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2025 Supreme(Online)(ITAT) 23407
INCOME TAX APPELLATE TRIBUNAL (PUNE BENCH)
R.K. Panda, Vice-President, Astha Chandra, Judicial Member
Capgemini Technology Services India Limited – Appellant
Versus
Assistant Commissioner of Income Tax – Respondent
ITA No.1260/PUN/2025
For the Appellants/Petitioners: Vyomesh Pathak
For the Respondents: Vidya Ratna Kishore
Penalties for under-reporting of income u/s 270A cannot be imposed on claims that were bona fide and supported by judicial precedent at the time of filing, even if subsequent retrospective amendments render them non-deductible, provided the assessee discloses all material facts and voluntarily adjusts the claim.
Headnote:(A) Income Tax Act, 1961 - Section 270A - Penalty for under-reporting and misreporting of income - Section 155(18) - Deemed under-reported income - Immunity from penalty - Assessee claimed deduction of cess as expenditure based on judicial precedents - Subsequent retrospective amendment in 2022 rendered such cess non-deductible - Assessee voluntarily withdrew claim and filed prescribed form for recomputation - Penalty cannot be levied where claim was bona fide and based on prevailing judicial view at the time of filing original return - Amendment only clarifies legislative intent; it does not turn a bona fide legal claim into suppression or misrepresentation - Penalty u/s 270A is discretionary and not to be levied in a routine manner without establishing specific limb of default under s. 270A(9). (Paras 9, 10, 11)
(B) Penalty - Discretionary nature - Primary burden of proof lies on Revenue to prove that the case falls within the four corners of the statutory provisions - Where assessee discloses all material facts and offers a bona fide explanation, no penalty should be imposed for mere disallowance of a claim. (Para 11)
Facts of the case:
The assessee claimed a deduction for cess paid on income tax, treating it as business expenditure. During assessment proceedings, the claim was disallowed due to a retrospective amendment in the Finance Act, 2022. The assessee accepted the disallowance, withdrew the claim via a formal letter, and filed the prescribed form for recomputation of tax liability. Despite this, the authorities imposed a penalty for under-reporting of income, alleging misreporting.
Findings of Court:
The court found that at the time the return was filed, the claim was supported by various judicial rulings. The retrospective amendment was a legislative clarification, not a validation of bad faith. Since the assessee offered a bona fide explanation and voluntarily complied with the recomputation requirements, the penalty was unwarranted.
Issues: Whether the disallowance of a claim based on a retrospective amendment constitutes under-reporting or misreporting of income justifying a penalty under section 270A.
Ratio Decidendi: A claim made under a bona fide belief, supported by judicial precedent, does not constitute under-reporting or misreporting when the law is subsequently clarified retrospectively, provided the assessee acts in good faith and complies with the necessary legal procedures for adjustment.
Result: Appeal allowed; penalty deleted.
| Table of Content |
|---|
| 1. factual summary of assessment, penalty initiation, and confirmation by lower authorities. (Para 10 , 11) |
| 2. court analysis of bonafide belief regarding allowability of cess as business expenditure. (Para 12 , 13 , 14 , 15) |
| 3. judicial interpretation of immunity under section 270aa and requirements for penalty under 270a. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28) |
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 29.03.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)/NFAC”] whereby he confirmed the penalty of Rs.93,30,373/- levied by the Ld. Assessing Officer (“AO”) for under reporting of income u/s 270A of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment Year (“AY”) 2020-21.
The assessee has raised the following grounds of appeal :-
“1. That on the facts and circumstances of the case and in law, the impugned order passed by the Hon'ble CIT(A) is based on incorrect appreciation of facts and incorrect interpretation of law, and therefore erroneous, bad in law;
2. That on the facts and circumstances of the case, the penalty order under section 270A is bad in law and void ab initio and same needs to be quashed considering that the AO has initiated the penalty proceedings under the category of under reporting of income in consequence of misreporting (as per the provisions of section 270A(9) read with section 270A(8) while the final order is passed under the category of underreporting of income(as per the provisions of section 270A(2) read with section 270A(7).
3. The CIT(A) has erred in confirming the penalty levied under section 270A of the Act for claiming deduction of Health and Education Cess by the Appellant which was supported by various Judicial precedents.
4. The Ld. AO / CIT(A) has failed to appreciate that the claim of Health and Education Cess was made by Appellant in good faith and hence does not tantamount to under-reporting of income as per the provisions of section 270A of the Act.
5. The Ld. AO has erred in passing the penalty order dated 30th March 2023 without considering the Form 69 filed by the Appellant on 25th March 2023 as per Notification no. 111/2022, dated 28-09-2022 issued by the CBDT.
6. The Ld. AO / CIT(A)has failed to appreciate that Form 69 was filed on 25th March 2023 by the Appellant before due date of 31st March 2023 as per Notification no. 111/2022, dated 28-09-2022 issued by Central Board of Direct Taxation (“CBDT”) and even before the date of passing the penalty order (which was passed on 30th March 2023) and consequently the Appellant is eligible for immunity from levy of penalty under provisions of section 155(18) of the Act.
7. The Ld. AO CIT (A)has failed to appreciate that the Appellant has reduced the amount of MAT credit to be carried forward to the extent of incremental taxes arising on account of disallowance of Health & Education Cess in the current assessment year and has paid higher amount of taxes in the final year of utilisation of MAT Credit.
8. The Ld. AO/ CIT(A) has erred in levying penalty under section 270A without appreciating the fact that the Appellant has not under reported the income as per the exclusions provided under section 270A(6)(a).
9. The Appellant craves leave to add to, withdraw or modify any of the grounds of objections at the time of hearing.”
Briefly stated, the facts of the case are that the assessee is engaged in the business of providing software engineering services and solutions for the communication industry. For AY 2020-21, the assessee e-filed its return of income declaring total income of Rs.4,06,55,53,790/-. The case of the assessee was selected for complete scrutiny under the E-assessment Scheme, 2021. The assessment was completed u/s 143(3) r.w.s. 144B of the Act by the Ld. AO vide order dated 24.09.2022 making disallowance of health and education cess of Rs.5,34,01,866/-. The Ld. AO also initiated the penalty pr
