GREESHMA SHRIDHAR KULKARNI,THANE vs. INCOME TAX OFFICER - WARD 34(2)(1), MUMBAI

आदेश / ORDER

PER: NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER:

This appeal has been preferred by the Assessee against the order dated 27.01.2026, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short, “Ld. Commissioner”) u/s 250 of the Income Tax Act, 1961 (in short, “the Act”), for the A.Y. 2020-21.

ITA No.3803/MUM/2026 Greeshma Shridhar Kulkarni 2. Brief facts relevant for adjudication of the instant appeal are that the AO, vide assessment order dated 09.01.2025 passed u/s 147 r.w.s. 144B of the Act, made an addition of Rs.20,68,993/- on account of variation in expenses claimed towards salaries and wages, commission, hotel boarding and lodging, travelling and miscellaneous expenses. The AO thereafter levied penalty of Rs.9,01,050/- vide order dated 15.07.2025 u/s 270A(9) of the Act, which was affirmed by the Ld. Commissioner.

ITA No.3803/MUM/2026 Greeshma Shridhar Kulkarni

"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. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No. 1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in assessment order as well and consequently, there is no question of any misreporting." 7.1 The Hon'ble Tribunal also taken into account the judgment of the co-ordinate Bench of the Tribunal at Mumbai in the case of Saltwater Studio LLP v. NFAC, Delhi (ITA No.13/Mum/2023) dated 22.5.2023/ [2023] 157 taxmann.com 749 (Mumbai - Trib.), wherein the identical issue as involved in the instant case was also dealt with and ultimately the penalty levied u/s 270A of the Act was deleted by holding as under: "10. The Mumbai Bench of the Tribunal in ITA No. 13/Mum/2023 in the case of Saltwater Studio LLP v. NFAC, Delhi vide order dated 22.5.2023 held as under:- 11. It has to be examined as to whether the action of the AO to have levied penalty under sub-section (9) of section 270A of the Act is legally valid or not. The AO in order to levy the penalty has given the reason for doing so as under:- "The contention of the assessee to drop the penalty proceedings is rejected because the assessee has clearly misreported its income by an amount of Rs.3,94,996/- as per the provisions of the Section 270(A)(9) of the Act. And a misreported income leads to evasion of Tax. Hence, it is clearly established that the assessee has committed an intentionally fault under the provisions of the Section 270(A)(9) of the Act by under reporting its income in consequence of misreporting its income, to the tune of Rs.3,94,996/-. Therefore, I am satisfied that it is a fit case for levy of penalty u/s 270A of the Income Tax Act, 1961. The amount of penalty that is to be levied for the fault of under reporting income in consequence of misreporting income is determined under section 270A(8) of the Act, which is two hundred percent of the tax payable on under reported income in consequence of misreported income." 12. And the above action of AO has been confirmed by the Ld. CIT(A) on the same reasoning. The question is whether the AO's action to levy penalty u/s 270A(9) of the Act is sustainable in the given facts of the case. In order to examine that let us have a look

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at relevant provisions of Section 270(8) & (9) of the Act which reads as under: - 13. The AO has levied the higher penalty of 200% of tax payable of misreporting income. Then in such a scenario, the AO has to bring the action/omission on the part of the assessee in the ken of sub-section (9) of section 270A of the Act which are given (supra), viz (a) to (f) of section 270A(9) of the Act. However, a reading of the reasons given by the AO to levy penalty for misreporting (supra) it is discerned that he has failed to spell out as to how the assessee's case/additions falls within the ken of instances given in clause (a) to (f) of sub-section (9) of section 270A of the Act. Since AO failed to bring the addition/disallowance he made in quantum assessment, under the ken of (a) to (f of the sub- section(9) of section 270A of the Act, the penalty levied for misreporting @ 200% cannot be sustained because it is trite law that penalty provisions have to be strictly interpreted. And therefore, taking into consideration, the facts and circumstances of the case, we find that the levy ofpenalty by the AO u/s 270A of the Act suffers from the vice of nonapplication of mind as well as violates principles of natural justice. And therefore, the penalty levied on addition of sustained quantum addition of Rs.67,970/- cannot survive. And therefore, it is directed to be deleted." 7.2 The Hon'ble co-ordinate Bench of the Tribunal in Jaina Marketing & Associates case (supra) ultimately deleted the identical penalty as imposed u/s 270A(9) of the Act, by holding as under: "15. In the instant case, on perusal of the penalty notice placed on record dated 02/06/2021, it is evident that the Ld. AO had show caused the assessee as to why the assessee should not be imposed with penalty for 'under reporting of income'. The assessee had filed its submissions stating that he had not 'under reported its income' We are unable to comprehend ourselves to accept to the argument of the Ld. DR that assessee did not make any submissions with regard to 'mis reporting of income'. The assessee could be expected to give reply only in respect of show cause notice that is put to him. Why at all the assessee should infer/ assume/presume that the Ld. AO having recorded satisfaction in the quantum assessment order that offence of both 'under reporting' and 'mis reporting' is committed by the assessee and accordingly the penalty would be levied on the assessee for both in terms of section 270A(9) of the Act? 16. It is well settled that penalty proceedings and assessment proceedings are separate and distinct. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Anantharam Veera Singhaiah & Co. v. CIT [1980] 123 ITR 457 (SC) wherein it was held that findings recorded in assessment proceedings cannot be taken as conclusive for penalty proceedings. Even the provisions of section 270A(6) of the Act provides for granting immunity from penalty if the case falls in "under reporting of income". Moreover different rates of penalty are prescribed for 'under reporting of income' alone and for 'under reporting' in consequence of 'misreporting of income. Hence it is all the more essential to mention in the show cause notice itself as to which of the offence is committed by the assessee for which explanations are being sought for by the Id. AO. There is no whisper at

ITA No.3803/MUM/2026 Greeshma Shridhar Kulkarni all in the notice issued u/s 270A read with section 274 of the Act about "misreporting of income". In-fact two notices were issued by the Id. AO and in both the notices, the A.O. had only directed the assessee to reply with regard to 'under reporting of income. But we find that the penalty had been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act for which show cause notice was never issued to the assessee. The ratio laid down in the aforesaid Full Bench decision of Hon'ble Bombay High Court, the decision of Hon'ble Jurisdictional High Court in the case of Sahara India Life Insurance reported in [2019] 108 taxmann.com 597/432 ITR 84 (Delhi) and other decision reffered supra squarely applies to the facts of the instant case before us. Hence we direct the Ld. AO to delete the penalty levied u/s 270A of the Act for the Assessment Year 2017-18. Accordingly, we allow the Appeal of the Assessee on this technical ground and leave the grounds raised on levy of penalty on merits left open as adjudication of the same becomes academic in nature." 8. Coming to the instant case, admittedly in the assessment order, 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. Further, in the penalty notice issued u/s 274 r.w.s 270A of the Act dated 11.11.2021 mentioned under reporting of the income. Subsequently during the penalty proceedings again issued the notice dated 20.12.2021 u/s 274 r.พ.5 270A of the Act, without specifying any limb or sub clause of section 270A of the Act and ultimately vide order dated 22.02.2022 u/s 270A of the Act levied the penalty for misreporting of the income as well as underreporting of the income, as per provisions of section 270A(8) of the Act with the aid of section 270A(9)(e) of the Act. As the AO issued the vague notice without specifying any particular limb or sub clause for levying the proposed penalty. There is no whisper at all in the notice issued u/s 270A read with section 274 of the Act about "misreporting of income" whereas the penalty has been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act, for which show cause notice was never issued to the Assessee. And therefore in view of the judgment passed by the coordinate Bench of the Tribunal in the case of Jaina Marketing & Associates (supra), wherein the Co-ordinate Bench of the Tribunal not only analyzed the provisions of law but also considered the judgments of the Higher Courts and the Tribunal and deleted the identical penalty as involved in this case, hence respectfully following the decision of the Tribunal, we are inclined to delete the penalty under consideration. Thus, the penalty is deleted and appeal filed by the Assessee is allowed. 9. As we have deleted the penalty, hence not dwelling into other aspects of the case, as extensively argued by the parties, as adjudication of the same would be futile exercise.”

ITA No.3803/MUM/2026 Greeshma Shridhar Kulkarni 4. The Ld. DR on the contrary opposed the claim of the Assessee; however, no contrary decision was brought to our notice against the aforesaid Coordinate Bench decision.

Order pronounced in the open court on 01.09.2026.

Sd/- Sd/- PRABHASH SHANKAR NARENDER KUMAR CHOUDHRY ACCOUNTANT MEMBER JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.