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Facts
The assessee purchased a property for Rs. 79 lakhs, but the stamp duty value was Rs. 1,07,07,480/-. This difference was added to the income, and a penalty under Section 270A was levied. The assessee argued that information was disclosed and there was no misreporting of income.
Held
The Tribunal held that the addition made under Section 56(2)(x) due to the difference between purchase price and stamp duty value does not constitute underreporting or misreporting of income for the purpose of levying penalty under Section 270A. The penalty was quashed.
Key Issues
Whether penalty under Section 270A can be levied on additions made due to the difference between the purchase price and the stamp duty value of a property, when the assessee claims to have disclosed all material facts and there was no misreporting of income.
Sections Cited
270A, 274, 250, 154, 56(2)(x), 50C, 92D, 271(1)(c), 271AAB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN& SHRI OM PRAKASH KANT
Date of Hearing 19.11.2025 Date of Pronouncement 18.12.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.:
The present appeal has been filed by the assessee challenging the impugned order dt. 29.11.2024 passed by National Faceless Appeal Centre, Delhi (NFAC) / CIT(A).The assessee has raised the following grounds of appeal:
I. Penalty u/s 270A of the Act. 1. The Ld CIT(A) erred in confirming Assessing Officer order levying penalty u/s 270A of Rs. 14,50,038/- in regards to difference between purchase consideration and the stamp duty value of the property purchased without appreciating that there is no misreporting of any income, therefore levy of penalty u/s 270A of the Act is not justified.
2. The Ld Commissioner of Income Tax (Appeal) erred in confirming that levy of penalty of Rs. 14,50,038/- merely on the basis of additions made in assessment order by Assessing officer without appreciating that addition is made merely because of valuation difference therefore notice is bad in law.
3. The notice issued u/s 270A r.w.s. 274 of the Act for levy of penalty bad in law.
4. The Assessee craves leave to add, alter, amend, delete and/or modify all or any of the above grounds of appeal.
At the very outset, we noticed that there is a delay in filing the present appeal and in this regard assessee has filed an application for seeking condonation of delay in filing appeal before the Tribunal, which is reproduced herein below:
I, Suruchi Satish Sarmalkar 75 years of age, (widow of late Shri Satish Ramchandra Sarmalkar) presently residing at D/45 Jai View, D.N. Nagar Andheri West, Mumbai 400053, Maharashtra, India. do hereby state on solemn affirmation as under:
2. I further say that the CIT(A) order was passed and uploaded on portal on 29/11/2024 and accordingly the last day for filing the appeal before ITAT was 31/01/2025. However, the appeal was delayed and filed on 26/09/2025.Thus there is a delay of 238 days.
I say that I am a senior citizen aged 75 years and I have no formal background in legal or tax matters. I am completely unaware of the legal proceeding and process and I am completely dependent on my Chartered Accountant Mr. Sankara Narayan Laxminarain who is also senior citizen aged 76 years for return filing & present tax proceedings.
4. say that in quantum proceeding my CA filed Rectification application u/s 154 of the Act on 31/12/2024 against the CIT(A) order dated 29/11/2024 and the order u/s 154 r.w.s. 250 of the Act was passed on 30/06/2025. The order was served on the email of my CA. My CA on his return from Chennai on 07/09/2025 took up the matter. (Travel details PNR No. 8434310649 From LTT to Chennai 12th August 2025 and Return PNR No. 4221824634 Return date 07th September 2025 From Chennai to LTT Mumbai). At this juncture both the appeals for quantum as well as penalty was filed before Hon ITAT.
I believe that I have a strong case on merits, therefore, I respectfully request that the delay may be condoned. I am confident that the appeal, if heard, addition shall be deleted, I kindly request that the Hon'ble Tribunal to give me an opportunity to present my case on merits in the interest of justice.
6. Therefore, I humbly pray that the Hon'ble Tribunal may be pleased to condone the delay in filing the appeal and admit the same for hearing on its merits. No loss/ prejudice would be caused to the Respondent/ dept if the delay is condoned.
7. I further submit that the delay was unintentional, and I am making this request with the utmost sincerity, hoping that the Hon'ble Tribunal will grant me a chance to proceed with my appeal.
8. I, say that whatever is stated in the above paras of the Affidavit is true and correct. I further say that whatever is stated in above paras are true to best of my knowledge and I believe it to be true.
3. On the other hand Ld. DR refuted the contents contained in the application and requested for dismissal of the same.
Smt Suruchi Satish Sarmalkar, Mumbai.
After having heard the counsel for both the parties on this application for seeking condonation of delay and considering the entire factual position as explained before me and also keeping in view the principles laid down by Hon'ble Supreme Court in the case of Land Acquisition Collector Vs MST Katiji and others 1987 AIR 1353 Supreme Court, wherein it has been held that were substantial justice is pitted against technicalities of non deliberate delay, then in that eventuality substantial justice is to be preferred. In our view the principals of advancing substantial justice is of prime importance. Hence considering the explanation put forth by the Assessee by justifiably and properly explaining the delay which occurred in filing the appeal and construing the expression "sufficient cause" liberally we are inclined to condone the delay in filing the appeal before us. Therefore we condone the delay and admit the appeal to be heard on merits.
5. The only effective ground raised by the assessee in the present appeal is challenging the order of Ld. CIT(A) in confirming the levy of penalty u/s 270A of the Act of Rs. 14,50,038/- by the AO.
In this regard Ld. AR reiterated the same arguments as were raised by him before the revenue authorities and submitted that no under reporting of income has been committed by the assessee as in regard to show cause Smt Suruchi Satish Sarmalkar, Mumbai. notice issued during the course of assessment proceedings. The assessee has specifically stated that she had sold an inherited property for Rs. 80 lakhs on 29.12.2018 and the said amount was fully invested in the purchase of residential property, which includes stamp duty of Rs. 6 lakh. It was submitted that the entire information was already been mentioned while filing her return of income for the year under consideration. Whereas the assessee could not upload the documents on account of internal error in the income tax software. Ld. AR further relied upon the documents submitted by way of paper book which includes copy of sale agreement, stamp duty value letter, payment receipt of stamp duty and registration charges. The Ld. AR also relied upon the decision in the case of Narayanbhai Shivambhai Patel Vs. ITO, [2025] 178 taxmann.com 576 (Ahd -Trib).
7. On the other hand Ld DR relied upon the orders passed by the revenue authorities.
We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we noticed that assessee had purchased immovable property amounting to Rs. 79 lakhs, the stamp duty value which as per registration authority was at Rs. 1,07,07,480/- and thus the difference of Rs. 28,07,480/- was added to the income of the assessee in terms of provisions of Sec. 56(2)(x)(b)(B) of the Act. In this regard it was specifically mentioned by the assessee that she had sold inherited property of Rs. 80 lakhs and fully invested the said amount in purchase of residential property. Since the assessee had already informed while filing her income tax return for the year under consideration. Therefore no penalty u/s 270A of the Act is attracted. In this regard, we draw strength from the decision of Coordinate Bench of ITAT in the case of Narayanbhai Shivambhai Patel (supra), wherein the operative portion of the said order is reproduced herein below:
We have carefully considered the rival submissions. It is found that the addition in this case was made under the deeming provisions of Section 56(2)(x) of the Act. The contention of the assessee is that no penalty under Section 270A of the Act can be imposed for such deeming addition. It is found that the case laws relied upon by the assessee were in the context of penalty levied under Section 271(1)(c) of the Act which are not found relevant to decide the issue before us. Only the decision of Co-ordinate Bench of Bombay Tribunal in the case of Alrameez Construction (P.) Ltd. v. CIT/NFAC [2023] 152 taxmann.com 382/202 ITD 379 (Mumbai - Trib.) is found to be in the context of penalty under Section 270A of the Act for under-reporting the income. In that case also, the addition was made under Section 56(2)(x) of the Act, which was held as not falling in the category of underreporting or misreporting of income. 7.1 The assessee has also contended that his case is covered under the exception under Section 270A(6) of the Act. The said section is reproduced for the sake of easy understanding. Penalty for under-reporting and misreporting of income. 270A. (6) The under-reported income, for the purposes of this section, shall not include the following, namely:
(a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or95[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or95[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced there from; (c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB.
7.2 It is found that the assessee had disclosed all the material facts and explanation as to why the purchase price of the property was less than the stamp duty value was also given by the assessee. However, the Assessing Officer had held that the explanation of the assessee was not bona-fide as no supporting evidence for the explanation was brought on record. The addition made under Section 56(2)(x) of the Act is not absolute addition, as the assessee has an option to dispute the stamp value of the property on the grounds mentioned in Section 50C of the Act and, thereafter, the Assessing Officer is required to refer the matter to the Valuation Officer. Further, if the value as determined by the Valuation Officer is within 20% of the purchase consideration, then no addition is required to be made under Section 56(2)(x) of the Act. Therefore, no penalty u/s 270A can be automatically levied for all the additions made u/s 56(2)(x) of the Act. It is also relevant to consider that the value determined by the DVO is also an estimate, based on the sale consideration of other properties in the same vicinity or on the basis of other yardsticks as prescribed. Therefore, any addition made under Section 56(2)(x) of the Act on the basis of difference in the stamp duty value and the purchase price or between the value determined by the DVO and the purchase consideration, cannot be considered as underreporting of income by the assessee so as to invoke the provisions of Section 270A of the Act. The provision of Section 270A(6)(d) of the Act stipulates that the amount of under-reported income on the basis of addition made in conformity with Arm's Length Price determined by the TPO, does not qualify for imposition of penalty under Section 270A of the Act. Following the same rationale, the amount of under-reported income determined on the basis of the report of the DVO also cannot qualify for imposition of penalty under Section 270A of the Act. Merely because the assessee didn't opt to refer the matter to the Valuation Officer, it doesn't make a case fit for imposition of penalty u/s 270A of the Act.
8. In view of the above facts and discussions, we are of the considered view that no penalty under Section 270A was leviable in this case as there was no underreporting or misreporting of income by the assessee. Therefore, the penalty imposed by the Assessing Officer under Section 270A of the Act is quashed.
Therefore considering the totality of the facts and circumstances as discussed by us above also keeping in view the principles laid down by the Coordinate Bench of ITAT in the case of Narayanbhai Shivambhai Patel (supra), we are also of the view that any addition made Smt Suruchi Satish Sarmalkar, Mumbai. u/s 56(x)(b)(B) of the Act on the basis of difference in stamp duty value of purchase price could not be considered as under reporting of income by assessee so as to invoke the provisions of Sec. 270A of the Act. Consequently the grounds raised by the assessee are stands allowed.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 18/12/2025.