Ajay Maheshwari Vs ACIT (ITAT Nagpur)
The Income Tax Appellate Tribunal (ITAT), Nagpur, allowed the assessee’s appeals for Assessment Years 2017-18 and 2018-19 by quashing penalties imposed under Section 270A of the Income Tax Act for alleged misreporting of income. The Tribunal held that the assessee’s exclusion of income received from a Hong Kong company was based on a bona fide and debatable legal interpretation of the Place of Effective Management (POEM) provisions and did not amount to misreporting or suppression of facts.
For Assessment Year 2017-18, the assessee originally filed a return declaring income of ₹2.84 crore, which was subsequently revised to ₹36 lakh by excluding ₹2.48 crore received from Oasis International HK Ltd., a Hong Kong company in which the assessee was the sole shareholder. During scrutiny assessment under Section 143(3), the Assessing Officer (AO) treated the amount as taxable global income of a resident under Section 6 and made an addition of ₹2.48 crore. The AO thereafter initiated penalty proceedings under Section 270A, treating the case as one of under-reporting arising from misreporting of income under Section 270A(9)(a), and levied a penalty at 200% of the differential tax. The Commissioner of Income Tax (Appeals) upheld the penalty.
