Penalty u/s 270A deleted as AO failed to mention the relevant clause the case fall

Penalty u/s 270A deleted as AO failed to mention under which clause the case of the assessee fall.

In a recent judgment, ITAT Delhi deleted penalty u/s 270A as the Assessing Officer (AO) directly applied the higher penalty percentage provided in Section 270A(9) without mentioning under which clause thereon the case of the assessee fall.

ABCAUS Case Law Citation:
5084 (2026) (03) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the levy of penalty u/s 270A of the Income Tax Act, 1961 (the Act).

The assessee was individual and Proprietor. The return of income was processed u/s 143(1) of the Act. The case of the assessee was taken up for Compulsory Manual Scrutiny as survey was conducted on assessee. The assessee was involved in accommodation entry business and shown commission income during the year under consideration.   

Later assessment u/s 143(3) of the Act was framed determining the total income and penalty proceeding u/s. 270A was initiated against the assessee vide penalty notice for under reporting of income.  Finally, a penalty @ 200% was imposed u/s. 270A(8) upon the assessee. 

The Tribunal observed that AO had imposed the penalty u/s. 270A @200% of the amount of tax payable on under reported income by observing that the assessee had under reported his income for the year under consideration.

The Tribunal further observed that under section 270A, penalty is imposed in two conditions i.e. when the income is ‘under reported’ or ‘misreported’. Section 270A provides different penalty rates for each head i.e. as per section 270A(7) the penalty  for  ‘under reporting’ is prescribed at 50% and it is only for “misreporting” the penalty is prescribed at 200% u/s 270A(8).  

The Tribunal also noted that penalty notice u/s 270A would show that the penalty was initiated under the head “under-reporting of income” and not under the head “misreporting”. It was further noted that even in the penalty order, there was not a single whisper of the ‘misreporting’ by the AO. The AO failed to state, both in the notice as well as in the penalty order, as to how the assessee’s case /addition falls within instances given in Clauses (a) to (f) of Sub-section (9) of Section 270A of the Act and, therefore, the impugned notice issued u/s. 270A being vague notice and thus liable to be quashed.

The Tribunal further observed that from the perusal of the penalty notice it was evident that the AO had show caused the assessee as to why the assessee should not be imposed with penalty for ‘under reporting of income’. AO recorded satisfaction in the quantum assessment order that offence of both ‘under reporting’ and ‘mis-reporting’ is committed by the assessee and therefore, accordingly, the penalty would also be levied on the assessee for both in terms of section 270A(9) of the Act.

The Tribunal further observed that the assessee had made complete disclosure of the entire income in the return.  This goes to prove that the assessee had disclosed his income in the ITR.  Therefore, there was absolutely no underreporting income in consequence of misreporting of income in the instant case. The AO assertion that assessee case falls u/s 270A(9)(a) of the Act which talks about misreporting or suppression of facts, was absolutely not applicable in the instant case.

The Tribunal held that AO had directly applied the higher penalty percentage provided in Section 270A(9) of the Act without mentioning under which clause thereon the case of the assessee falls and therefore non mentioning of the specific clause clearly specifying offences committed by the assessee, would become fatal to the penalty proceedings per se.

The Tribunal held that there was no misreporting or underreporting of income as the entire details relevant for computation of income were already placed on record in ITR itself.

Accordingly, grounds raised by the assessee were allowed. 

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