ITAT Condones Delay and Deletes Penalty Levied Under Section 270A(9) of Income Tax Act

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Ahmedabad, gave relief to an appellant by deleting a penalty under Section 270A(9) of the Income Tax Act, which was levied by the Assessing Officer and the same was upheld by the CIT(A).

The appellant, Krunal Sanghvi, had claimed a deduction for capital gains under Section 54F of the Income Tax Act for the full amount of Rs 1,17,92,358, which was invested in a new house. However, the Assessing officer claimed that the deduction should only be on a proportionate basis. The AO calculated the eligible deduction of the assessee at Rs 91,60,046. The assessee did not challenge the deduction before the Commissioner of Income Tax (Appeals). Accordingly, a penalty under Section 270A(9) of the Income Tax Act, 1961, was imposed for misreporting income. The ld. CIT(A) also confirmed this penalty for the misreporting of income.

The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad. However, there was a delay in filing by 338 days. The assessee explained that the delay was due to a change in the tax consultant who was handling the appellant’s tax-related cases. He explained that when he appointed a new consultant, the required steps were taken to file the appeal. Therefore, the assessee also requested the tribunal to condone the delay.

The ITAT observed that the assessee had given enough explanation for the delay in filing the appeal. Therefore, the tribunal condoned the delay after finding the reason valid and justified.

Regarding the penalty levied by the assessing officer and confirmed by the CIT(A), the tribunal cited Section 270A, which allows the assessing officer to impose a penalty on taxpayers who have underreported or misreported their income on their return. However, in the present case, the ITAT noted that the assessee had disclosed all facts related to the capital gains earned by him and invested in the acquisition of the new asset. The only fault was that the assessee mis-calculated the deduction. The tribunal said that the assessee’s case did not fall within any clauses of Section 270A(9) of the Act. Therefore, there was no basis for a penalty for the misreporting of income.

Accordingly, the ITAT deleted the penalty levied under 270A(9) of the Act.