Penalty u/s 270A cannot stand Without Actual Under Reporting
Recently, in a writ petition, the court in the case of Srinivasa Gandhi Sampath v. ACIT (W.P. No. 22802 of 2022) has held that Penalty u/s 270A cannot stand Without Actual Under Reporting
Let us have a Short Overview of the Case: –
Facts of the case: The taxpayer filed his return for AY 2017-18 claiming Foreign Tax Credit (FTC). The return was processed under section 143(1) and later accepted in full under section 143(3), with no variation between returned income and assessed income. Subsequently, the department issued a penalty notice under section 270A alleging under-reporting and misreporting, on the basis that the assessee had claimed “excess FTC”.
High Court Decision: The High Court quashed the penalty, holding that:
1. Section 270A applies only where income assessed exceeds income returned, i.e., there must be under-reporting as defined in section 270A(2).
In this case, assessed income = returned income, so 270A could not be invoked.
2. Mere incorrect or excessive claim of FTC does not amount to under-reporting or misreporting.
3. Penalty provisions must be strictly construed; unless statutory conditions exist, penalty cannot be imposed (relying on Reliance Petroproducts principle).
4. Even though an appellate remedy existed, the Court exercised writ jurisdiction because the penalty order was without jurisdiction-basic statutory conditions for 270A were not satisfied.
Key Takeaways:
1. Penalty u/s 270A cannot be levied merely for a wrong or excessive FTC claim when the returned income has been accepted without variation.
2. Under-reporting requires a mathematical difference between returned and assessed income. If there is no difference, 270A simply does not apply.
3. Revenue cannot recharacterize a legal claim as misreporting unless it fits one of the specific clauses under section 270A(9).
4. The judgment reinforces that penalty provisions are not automatic and require strict satisfaction of statutory triggers.
Disclaimer: This summary is for general informational purposes only and does not constitute professional advice. Readers should evaluate the implications based on specific facts and consult tax advisors for detailed guidance.
The copy of the order is as under:
