Srinivasa Gandhi Sampath Vs ACIT (Karnataka High Court)
Erroneous excess claim of FTC not underreporting or misreporting of income; Sec. 270A not invocable: Karnataka High Court
The Karnataka High Court examined the validity of a penalty imposed under Section 270A on the petitioner for allegedly under-reporting income through an excess claim of Foreign Tax Credit (FTC) for AY 2017-18. The petitioner’s return of income and FTC claim were fully accepted without variation both at the processing stage under Section 143(1) and during regular assessment under Section 143(3). Despite this, a show-cause notice was later issued alleging under-reporting and misreporting of income. The petitioner demonstrated that all particulars relating to foreign income, foreign tax paid, and FTC were duly disclosed and scrutinized, and no income was ever modified or added by the Assessing Officer. The Court held that Section 270A(2) applies only when assessed income exceeds returned income, which was not the case. It further held that an erroneous or excessive FTC claim, when all facts are disclosed, cannot constitute misreporting under Section 270A(9), and none of the statutory categories of misrepresentation or falsification were satisfied. Since neither under-reporting nor misreporting existed, the Assessing Officer lacked jurisdiction to levy penalty. The Court also held the writ petition maintainable because the penalty order was issued without legal authority, quashing all consequential proceedings.
