Case Law Details
Saltwater Studio LLP Vs NFAC (ITAT Mumbai)
In the case of Saltwater Studio LLP Vs NFAC, the ITAT (Income Tax Appellate Tribunal) examined the legality of the penalty imposed under section 270A of the IT Act for misreporting of income. The AO (Assessing Officer) and the Ld. CIT(A) confirmed the penalty, citing misreporting of income by the assessee. However, the ITAT analyzed the relevant provisions of the Act and concluded that the penalty could not be sustained due to the lack of application of mind and violation of principles of natural justice.
The AO had levied a penalty of 200% of the tax payable on the under-reported income, considering it as misreporting. However, the ITAT observed that the AO failed to establish how the assessee’s case fell within the instances of misreporting mentioned in sub-section (9) of section 270A of the Act. The penalty provisions need to be strictly interpreted, and since the AO could not demonstrate the applicability of misreporting clauses to the case, the penalty was deemed unsustainable.
Based on the facts and circumstances of the case, the ITAT directed the deletion of the penalty imposed under section 270A of the IT Act. The penalty levied for misreporting lacked the application of mind and violated principles of natural justice. The decision highlights the importance of strictly interpreting penalty provisions and ensuring a valid basis for imposing penalties.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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