Kanodia Technoplast Limited Vs ACIT (ITAT Delhi)
Lack of Clarity on “Under-reporting vs Misreporting” Fatal to Penalty Proceedings-Penalty u/s 270A Deleted
Assessee filed its return declaring income of ₹11.25 crores. Assessment u/s 143(3) was completed after disallowing ₹73,948/- as interest to MSME creditors & ₹8.84 lakhs towards late deposit of employees’ PF/ESI contribution. AO initiated penalty u/s 270A & levied ₹1.49 lakhs, which was confirmed by CIT(A). CIT(A) held that post-2017, penalty is automatic whenever assessed income exceeds returned income.
Before Tribunal, Assessee argued that AO failed to specify whether penalty was for “under-reporting” or “misreporting”, which is mandatory u/s 270A. The PF/ESI issue was debatable & finally settled only after SC decision in Checkmate Services Pvt. Ltd. Vs. CIT (12.10.2022). Additions were already disclosed in audit report; hence no concealment or misreporting.
Tribunal held that penalty u/s 270A requires clear classification under its specific limbs. In this case, AO had not identified the charge properly. Further, disallowance for delayed PF/ESI payments was a debatable issue at the time of assessment. Since disclosures were already made in the audit report & tax was offered on MSME interest, it was not a fit case for penalty. Accordingly, Tribunal deleted the penalty of ₹1.49 lakhs levied u/s 270A & allowed the Assessee’s appeal
