Sermadevi Yegnaswamy Ramakrishnan Vs ITO (ITAT Bangalore)
Bengaluru ITAT: Section 270A Penalty Invalid Where Notice Fails to Specify the Exact Limb of Under-Reporting or Misreporting
The Bengaluru Bench of the ITAT held that a penalty under section 270A cannot be sustained where the show-cause notice and the penalty order fail to specify the exact statutory limb under which the assessee is alleged to have under-reported or misreported income. The Tribunal observed that section 270A(2) and section 270A(9) contain distinct circumstances attracting penalty, and the Assessing Officer must clearly identify the precise clause invoked. Failure to do so vitiates the penalty proceedings.
In the present case, the assessee had omitted to disclose interest earned on a foreign bank deposit, believing that interest on funds accumulated while working abroad as a non-resident was not taxable in India. Upon receipt of notice under section 148, the assessee voluntarily disclosed the interest income, filed the return, and paid the due taxes along with interest. Nevertheless, the Assessing Officer levied 200% penalty under section 270A, alleging under-reporting in consequence of misreporting, without specifying the applicable limb of the provision either in the notices issued under section 274 read with section 270A or in the penalty order itself.
Relying on the decisions of the Delhi High Court in GE Capital US Holdings Inc. and Schneider Electric South East Asia (HQ) Pte. Ltd., as well as several coordinate Bench rulings, the Tribunal held that non-specification of the exact statutory limb is a fatal defect, rendering the notice and the consequential penalty order legally unsustainable. Accordingly, the Tribunal set aside the orders of the lower authorities and deleted the penalty, without adjudicating the merits of the assessee’s explanation regarding the foreign interest income.
Cases Discussed
