Angira Diamonds And Jewellery Private Limited Vs ITO (ITAT Bangalore)
200% Penalty under Section 270A Invalid Unless Specific Limb of Misreporting Is Identified: Bangalore ITAT
The assessee, engaged in the gems and jewellery business, was selected for scrutiny due to its large turnover and comparatively low returned income. The AO disallowed part of the rent and other expenses and the entire salary expenditure because complete supporting details were allegedly not furnished.
Consequently, the AO initiated proceedings for under-reporting of income resulting from misreporting and imposed penalty under section 270A at 200% of the tax payable. The CIT(A) confirmed the penalty.
The ITAT examined the assessment order, notice under section 274 read with section 270A and the final penalty order. It found that the AO had merely used the general expression “under-reporting of income in consequence of misreporting” without specifying the particular clause or limb of section 270A(9) allegedly attracted.
The Tribunal held that section 270A(9) identifies different categories of misreporting. Unless the AO clearly specifies the precise charge, the assessee is deprived of a meaningful opportunity to defend itself. Failure to identify the relevant limb is therefore fatal to the penalty proceedings.
Following its earlier decisions and the Delhi High Court rulings in GE Capital US Holdings Inc. and Schneider Electric South East Asia (HQ) Pte. Ltd., the ITAT deleted the entire penalty under section 270A. As relief was granted on the legal issue, the grounds on merits were treated as infructuous.
