Poonawalla Fincorp Limited Vs ITO (ITAT Pune)
Bonafide Education Cess Claim and No Exempt Income Bar Penalty and Section 14A Disallowance: ITAT Pune
The Pune ITAT decided two appeals filed by the assessee relating to AYs 2019-20 and 2020-21. The first appeal concerned levy of penalty under Section 270A, while the second involved disallowance under Section 14A.
For AY 2019-20, the assessee challenged the penalty imposed under Section 270A(2)(a) for alleged under-reporting of income arising from the claim of deduction towards Education Cess. The assessee contended that the claim was made based on judicial precedents prevailing when the return was filed. Subsequently, the Finance Act, 2022 inserted Explanation 3 to Section 40(a)(ii) with retrospective effect from 01.04.2005, clarifying that tax includes surcharge or cess. The assessee also submitted that Section 155(18) and the option of filing Form No. 69 were inapplicable, as the claim had not been allowed in the assessment.
The Tribunal held that the penalty was unsustainable. It observed that the Assessing Officer invoked Section 270A(2)(a) although the assessment had been completed under Section 143(3), making the provision inapplicable. It further found that the assessee had made a legitimate claim based on settled judicial precedents existing when the return was filed and could not be treated as having under-reported income due to a retrospective amendment introduced later. The Tribunal also held that Section 155(18) did not apply since the Education Cess claim had not been allowed in the assessment. Accordingly, the penalty under Section 270A was deleted and the order of the CIT(A) was reversed.
