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Facts
The assessee filed an appeal against the penalty order passed by the AO and confirmed by the CIT(A). The penalty was levied under Section 270A of the Income Tax Act for assessment year 2017-18, based on findings of misreporting and underreporting of income.
Held
The Tribunal held that the penalty notice issued by the AO was vague as it did not specify the limb of Section 270A under which the penalty was being levied. The Tribunal followed the decisions of the Delhi High Court and ITAT, which held that a vague penalty notice is fatal to the proceedings.
Key Issues
Whether the penalty levied under Section 270A is sustainable when the penalty notice is vague and does not specify the specific limb of the section.
Sections Cited
270A, 274, 143(1), 143(2), 143(3), 270AA
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Income Tax Appellate Tribunal, DELHI BENCH “E” NEWDELHI
Date of hearing 05.06.2025 Date of 05.06.2025 pronouncement ORDER
PER SUDHIR KUMAR JM:
The assessee preferred the captioned appeal, challenging the order dated 28.10.2024 passed by the Ld. CIT(Appeals) (in short “Ld. CIT (A)”) New Delhi passed by the Assessing Officer order dated 2 06.09.2021 under Section 270A of the Income Tax Act, 1961(in short “the Act”) pertaining to A.Y. 2017-18.
The assessee has raised following grounds of appeal:
1. On the facts and circumstances of the case and in law, the penalty order passed by the assessing officer is bad-in-law, and without jurisdiction.
2. On the facts and circumstances of the case and in law, the notice u/s 274 of the Act issued is defective and contrary to the provisions of law and therefore, the penalty of Rs. 13,18,464/-levied by the assessing officer u/s 270A of the Act is liable to be cancelled and the penalty order is liable to be quashed and CIT(A) erred in not holding so.
3. On the facts and circumstances of the case and in law, the assessing officer erred in imposing penalty of Rs. 13,18,464/- u/s 270A of the Act and therefore the penalty imposed by the assessing officer is liable to be cancelled.
4. On the facts and circumstances of the case and in law the CIT(A) erred in confirming the penalty-imposed u/s 270A by the assessing officer of Rs. 13,18,464/ of the Income Tax Act, 1961 considering the same as misreporting of Income and underreporting of Income under section 270A of the Income Tax Act, 1961.
3 5. On the facts and circumstances of the case and in law the assessing officer has ignored the fact that assessee has fulfilled all the conditions existing for receiving the immunity from imposition of penalty under section 270AA of the Income Tax At, 1961 and CIT(A) erred in not holding so.
The brief facts of the case are that the assessee filed return of income declaring total income of Rs. 87,71,600/- and return was process u/s 143(1) of the Act. The case was selected under CASS and notice u/s 143(2) of the Act was selected. The AO has completed the assessment after making the addition and penalty proceeding also initiated against the assessee. The AO has passed an order under section 270A of the Income Tax Act, 1961 (for short ‘the Act’) on 06 September 2021 levying penalty of Rs.13,18,464/- based on the assessment completed u/s. 143(3) of the Act on 22ndDecember 2019. Aggrieved by the penalty order under section 270A of the Act passed by the AO, the assessee preferred the appeal before CIT(A). The Ld. CIT(A) in his order has observed as under; 6. This order addresses the appeal filed by Sh. Lokesh Sachdeva (hereinafter referred to as "the appellant) challenging the imposition of penalty amounting to 4 213,18,464 under Section 270A of the Income Tax Act, 1961. This penalty was levied by the Assessing Officer (AO), DCIT, Central Circle-29, New Delhi, based on findings of "misreporting and underreporting of income in the appellant's assessment order dated 22.12.2019.
6.1 The AO issued a penalty order under Section 270A on 06.09.2022 after making the additions during assessment proceedings. The appellant contended that they met the requirements to claim immunity from penalty under Section 270AA but failed to file the formal application for the same. The grounds for appeal include procedural objections to the penalty imposition and a request to invoke immunity under Section 270AA, despite no application being filed for such relief.
6.2 The appellant was given multiple opportunities to present submissions during the appellate proceedings. However, despite repeated notices, the appellant either sought adjournments or failed to file any meaningful representation. The record reflects a clear pattern of non- 5 cooperation, with the appellant continuously deferring submission on grounds of preparing documents without any substantial progress. In cases of non-compliance, as held by CIT v. Multiplan India Ltd. (38 ITD 320) and Estate of Late Tukoji Rao Holker v. CWT (223 ITR 480), appeals can be adjudicated based on available records when the appellant shows a lack of diligence.
6.3 Based on the available facts, it is evident that the appellant has not substantiated their claims of procedural unfairness or demonstrated any conditions that would qualify them for immunity under Section 270AA without a formal application. Section 270A penalizes misreporting and underreporting, with the intent being to deter the concealment of income. Given that the addition has been sustained and no further rebuttal is on record, the penalty under Section 270A stands on firm ground.
6.4 The imposition of penalty under Section 270A for misreporting aligns with judicial precedents that underscore accountability for underreporting. Cases such 6 as CIT v. Zoom Communication (P) Ltd. (327 ITR 510) affirm that where additions are upheld due to lack of satisfactory explanations, penalties are justified. In the current case, as the appellant has provided no substantial explanation or evidence to refute the AO's findings, the Department's contention remains unchallenged.
6.5 In light of the appellant's consistent non-compliance and lack of merit in their arguments, the penalty imposed under Section 270A by the AO is confirmed. The appellant's grounds do not warrant any relief, especially given the failure to file the necessary application for immunity under Section 270AA. This appeal is therefore dismissed based on the records and in alignment with judicial precedents affirming penalties in cases of underreporting and misreporting.
7. Directions to the Assessing Officer:
7 The AO is instructed to enforce the penalty of ₹13,18,464 under Section 270A as levied, with no modifications, given the lack of any substantiated defense from the appellant. 8. Conclusion: The appeal stands dismissed. The penalty levied under Section 270A is upheld based on the appellant’s unexplained failure to report income accurately and sustained non-cooperation in appellate proceedings. 9. As a result, the appeal is dismissed.
The Ld. AR submitted that the AO initiated the penalty proceedings u/s. 270A of the Act without mentioning any sub clause of the section 270A of the Act or not specifying any limb of the penalty proposed to be levied. The AO has not even specified as to whether it is a case of under reporting or misreporting leave along the requirement of specifying the clause of section 270A of the Act under which the AO is initiating penalty. The penalty proceedings initiated by issuing notice u/s. 270 of the Act are vague and have not particularly specified the basis of charge subject to which the penalty is imposed.
8 5. The Ld. AR further submitted that it is well settled law that penalty cannot be sustained u/s. 270A of the Act, without specifying any specific limbs of the section 270A of the Act under which the penalty is being levied. The said notice failed to state as to how the Assessee’s case/ addition falls within instances given in clauses (a) to (g) of the sub-Section (2) or 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 illegal and consequently the penalty order and the order of the CIT(A) is also liable to be deleted. In this regard, he relied on the following decisions of the Hon’ble Delhi High Court and ITAT : 1. Schneider Electric South East Asia (HQ) Pte Ltd. [2022 (3) TMI 1295 –Delhi High Court] 2. Prem Brothers Infrastructure LLP. Vs. National Faceless Assessment Centre & Anr. 2022(6) TMI 130 Delhi High Court 3. Ujala Crdit Co-operative Society Ltd. Vs. National Faceless Appeal Centre, Delhi 2024 (6) TMI 600-ITAT Delhi 9 6. The Sr. DR relied on the order of the authorities below. He also submitted that the assessee has the knowledge on which basis the penalty was imposed. The AO has mentioned the limbs in his order on which basis the penalty was imposed.
We have heard the rival arguments and perused the material available on record. For the sake of clarity, we reproduced the notice dated 28.08.2021 issued under Section 270A as under:
11 8. We observed from the submissions of the Ld. AR and the decisions of the Hon’ble High Court that the issue is squarely covered in favour of the assessee. The Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte Ltd. (supra) has held as under : “6. Having perused the impugned order dated 09th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated.
7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.
Consequently, the impugned order dated 09th March, 2022 passed by Respondent No.1 under Section 270AA (4) of the Act is set aside and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner.”
Further, in this regard, we find force from the decision of Hon’ble Delhi High Court in the case of Prem Brothers Infrastructure LLP Vs. National Faceless Assessment Centre & Anr. (supra) and the decision of coordinate Bench of the Tribunal in the case of Ujala Credit Co- operative Society Ltd vs. National Faceless Appeal Centre (supra).
10. The AO has not mentioned any specific limbs of the section 270A in the notice on which the assessess’s case falls. Respectfully following the aforesaid decisions, we have no hesitation to cancel the levy of penalty u/s 270A of the Act in the facts and circumstances of the instant case as the penalty notice is vague and hence becomes fatal to the proceedings. Accordingly, the grounds raised by the assessee are allowed on this technical issue.
13 11. Since, relief is granted to the assessee on the technical issue the other factual grounds raised by the assessee need not to be adjudicated and kept them open.
12. In the result, the appeal filed by the assessee is allowed.