9. Accordingly, Learned AO computed the eligible deduction under Section 80G of the Act, and disallowed the inadvertent excess deduction claimed u/s 80G of the Act.
10. Under this circumstances it was submitted that since the error, was bonafide human error as such same was accepted by the assessee and due taxes were also paid and no appeal have been filed by the appellant, it cannot be said to a case of under reporting of income in any manner and further that as the assessee disclosed all material facts as such in view of the provision of Section P a g e |8 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) 270A(6)(a) of the Act no penalty is leviable under Section 270A of the Act.
11. On the other hand, the Ld. D.R relied upon the orders passed by the authorities below.
12. Apart from that the Ld. AR further argued that the proceeding has been initiated upon issuing show cause notice on account of under reporting of income in consequence of misreporting thereof, imposition of penalty by the AO though on the same ground but finally levy of penalty at 50% of tax payable confirmed on the other limb being under reporting of income made by the CIT(A) is not sustainable in the eyes of law, since show cause being the very basis of initiation of the penalty proceeding against the assessee is on some other change. Unless and until the limb is specified, the penalty levied on other count cannot be sustainable. The Ld. Counsel of the assessee in this regard relied upon the judgment passed by the Hon'ble High Court of Delhi in the matter of Prem Brothers Infrastructure LLP Vs. NFAC reported in [2022] 288 Taxman 768 (Delhi); the relevant portion of the case is as follows:
"6. This court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. v. Asstt. CIT, International Taxation (WP (C) No 5111 of 2022, dated 28-3- 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 was initiated under section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated P a g e |9 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1)
7. This Court also finds that there is not even a whisper as to which limb of section 270A of the Art 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 assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary
8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No 1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting
9. This Court is further of the view that the impugned action of Respondent No. 1 is contrary to the avowed Legislative intent of section 270AA of the Act to encourage/incentivize a taxpayer to (1) fast-track settlement of issue, (ii) recover tax demand, and (ii) reduce protracted litigation
10. Consequently, the impugned order dated 09th March, 2022 passed by Respondent No. 1 under section 270AA (4) of the Act is set aside and Respondent No. 1 is directed to grant immunity under section 270AA of the Act to the Petitioner."
7. This Court is of the opinion that the only addition in the assessment order framed by Respondent No 1 is in respect of disallowance under section 14A of the Act. The Petitioner has made a disallowance of Rs. 3,20,14,010/- which was recomputed by the Assessing Officer at Rs. 6,82,45,759/- Thus, this is a case where the amount of underreporting of income is consequent to increase in the disallowance voluntarily estimated by the assessee. This court is conscious of the fact that there can be cases where underreporting of income may result in misreporting of income, however, in peculiar facts of the present case, the underreporting allegedly done by the assessee cannot amount to misreporting 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 le 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.
9. Consequently, the impugned penalty order dated 28th March, 2022 passed by Respondent No. 1 under section 270A of the Act is quashed and P a g e | 10 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) Respondent No. 1 is directed to grant immunity under section 270AA of the Act to the Petitioner
10. With the aforesaid directions, the present writ petition along with pending applications stand disposed of."
13. In this regard, he has further relied upon the judgment passed by the Hon'ble Pune Bench in the case of Kishore Digambar Patil Vs. ITO, Ward 2(1). The relevant observation on this issue is reproduced hereinbelow :
"6.1. Mr. Murkunde could further not dispute the fact that right from the Assessing Officer's twin assessments to his impugned penalty orders as well the NFAC's detailed discussion, the learned lower authorities have nowhere specified the corresponding "sub-limbs" (a to f) in sub-sec.(9) of sec.270A of the Act. That being the case, I wish to quote para 62.10 in the CBDT's circular no.3/2017 (supra) making it explicitly clear that these six clauses (a to f) would indeed form part of sub-section (8) to sec.270A as under:
"62.10 The rate of penalty shall be fifty per cent of the tax payable on under-reported income. However in a case where under reporting of income results from misreporting of income by the assessee, the person shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income. The cases of misreporting of income have been specified as under:
(i) misrepresentation or suppression of facts;
(ii) non-recording of investments in books of account;
(iii) claiming of expenditure not substantiated by evidence;
(iv) recording of false entry in books of account;
(v) failure to record any receipt in books of account having a bearing on total income;
(vi) failure to report any international transaction or deemed international transaction under Chapter X of the Income tax Act."
6.2. Faced with the situation and in light of overwhelming material strongly supporting the assessee's case and going by stricter interpretation as per Commissioner of Customs (Imports), Mumbai vs. Dilipkumar And Co. & Ors. 2018 (9) SCC 1 (SC) (FB), I am of the view that the above stated judicial precedents regarding the "limb theory" would squarely apply even in case of failure of the Assessing Officer to quote any of the six sub-limbs as well prescribed in sec.270A(9) (a) to (f) of the Act introduced by the legislature in order "to rationalize and bring objectivity, certainty and clarity in the penalty provisions". And that his noncompliance to this clinching effect would not only defeat the legislative mandate but also it renders the amending provisions an P a g e | 11 ITA Nos.294 & 295/Del/2023 Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) otiose. I accordingly hold in these peculiar facts and circumstances that both the impugned penalties deserve to be quashed as not sustainable in the eye of law. Ordered accordingly.
7. These assessee's twin appeals are allowed in above terms. A copy of this common order be placed in the respective case files."
14. Having regard to the facts and circumstances of the matter we find that the case made out by the assessee is acceptable particularly for the reasons for non-adherence to the limb theory and also for non-specifying the clause under Section 270A(9) of the Act by the Ld. AO while initiating penalty proceedings culminating in penalty order as observed in the judgment passed by the ITAT Pune Bench in the case of Kishore Digambar Patil Vs. ITO, Ward- 2(1) (supra). The penalty is found to be without any basis and thus deleted.
15. In the result, both the appeals preferred by the assessee are allowed.
Order pronounced in the open court on 26.09.2024 Sd/- Sd/-
(AVDHESH KUMAR MISHRA) (MADHUMITA ROY)
ACCOUNTATNT MEMBER JUDICIAL MEMBER
Dated: 26/09/2024
PS: Rohit
P a g e | 12
ITA Nos.294 & 295/Del/2023
Iskander Altaf Lalljee Vs. DCIT, Circle 52(1) Copy forwarded to -
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi