SUNNY VINODKUMAR VARYANI,GANDHINAGAR vs. THE ITO, WARD-1(1)(3), AHMEDABAD

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ITA 76/AHD/2026Status: DisposedITAT Ahmedabad30 July 2026AY 2019-206 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that claiming a deduction, even if inadmissible, does not automatically amount to misreporting of income. Unless the Revenue proves deliberate misrepresentation or false particulars, penalty for misreporting is unsustainable.

What were the facts?

The assessee claimed a deduction under Section 80GGC for a donation to a political party. Following a search in related cases, the AO reopened the assessment, and the assessee withdrew the deduction. The AO initiated penalty proceedings under Section 270A for the bogus claim.

What were the issues?

Whether the disallowance of a deduction claimed under Section 80GGC constitutes 'misreporting of income' for the purpose of levying penalty under Section 270A.

Which sections of the Income-tax Act were involved?

Section 80GGC,Section 270A,Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC” BENCH, AHMEDABAD

Per Rahul Chaudhary, Judicial Member:

1.

The present appeal preferred by the Assessee is directed against the Order, dated 11/11/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had dismissed the appeal against the Penalty Order, dated 23/06/2025, passed under Section 270A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment year 2019-2020. 2. The grounds raised by the Assessee read as under:

“1. In law and in the facts and circumstances of the case of the appellant, the learned CIT(A) has erred into confirming the Assessment Year: 2019-2020

penalty order u/s 270A of the Act passed by the assessing officer. The appellate order being bad in law deserves to be quashed.

2.

In law and in the facts and circumstances of the case of the appellant, the learned CIT(A) has erred in confirming the penalty levied u/s 270A of the Act amounting to Rs.56,232/- even when no such penalty is leviable.”

3.

The brief facts of the case are that the appellant filed his return of income for the Assessment Year 2019-2020 declaring total income at INR.4,13,890/- after claiming deduction of INR.2,00,000/- under Section 80GGC of the Act being donation to political party [i.e. Rashtriya Samajwadi Party (Secular)]. Information was circulated within Department after search and seizure action under Section 132 in the cases of these political parties and charitable organizations that group of persons used certain unrecognized political parties to carry out the scam of soliciting bogus donations in the form of donations received from various persons in lieu of commission and ultimately donations are returned back to the original donors. Since the Assessee claimed deduction under Section 80GGC on account of donation to such political party, the Assessing Officer initiated reassessment proceedings under Section 147 of the Act and issued notice under Section 148 of the Act on 17/04/2023. In response, the Assessee filed return of income declaring total income at INR.6,13,890/- thereby withdrawing the deduction of INR.200,000/- claimed under Section 80GGC of the Act in the original return of income. The Assessing Officer completed the assessment by passing an Assessment Order under Section 147/144B of the Act on 20/12/2024 accepting the income declared in the return of income filed under Section 148 of the Act. In respect of bogus claim made under Section 80GGC of the Act in the original return of income, the Assessing Officer initiated penalty proceedings under Section 270A of the Act. The Assessing Officer was not satisfied with the Assessee's reply. The Assessing Officer vide Order, dated 23/06/2025, levied the penalty of INR.56,232/- under Section 270A of the Act.

4.

Aggrieved by the penalty order, the Assessee preferred an appeal

2 Assessment Year: 2019-2020

before the Learned CIT(A). However, the Learned CIT(A), vide Order, dated 11/11/2025, passed under Section 250 of the Act dismissed the said appeal.

5.

Being aggrieved, the Assessee has preferred the present appeal before the Tribunal.

6.

When the appeal was taken up for hearing, at the outset, both the sides fairly submitted that the issue raised by the Assessee in the present appeal stands covered by the decision of the Ahmedabad Bench of the Tribunal in the case of Hiro Mulchand Tanwani Vs. ITO [ITA No.110/AHD/2026, dated 15/05/2026] the relevant extract of which reads as under:

“3. The assessee challenged the levy of penalty under Section 270A of the Income-tax Act, 1961, contending that the Assessing Officer was not justified in treating the disallowance of deduction claimed under Section 80GGC as a case of “misreporting of income.” The facts reveal that the assessee had filed the return of income for Assessment Year 2019-20 declaring total income of Rs.13,25,710 after claiming deduction of Rs.1,50,000 under Section 80GGC in respect of donation made to a political party, namely Manvadhikar National Party. Subsequently, the assessment was reopened under Section 148 to verify the genuineness of the said donation. In the reassessment completed under Section 147 read with Section 144B, the Assessing Officer disallowed the deduction and assessed the total income at Rs.14,75,710, and thereafter levied penalty of Rs.93,600 under Section 270A on the ground that the assessee had under-reported income in consequence of misreporting.

4.

The contention of the Assessing Officer that the assessee had accepted the addition by not filing an appeal against the disallowance cannot, by itself, be a valid basis for concluding that there was misreporting of income. The mere fact that the assessee chose not to challenge the quantum addition due to the relatively small amount involved and in order to avoid prolonged litigation does not amount to an admission of concealment or furnishing of false particulars. It is well settled that penalty proceedings are distinct and independent from assessment proceedings, and the findings in the assessment order are not conclusive for the purpose of levy of penalty. Section 270A draws a 3 Assessment Year: 2019-2020

clear distinction between “under-reporting of income” and “misreporting of income.” Misreporting is attracted only in specific circumstances enumerated in sub-section (9), such as misrepresentation or suppression of facts, failure to record investments, claiming of expenditure not substantiated by evidence, recording false entries, or failure to report receipts. In the present case, the assessee had duly disclosed the donation in the return of income and claimed deduction under Section 80GGC based on the belief that the payment qualified for deduction. The disallowance arose because the Assessing Officer was not satisfied about the genuineness or eligibility of the donation. However, there is no material on record to establish that the assessee had furnished any false evidence, suppressed any facts, or made any deliberate misrepresentation. A claim of deduction made in the return, even if ultimately found to be inadmissible, does not automatically lead to the conclusion that the assessee has misreported income. Unless the Revenue demonstrates with cogent evidence that the claim was bogus and knowingly made on the basis of false particulars, penalty for misreporting cannot be sustained. At best, the case may fall within the ambit of under-reporting of income, but even that would require the Assessing Officer to establish that the conditions prescribed under Section 270A are satisfied. In the absence of any finding that the assessee deliberately furnished inaccurate particulars or fabricated documents, the higher penalty prescribed for misreporting is not legally tenable. Accordingly, considering that the deduction was claimed transparently in the return of income and that the disallowance was based solely on the Assessing Officer’s adverse view regarding its admissibility, the levy of penalty under Section 270A on misreporting of income is unsustainable in law. The penalty of Rs.93,600 is therefore directed to be deleted.”

7.

The above decisions was followed by the Co-ordinate Bench of the Tribunal in the case of Siddharth Laxminkant Vaderkar Vs. Income Tax Officer, Ward 4(2)(3) Ahmedabad [ITA No. 1072/AHD/2026, Dated 07/07/2026].

8.

In the absence of any change in factual matrix and legal proposition, following the above decisions of the Co-ordinate Benches of the Tribunal, we delete the Penalty of INR.56,232/- levied upon the Assessee under Section 270A of the Act. Ground No. 1 and 2 raised

4 Assessment Year: 2019-2020

by the Assessee are allowed.

9.

In the result, the present appeal preferred by the Assessee is allowed.

Order pronounced on 30.07.2026. (Dr. B.R.R. Kumar) Judicial Member

िदनांक Dated : 30.07.2026 अहमदाबाद Ahmedabad;DS, PS

5 Assessment Year: 2019-2020

आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant

2.

""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.

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