No penalty for misreporting of income if AO & assessee used same details to arrive at different conclusions: HC

Case Details: Prem Brothers Infrastructure LLP v. National Faceless Assessment Centre - [2022] 142 taxmann.com 38 (Delhi)

Judiciary and Counsel Details

• • Manmohan & Ms Manmeet Pritam Singh Arora, JJ.
  • Ved Kumar Jain, Adv. for the Petitioner.
  • Sanjay Kumar, Adv. for the Respondent.

Facts of the Case

The instant writ petition was filed by the assessee against the order imposing penalty under section 270A alleging misreporting of income. The assessee challenged the impugned order and also sought a direction to revenue to grant immunity under section 270AA.

High Court Held

The Delhi High Court held that the only addition in the assessment order framed by Assessing Officer was in respect of disallowance under section 14A. The assessee made a disallowance of Rs. 3,20,14,010/- which was recomputed by the AO at Rs. 6,82,45,759/-. Thus, this is a case where the amount of underreporting of income is consequent of an increase in the disallowance voluntarily estimated by the assessee.

High Court held that there can be cases where underreporting of income may result in misreporting of income, however, in peculiar facts of the present case, the underreporting allegedly done by the assessee cannot amount to misreporting as the assessee had furnished all the details of the transactions relating to disallowance made under section 14A.

AO as well as the assessee had used the same details to arrive at different conclusions i.e. differing quantum of disallowances under section 14A. This by no stretch of the imagination can be held to be ‘misreporting’.

Further, there was not even a whisper as to which limb of section 270A is attracted and how the ingredient of sub-section (9) of section 270A is satisfied. In the absence of such particulars, the mere reference to the word “misreporting” by AO in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

List of Cases Referred to

• • Joint Investments (P.) Ltd. v. CIT [2015] 59 taxmann.com 295/233 Taxman 117/372 ITR 694 (Delhi) (para 4)
  • Schneider Electric South East Asia (HQ) PTE Ltd. v. Asstt. CIT, International Taxation [W.P. (c) No. 5111 of 2022, dated 28-3-2022] (para 6).