Ahmedabad: The Income Tax Appellate Tribunal, Ahmedabad, has deleted penalties in at least two cases where political donation deductions were disallowed, holding that disallowance by itself does not indicate misreporting of income.In an order pronounced in May and released recently, the ITAT-A deleted a penalty of Rs 93,600 levied under Section 270A of the Income-tax Act, 1961. It held that “disallowance of a political donation deduction, by itself, does not amount to misreporting of income when the claim was transparently disclosed in the return and no false particulars were shown”. The order relates to Assessment Year 2019-20 and arose from an appeal by the assessee against the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi.CA Sulabh Padshah said, “The assessee had filed the return declaring total income of Rs. 13.25 lakh after claiming deduction of Rs. 1.5 lakh under Section 80GGC for a donation made to a political party named Manavadhikar National Party. The assessment was later reopened under Section 148 to verify the genuineness of the donation. In the reassessment, the Assessing Officer disallowed the deduction and imposed a penalty under Section 270A treating it as under-reporting “in consequence of misreporting”.” Padshah added that at least two judgments have been announced with similar views so far.The tribunal rejected the view that not filing a quantum appeal against the disallowance automatically supports a penalty. The tribunal stated in the order: “The mere fact that the assessee chose not to challenge the quantum addition due to the relatively small amount involved and in order to avoid prolonged litigation does not amount to an admission of concealment or furnishing of false particulars.”The ITAT emphasised the distinction under Section 270A between “under-reporting” and “misreporting”, observing that misreporting is attracted only in specified circumstances such as misrepresentation or suppression of facts, false entries or claims unsupported by evidence.Holding that no material established suppression, misrepresentation or fabricated documents, the ITAT held the higher penalty for misreporting was “unsustainable in law” and directed deletion of the penalty of Rs. 93,600. The appeal was allowed.CA Yash Shah said, “The judgements provide relief to the general salaried class in significant numbers.”
