This legal document outlines the proceedings and decision of the Income Tax Appellate Tribunal, Delhi Bench, in the case between Jubilant Securities Pvt. Ltd. and the Deputy Commissioner of Income Tax, Circle-13(2), Delhi, concerning a penalty imposed under Section 270A of the Income Tax Act for the assessment year 2017-18.
Jubilant Securities Pvt. Ltd., a corporate entity based in Noida, filed an appeal against the penalty of Rs.77,020 imposed by the National Faceless Appeal Centre (NFAC), Delhi. The penalty was levied based on a disallowance related to exempt income and expenses under Section 14A of the Income Tax Act.
The appellant argued that the disallowance made was in line with the ratio of exempt income to the total expenses, citing various judicial precedents supporting that the disallowance under Section 14A should not exceed the exempt income earned. Despite accepting the higher disallowance computed by the Assessing Officer during assessments, the appellant contested the penalty, stating that acceptance of the computed figures did not equate to under-reporting of income.
The Tribunal acknowledged the appellant’s rationale and referred to the legal precedents which support the claim that penalties under Section 270A are not automatically imposed and require specific circumstances that were not met in this case. Consequently, the penalty imposed was deleted.
The Tribunal’s decision to delete the penalty reinforces the principle that penalties for under-reported income must be based on clear justifications, not merely on the acceptance of adjustments by the taxpayer. This outcome not only provides relief to Jubilant Securities Pvt. Ltd. but also clarifies the application of Section 270A related to penalties for other taxpayers in similar situations.
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