Narayanan Sundaramahalingam Rajkumar Vs ACIT (ITAT Chennai)
In the case of Narayanan Sundaramahalingam Rajkumar vs. ACIT, the Chennai Income Tax Appellate Tribunal (ITAT) dealt with a penalty imposed by the Assessing Officer (AO) under Section 270A of the Income Tax Act, 1961. The case stemmed from an assessment for the year 2018-19, where the AO disallowed 30% of the indexed cost of development expenses related to the sale of land by the assessee. The disallowance amounted to ₹16,63,384, and a penalty of ₹7,88,112 was levied, citing underreporting of income due to failure to furnish evidence supporting the expenditure claimed. This penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], Chennai, leading the assessee to approach the ITAT for relief.
The ITAT found that the disallowance by the AO was based on an estimation of expenses, and the assessee had not concealed income or furnished inaccurate particulars. The Tribunal noted that the failure to provide all the vouchers for development expenses was due to the loss of documents, but the assessee had disclosed all material facts. The ITAT held that disallowances based on estimations do not constitute underreporting of income and thus are not grounds for a penalty under Section 270A. Therefore, the ITAT directed that the penalty levied by the AO and confirmed by CIT(A) be deleted, providing relief to the assessee.
