DALJIT KAUR,SIRSA,HARYANA vs. ITO WARD-1, SIRSA, HARYANA

The assessee is an individual who filed her Return of Income for A.Y. 2018-19 on 21.07.2018, declaring a total income of ₹ 8,75,330/-, which included agricultural income amounting to ₹ 6,45,930/-.

The case was selected for scrutiny, and an assessment under Section 143(3) of the Act was completed on 06.04.2021. In the assessment order, the Assessing Officer (AO) made an addition of ₹ 1,08,12,000/- on account of interest received on enhanced compensation on land. The total interest received was ₹ 2,16,24,000/-, and after granting a statutory deduction of 50% under Section 57(iv) of the Act (i.e., ₹ 1,08,12,000/-), the net amount of ₹ 1,08,12,000/- was added to assessee’s total income.

While completing the assessment, the AO initiated penalty under Section 270A of the Act for alleged "misreporting of income". Subsequently, the AO issued notice dated 06.04.2021 for under reporting in consequence of misreporting of income & passed a penalty order on 29.09.2025, levying a penalty of ₹ 76,84,088/- under Section 270A of the Act.

Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(A), who upheld the levy of penalty. Against this confirmation, the assessee is now in appeal before us.

5 The learned counsel for the assessee submitted that the penalty order passed under Section 270A suffers from a fundamental juri ictional defect. It was pointed out that while initiating the penalty in the assessment order, the AO referred to "misreporting of income," but in the show-cause notice as well as in the final penalty order dated 29.09.2025, the AO failed to specify the exact limb or sub-clause under Section 270A(2) (for under-reporting) or Section 270A(9) (for misreporting) under which the penalty was being levied. It was contended that non-specification of the exact charge deprives the 3 778/Chd/2026 assessee of a fair opportunity to defend themselves, violating the principles of natural justice and rendering the penalty order invalid.

6 Further, the AR submitted that the assessee was under a bona-fide belief that interest received on enhanced compensation on land for Rs.2,16,24,000 was as an exempt income and therefore, the same was duly been show as exempt income in the return of income. The said view was fortified by decisions of various Tribunals. The Ld. AR further stated that when different views are possible, penalty cannot be levied.

7 On the other hand, the learned Departmental Representative (Ld. DR) relied upon the orders of the lower authorities and argued that the addition was based on interest on enhanced compensation on land was not declared by the assessee in the return of income, justifying the levy of penalty under Section 270A.

We have heard the rival contentions, perused the material available on record, and carefully considered the applicable statutory provisions alongside relevant judicial precedents.

Section 270A of the Act creates two distinct categories of default with vastly different consequences:

It is a well-settled proposition of tax jurisprudence that when a statutory provision contains distinct categories or limbs, the Assessing Officer is under a strict legal obligation to specify the precise charge/limb invoked against the assessee. A generic mention of Section 270A without identifying whether the case falls under "under-reporting" or "misreporting," or failing to specify the relevant sub-clause of Section 270A (9), leaves the assessee guessing about the exact nature of the charge.

On perusal of the record in the present case, we observe that the AO initiated proceedings for "misreporting," but neither in the show-cause notice nor in the penalty order dated 29.09.2025 did the AO specify under which sub-clause of Section 270A(9) the Assessee’s case would fall. The AO simply levied a lump-sum penalty without specifying the exact statutory limb. The failure to do so vitiates the penalty proceedings.

Our view is duly fortified by the decision of Pune Bench of the Tribunal in the case of DCIT vs. Chakradhar Contractors (ITA Nos.1939 & 1940/Pun/2024) as well as the decision of Delhi Bench of Tribunal in the 5 778/Chd/2026 case of Divya Burman vs. Assessment Unit (ITA No. 4673/Del/2024) have consistently held that failure to state the exact statutory clause under Section 270A(2) or Section 270A(9) renders the penalty order invalid and void ab initio.

On merits also, the impugned penalty could not be sustained since are there divergent views of Tribunal on the impugned issues. This being so, the assessee could not be alleged to have misreported its income merely because it has adopted one of the possible views.

In view of the above facts and circumstances of the case, the impugned penalty could not be sustained and therefore, deleted. We order so.

In the result, the appeal filed by the assessee is allowed.

""थ"/ The Respondent 3. आयकर आयु"/ CIT 4. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड" फाईल/ Guard File