JAI SHANKAR KRISHNAN,MUMBAI vs. DCIT CIR 42(2)(1), BANDRA MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI PHYSICAL HEARING BEFORE HON’BLE SHRI PAWAN SINGH, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 1363/MUM/2026 (निर्धारण वर्ा / Assessment Year: 2020-21) Shri Jai Shankar Krishnan DCIT – Circle 42(2)(1) 323, Samudra Mahal Kautilya Bhavan, Bandra East बिधम/ Vs. Dr. Annie Besant Road, Worli Mumbai Maharashtra 400051 Mumbai, Maharashtra 400018 स्थायीलेखासं./जीआइआरसं./PAN/GIR No. AKAPK-5483-B (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Sh. Vishwas V. Mehendale (CA) – Ld. AR प्रत्यथीकीओरसे/Respondent by : Sh. Nishant Somaiya (CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 16-06-2026 घोषणाकीतारीख /Date of Pronouncement 14.07.2026 : आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2020-21 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 12.01.2026 partially confirming penalty u/s 270A as levied by Ld. AO vide order dated 30.07.2025. 2. The Ld. AR advanced arguments and assailed impugned penalty on bona-fide belief and also on legal grounds. The Ld. CIT-DR stated

that but for scrutiny proceedings, the assessee would have escaped higher taxes on its income. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. 3. From case records, it emerges that during this year, the assessee was employed with M/s DHR Holding India Pvt. Ltd. This entity was an Indian limb of parent company M/s Danaher Corporation, USA. The assessee was looking after India & Asia (part) operations of the parent company. The assessee filed original return of income on 17.12.2020 declaring income of Rs.1283.66 Lacs. The computation of income as placed on record (Page Nos.10 to 14 of the paper book) would show that the assessee, inter-alia, declared salary income of Rs.643.57 Lacs and Short Term Capital Gains (STCG) on sale of Shares of DHR Asia for Rs.567 Lacs. The cost of acquisition of the shares was claimed to be Re.1/- only. The assessee paid taxes @20% on this special income being STCG on securities in accordance with law. 4. Subsequently, the case was reopened on the ground that the assessee erred in declaring ESOP amount of Rs.567 Lacs under the head capital gains. The said amount was nothing but exercise of stock option by the assessee which was to be taxed as perquisites under the head Salaries and consequently, taxable at normal slab rates as against rate of 20% as offered by the assessee in his return of income. Accordingly, a notice u/s 148 was issued by Ld. AO to the assessee. In response thereto, the assessee admitted the mistake and revised its return of income wherein the full amount of ESOP was offered under the head Salaries and additional tax payable including refund already

granted to the assessee stood fully discharged by the assessee in this return of income. Though Ld. AO accepted this return of income, however, penalty proceedings were initiated in the assessment order u/s 270A(9)(a) for under reporting in consequence of misreporting of income. 5. During penalty proceedings, the assessee stated that the original return of income was filed in good faith since ESOP stocks were liquidated at short interval and reported under the head capital gains. The error occurred due to common man’s understanding about capital gain. Further, there was mere change of head of income and therefore, penalty was not justied. However, rejecting the same, Ld. AO levied penalty u/s 270A(9)(a) at the rate of 200% which was worked out to be Rs.663.03 Lacs. 6. The Ld. CIT(A) upheld the penalty on the ground that had the case not been scrutinized, the incorrect head of income as adopted by the assessee in the original return of income, would not have surfaced. The assessee’s employer had deducted TDS u/s 192 on perquisite value and law clearly provide that ESOP was taxable as perquisites under the heard salaries in the year of exercise of option by the assessee. Therefore, bona-fide mistake claim of the assessee was not accepted. However, Ld. CIT(A) concurred that the tax effect arising due to wrong categorization was Rs.52.29 Lacs only and Ld. AO had erred in computing the quantum of penalty. The Ld. AO was accordingly directed to re-compute the penalty. Finally, the appeal was

partially allowed. Aggrieved, the assessee is in further appeal before us. 7. From the facts, it clearly emerges that the assessee has earned income from salaries. Pursuant to ESOP option as exercised by the assessee, the assessee received certain shares on 26.11.2019 which were sold at very short interval on 29.11.2019 and the resultant sale proceeds were offered under the head ‘Short-Term Capital Gains’. The assessee paid due taxes thereon at the rate of 20%. However, the same being in the nature of perquisite, was subjected to tax u/s 192 and was liable to be taxed as perquisite only under the head salaries. When called upon to file a return of income u/s 148, the assessee realized the said mistake and offered the income under two heads. The full ESOP share value was added as perquisite under the head salaries and the differential in cost of acquisition and sale price of the shares was offered as Short-Term Capital Gains. Pertinently, the returned income has been accepted by Ld. AO. On these facts, we would accept the bona-fide argument of Ld. AR since the shares were sold at very short interval (within 3 days) and whole of sale consideration was offered as STCG. Later on, it was realized that the transaction would be taxable in two parts i.e., the full value of ESOP shares would be taxable as perquisite under the head salaries whereas differential in cost price and sale price would be taxable as capital gains. Accepting the mistake, the assessee revised its return of income and paid due taxes along with amount already refunded to it. When the share are sold at such a short interval, the assessee would

have reasonable belief that the profit earned on such transaction would be subjected to tax under the head capital gains only. The assessee was a salaried employee and may not be so well versed with the applicable statutory provisions. Moreover, the misreporting has to be in the return of income as filed by the assessee which is not the case here. The returned income has duly been accepted by Ld. AO. Therefore, in our considered opinion, this is not a fit case for levy of penalty and hence, we delete the penalty as sustained in the impugned order. The other grounds as urged by Ld. AR have been rendered infructuous. 8. The appeal stand allowed. Order pronounced u/r 34(4) of ITAT Rules, 1963.

Sd/- Sd/- (PAWAN SINGH) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER ANKIT, PS Dated: 14.07.2026 आदेश की प्रनिनलनप अग्रेनर्ि /Copy of the Order forwarded to : 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3. आयकरआयुक्त/CIT 4. ववभागीयप्रवतवनवि/DR 5. गार्डफाईल/GF

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