DY. COMMISSIONER OF INCOME TAX-7.1.1, MUMBAI vs. NSE CLEARING LIMITED, MUMBAI

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: This appeal is filed by the Revenue against the order of the learned Commissioner of Income Tax (Appeals), NFAC, Delhi, dated 19.01.2022, for the assessment year 2020-21 in deleting the penalty levied under section 270A of the Act.

“6.7 I have carefully considered the factual matrix and the legal position. The SC judgment was delivered in the scheme of old 271 (1) (c) whereas the present appeal is against penalty u/s 270A. In this regard, judgment of ITAT, Bengaluru is marshalled in the case of IIFL Samastha Finance Ltd in ITA NO 1054 of 2024 in which an identical issue for the same assessment year was discussed and decided. 6.8 The relevant extract is as below: In the present case, the assessee company well before the completion of the assessment proceedings i.e. on 16.9.2022 filed a letter to AO for voluntary 2 declaration of health and education cess by enclosing the revised computation. Considering the totality of the case, we are of the opinion that provisions of section 270A(6)(a) of the Act is squarely applicable in case of assessee company. Here, the assessee offered an explanation before the AO and we are of the opinion that the explanation is also bonafide. Since the assessee company claimed the deduction based on decision of Hon'ble jurisdictional & Non Jurisdictional High Court as well as Tribunals, and the assessee had disclosed all the material facts to substantiate the explanation. Further, the authorities below have also not controverted the decision relied on by the assessee to be incorrect. After the amendment in the Finance Act, assessee had also voluntarily disclosed the health and education cess before the AO well before the completion of assessment proceedings. We are of the opinion that the penalty by hereditary nature is always discretionary. The legislature has used the word "may" in section 270A(1) of the Act which clearly says that it is discretionary on the part of the AO to levy penalty or not. We are also of the opinion that penalty is not at par with the tax and interest and therefore, penalty should not be levied in a light hearted manner or in routine manner and not every additions/disallowances are liable for penalty. The primary onus is on the revenue to prove that assessee falls under particular limb of default. The AO have to bring the case in the four corners of the sections in order to levy penalty which in our opinion, the authorities below failed to do so. The authority below misdirected themself by citing various irrelevant decisions of Hon'ble Supreme Court without understanding the real issues involved in the case of assessee company. Therefore, we are of the opinion that the explanation offered by the assessee is bonafide and the assessee has disclosed all material facts to substantiate the explanation. With the above observations, we delete the penalty levied u/s 270A of the Act and allow the appeal of the assessee. 6.9 the present case is similar to the above. The assessee had suo moto withdrawn the claim of education and health cess in view of the amendment to the Act. In view of the above, penalty of Rs. 1,60,27,280/- u/s 270A is hereby deleted. Accordingly, this ground of appeal is allowed.” 4. On careful perusal of the order of the learned CIT(A), we do not see any valid reason to interfere with the findings of the learned CIT(A) in deleting the penalty levied under section 270A of the Act. Thus, we sustained the order of the learned CIT(A) and rejected the grounds raised by the Revenue.

Order pronounced in the open court on 12/08/2026

Sd/- Sd/- MAKARAND VASANT MAHADEOKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 12/08/2026 Prabhat Copy to: DY. COMMISSIONER OF INCOME TAX- 7.1.1, R NO 126, AAYAKAR BHAVAN, M.K. 1 ROAD,, MUMBAI-400020, MAHARASHTRA NSE CLEARING LIMITED, C-1, BLOCK G EXCHANGE PLAZA, 2 BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE