KANODIA TECHNOPLAST LTD,DELHI V. ACIT, CENTRAL CIRCLE-19, DELHI

ITA 1355/DEL/2025

AI Insights

The case involves M/s Kanodia Technoplast Limited, which appealed against the penalty imposed by the AO under section 270A of the Income-tax Act, 1961, for under-reporting of income. The penalty was initially upheld by the CIT(A), who stated that any discrepancy between the assessed income and the returned income automatically attracts a penalty under the revised provisions of section 270A. However, the Tribunal found that the AO did not specify whether the penalty was for 'under-reporting' or 'misreporting' of income, and the issues leading to the penalty were debatable at the time of the assessment, particularly the late payment of employees' contributions to PF & ESI, which was disclosed in the tax audit report.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774740 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Appeal Filed On: 04-03-2025
• Other Referred Cases: Checkmate services Private limited v. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: SAURABH RASTOGI
• Keywords: TDS; Wrong claim; Bonafide mistake
• Section: 143(3); 142(1); 153A; 37; 139(5)

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”, DELHI BEFORE SH. SUDHIR KUMAR, JUDICIAL MEMBER AND SH. MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.1355/DEL/2025 Assessment Year: 2019-20 M/s Kanodia Technoplast Limited A-54, Wazirpur Industrial Area Delhi PAN No. AAACK3668F Vs. ACIT Central Circle -19 New Delhi (APPELLANT) (RESPONDENT) Appellant by Shri Saurabh Rastogi Respondent by Sh. Om Prakash, Sr. DR Date of hearing: 20/08/2025 Date of Pronouncement: 10/09/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-26 New Delhi [hereinafter referred to as “CIT(A)”] vide order dated 27.02.2025 pertaining, to A.Y. 2014-15 arising out the penalty order dated 29-09-2022 u/s. 270 A of the Income-tax Act, 1961, (in short ‘the Act’). Printed from counselvise.com 2 2. The assessee has raised the following grounds in appeal:- 1. Asstt. Framed u/s 270A is unsustainable in law as well as on merits. 2. Asstt. Framed 270A is without jurisdiction. 3. That no proper and reasonable opportunity of hearing has been allowed. 4. That under the facts and circumstances of the case, no penalty of Rs. 1,49,586/- should have been levied. 5. That without prejudice that no penalty on debatable issue should have been levied. 6. That under the facts and circumstances of the case, the Ld. CIT(A) erred in law in enhancing the amount of penalty levied without issuing any enhancement notice. 3. The brief facts of the case are that the assessee filed his regular return of income u/s 139(5) of the Act on 30-11- 2020 declaring total income at Rs.11,25,52,870/-. Subsequently information was received in the case of M/s Kanodia Technoplast Ltd. Kanhaiya Koli , Gori Shanker & others from S.O. Thana Mukhani , Haldwani on 14-05-2020 regarding the cash. Accordingly a warrant of authorization was issued by the Pr. Director of Income Tax (Inv) Kanpur dated 04-12-2020 u/s 132A of the Act which was duly executed on 30-12-2020 in the name of Sh. Kanhaiya Koli, Sh.Gori Shanker , Sh. Chetan Kanodia, Sh. Laxman Singh, Printed from counselvise.com 3 Sh. Vivek Aggarwal others from S.O. Thana Mukhani , Haldwani on 14-05-2Sh. Kanhaiya Koli, & M/s Kanodia Technoplast Ltd. The unaccounted cash was seized. A notice under section 153A of the Act was issued to the assessee on 18-01-2021. In the compliance of the notice the assessee, filed the return of income declaring total income of Rs.11,25,52,870/-. Statutory notice u/s 142(1) of the Act was issued on 20-02-2022.After considering the submission filed by the assessee the ld. Assessing officer completed the assessment after making the addition of Rs. 73,948/- on account of interest paid to MSME creditors and Rs. 8,84,936/- disallowance regarding deduction of employee’s contribution towards EPF and ESI, and penalty proceedings was also initiated. 4. During the assessment proceedings the assessee offered the Tax on amount of Rs. 73948/- paid interest to MSME and the same was disallowed u/s 37 of the Act. The assessee was failed to deposit the employees contribution amounting to Rs. 1,75,567/- and Rs. 7,09,369/- respectively for ESI and PF payment on or before the due date. A show cause notice u/s 274 of the Act read with section 270A of the Act was issued. After considering the Printed from counselvise.com 4 explanation submitted by the assessee the Assessing officer levied the penalty of Rs. 1,49,586/- against the assessee. 4. Aggrieved by the order of the AO, the assessee filed the appeal before the Ld. CIT(A), the Ld. CIT(A) vide his order dated 27-02-2025 dismissed the appeal of the assessee by observing as under : “Appellant’s only contention that there is no concealment of income is misplaced because under new provisions u/s 270A of the Act, such requirement is done away with. Form AY 2017-18 the law is made straight forward. As soon as there is a difference in assessed income and returned income, the additional income would be liable for penalty on the higher assessed income regardless of whether the wrong claim is attributable to bonafide mistakes. As a result, penalty is leviable at a rate of 40% of such additional income. In view of above, the penalty levied by the AO is upheld. Accordingly, the grounds are dismissed. 5. Being aggrieved the order of the Ld. CIT(A) the assessee has filed this appeal before the Tribunal. 6. ld. AR of the assessee submitted that there from the contents of the penalty order, it is observed that the AO is not sure as to whether the penalty have ben levied for “under reporting” of income or “ misreporting” of income. The ld. Counsel for the assessee relied on the several judicial precedents which have held that penalty u/s 270 A of the Act, requires precise classification, whether the Printed from counselvise.com 5 penalty is being levied for misreporting of income or under – reporting of income. Ld. AR for the assessee submitted that this is not a case of misreporting of income attracting levy of penalty. He also submitted that the penalty cannot be levied on the debatable issue. Reliance has placed on the following decisions: (i) ITA No. 1861/Del/2017 ITO, Ward-4 Aayakar Bhawan Rohtak Vs. Sh. Suresh (ii)ITA No. 2446 to 2448/ Bang/ 2018 M/s Priyadarshini Education Society, vs. Additional Commissioner of Income Tax TDS Range Hubbali (iii) ITA No. 1478/Chny/ 2024 Srinivasan Chandraekara Chandilya vs. Asst. Commissioner Of Income Tax Non- Corporate Circle -7(1) Chennei 6. Ld. DR relied the orders of the lower authorities and submitted that penalty was rightly levied on the assessee. 7. We have heard the revival contention and gone through the material available on record. In this case an assessment order was passed u/s 143(3) of the Act dated 29-03-2022 determining total income of Rs.11,64,08,504/- after making an addition 8,84,936/-on account of disallowance for late payment of Employee Contribution to PF & ESI and Rs. 73,948/- on account of disallowance u/s 37 of the Act. The Printed from counselvise.com 6 AO recorded the satisfaction for the initiation of penalty u/s 270A of the Act. The Provisions of section 270A (2) of the Act deals with levy of penalty for under –reporting of income and this section typically involves discrepancies such omission or inaccuracies not involving deliberate misrepresentation. From the contents of the notice for initiating penalty proceedings as well as appellate order u/s 270A of the Act, the AO has no clarity under which specific limb of section 270A the AO is proceeding to levy penalty. Therefore, in the absence of any clarity on specific limb u/ 270A of the Act, where the penalty have been levied on the assessee, in our considered view penalty u/s 270A of the Act is not liable to be sustained. 8. Further while confirming the penalty, the Ld. CIT(A) has held that penalty is levied u/s 270A of the Act, on account of under reporting income by the assessee. The ld. CIT(A) also held as under: “the provision of 270A of the Act made a clear distinction of income that is concealed and where the income is understated because of wrong claim regardless of bonafide. The levy of penalty for misreporting attracts higher penalty whereas the same for under-reporting of income is at a lower rate. Sub section (1) provides that the Assessing Officer and Printed from counselvise.com 7 other higher Income Tax authorities may, during the course of any proceedings under this Act, direct that any person who has under reported his income shall be liable to pay a penalty in addition to tax, if any on the under-reported income. Sub – section (2) provides for certain instances where the income shall be held to be under reported. However the under –reporting is held to be misreporting of income. This is dealt in sub-section (8) of the Act. In the instant case, the AO has held the additional income determined in the assessment proceeding by the department as under-reporting of income and accordingly, levied penalty under section 270A of the Act.” 9. In the instant case the AO has made the addition of Rs.8,84,936/-on account of late payment of Employees Contribution to PF & ESI. We observe from the record that disallowance regarding late deposits of Employees contribution towards PF & ESI were adequately disclosed in the tax audit report. In the instant case, the return of income for the impugned year i.e. A.Y. 2019-20 was filed on 30-11-2020 and assessment order was passed on 29-03- 2022, therefore at the time of passing of the assessment order, issue of delayed payment towards PF & ESI was Printed from counselvise.com 8 debatable issue and issue got settled fully after passing of order by Hon’ble Supreme Court in the case of Checkmate services Private limited v. CIT vide order dated 12-10-2022. Therefore, in our considered the case of the assessee does not fall under any of the provisions of section 270A of the Act. Further we observe that the AO has disallowed the sum of Rs.73948/- on account of interest paid to MSME on which the assessee offered the tax at the time of the assessment. For the above reason the assessee’s case is not a fit case for levy of penalty u/s 270A of the Act on account of failure on the part of the AO in giving precise classification/limb of section 270A of the Act in which the case of the assessee is falling. In the result, the penalty levied u/s 270A of the Act is deleted and the appeal of the assessee is allowed. Order pronounced in the open court on 10.09.2025. Sd/- Sd/- (MANISH AGARWAL) ( SUDHIR KUMAR) ACCOUNTANT MEMBER (JUDICIAL MEMBER) Neha, Sr. PS Date:10 .09.2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) ` Printed from counselvise.com 9 5. DR: ITAT ASSISTANT REGISTRAR ITAT DELHI Printed from counselvise.com "