The Income Tax Appellate Tribunal, Delhi Bench ‘E’, adjudicated the appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, affirming the penalty imposed under Section 270A of the Income-tax Act, 1961 for Assessment Year 2022-23.

The assessee filed the return of income declaring total income of ₹77,09,300/-. During scrutiny assessment, the Assessing Officer observed discrepancies in purchase transactions with M/s Manish Overseas Private Limited and held that purchase return of ₹17,13,600/- was not properly accounted for. The said amount was added to the income and penalty proceedings under Section 270A were initiated on the allegation of under-reporting in consequence of misreporting of income.

During penalty proceedings, the assessee explained that the purchase return was duly recorded in the books of account and supported by ledger copies and supplier confirmation. The assessee paid tax and interest and filed Form-68 seeking immunity under Section 270AA. The Assessing Officer rejected the application holding that the case fell under Section 270A(9) relating to misreporting of income, where immunity is not available, and imposed penalty of ₹10,69,286/-.

The CIT(A) confirmed the penalty holding that the assessee was aware that penalty proceedings were initiated under Section 270A(9) and therefore immunity under Section 270AA was not maintainable.

Before the Tribunal, the assessee contended that there was no misreporting or suppression of facts and that the transaction was fully explained during assessment proceedings. It was further argued that the case did not fall under any of the clauses of Section 270A(9) and therefore penalty was not sustainable on merits.

The Tribunal examined the scope of Section 270A(9) and observed that misreporting requires misrepresentation or suppression of facts or other specified defaults. It was noted that the assessee had duly explained the purchase return and there was no false entry, suppression, or misrepresentation. The addition was made merely due to non-acceptance of explanation by the Assessing Officer.

The Tribunal held that the assessee’s case did not fall within Section 270A(9)(a) and therefore penalty for misreporting was not leviable. Accordingly, the penalty of ₹10,69,286/- was deleted. In the result, the appeal of the assessee was allowed.

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