United Steel Allied Industries Pvt. Ltd. Vs DCIT (ITAT Hyderabad)
ITAT Hyderabad Deletes Penalty of ₹1.58 Cr. Levied u/s 270A on Excess Loss Claim – No Satisfaction, No Penalty
Background
- Assessee engaged in iron & steel manufacturing filed return showing loss of ₹46.59 Cr.
- AO, after assessment, determined loss at ₹32.84 Cr. and held that assessee wrongly claimed excess loss of ₹13.75 Cr. by applying indexation from FY 2008-09 for all 1.84 Cr. shares of USAI Forge Pvt. Ltd., though 34.89 lakh shares were actually purchased in FY 2013-14.
- AO treated this as under-reporting of income and levied penalty u/s 270A @ 50% of tax sought to be evaded = ₹1.58 Cr.
First Appeal
Before CIT(A)-NFAC, assessee argued:
- AO had not recorded satisfaction in assessment order or in notice u/s 274 r.w.s. 270A.
- The error was inadvertent and corrected during assessment by filing revised computation.
- CIT(A) rejected plea & sustained penalty, holding it was a clear case of under-reporting.
Tribunal’s Observations
Lack of Satisfaction by AO:
- Neither assessment order nor SCN recorded satisfaction as to whether penalty was for under-reporting or misreporting.
- Even in penalty order, AO failed to specify the limb.
- Such non-recording makes the penalty void ab initio, supported by SC in Pr. CIT v. Golden Peace Hotels & Resorts (P) Ltd..
On Merits:
- Assessee purchased shares in two years (2008-09 & 2013-14) but applied indexation from 2008-09 for all.
- Assessee admitted mistake & filed revised computation during assessment; AO himself recomputed correct loss at ₹32.84 Cr.
- Even after correction, assessee still had a loss—no reduction of taxable income.
- Error was bonafide and covered by Sec. 270A(6)(a): when explanation is bonafide & all facts disclosed, it is not under-reporting.
Decision
- ITAT held penalty was unsustainable both in law & on merits.
- Set aside CIT(A) order & directed AO to delete penalty of ₹1.58 Cr. levied u/s 270A.
- Appeal allowed in favour of Assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
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