AGRAJA COIR WEAVER,TIRUVALLUR vs. ITO, WARD-3,, VELLLORE

PDF · subscribers
ITA 1942/CHNY/2026Status: DisposedITAT Chennai14 July 2026AY 2020-218 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under Section 270A was invalid because the AO failed to specify the exact clause of Section 270A(9) in the show-cause notice. Regarding the penalty under Section 271B, the Tribunal held it was not warranted as the tax audit report was filed before the completion of the assessment, constituting a technical breach.

What were the facts?

The assessee, a partnership firm, failed to file its return of income. The Assessing Officer (AO) reopened the case based on financial transactions and completed the assessment, making an addition. Subsequently, the AO initiated penalty proceedings under Section 270A for under-reporting of income and under Section 271B for non-filing of the audit report.

What were the issues?

Whether the penalty levied under Section 270A is valid without specifying the exact clause of Section 270A(9) in the show-cause notice, and whether penalty under Section 271B is justified when the audit report is filed before assessment completion.

Which sections of the Income-tax Act were involved?

Section 270A,Section 271B,Section 44AB,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & MS PADMAVATHY S

Hearing: 13.07.2026Pronounced: 14.07.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: These appeals filed by the assessee are directed against two orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi both dated 17.03.2026 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21.

ITA Nos.1941 & 1942/CHNY/2026 - 2 - Agraja Coir Weaver ITA No.1941/CHNY/2026 2. Brief facts of the case are as follows: The assessee is a partnership firm and had not filed its return of income. The assessee had not filed its return of income for the relevant assessment year. Based on information received regarding specified financial transactions amounting to Rs.3,21,60,000/-, the case was reopened. Thereafter, the assessment was completed u/s.147 r.w.s 144B of the Act, determining the total income at Rs.2,03,802/- after making an addition of Rs.1,85,082/-. Consequent to the assessment, the AO initiated penalty proceedings u/s.270A of the Act for under-reporting of income and issued a show-cause notice dated 03.12.2024. Although the assessee filed its reply to the notice, the AO was not satisfied with the explanation and passed an order levying a penalty of Rs.1,15,492/- u/s. 270A of the Act.

3.

Aggrieved by the penalty order, the assessee preferred an appeal before the First Appellate Authority (FAA). The FAA, however, upheld the action of the AO and confirmed the levy of penalty.

4.

Aggrieved, assessee is in appeal before the Tribunal. The Ld. AR for the assessee submitted that the penalty levied u/s.270A of the Act is without valid jurisdiction. He submitted that while initiating the penalty proceedings by issuing the show cause notice dated

ITA Nos.1941 & 1942/CHNY/2026 - 3 - Agraja Coir Weaver 03.12.2024, the AO failed to specify the particular clause of section 270A(9) of the Act under which the penalty was proposed. According to the Ld. AR, such failure vitiates the assumption of jurisdiction for levy of penalty. He further submitted that this jurisdictional issue was specifically raised before the CIT(A) as Ground No.2 in Form No.35; however, the same was not properly considered or adjudicated. The Ld. AR further relied on the order of the Chennai Bench of the Tribunal in the case of Chungath Varghese Sunny vs. DCIT in ITA Nos.1806 to 1810/Chny/2025 (order dated 28.10.2025), wherein the Tribunal quashed the penalty levied u/s.270A of the Act on the ground that the AO had failed to specify the exact clause of section 270A(9) of the Act under which limb, the charge of under-reporting or misreporting of income was levelled. Relying on the said decision, the Ld. AR prayed that the penalty levied u/s. 270A of the Act be deleted.

5.

The Ld.DR relied on the orders of the AO & the FAA.

6.

We have heard rival submission and perused the material on record. The undisputed fact is that while initiating the penalty proceedings u/s. 270A of the Act by issuing the show cause notice dated 03.12.2024, the AO has not specified the exact clause of section 270A(9) of the Act under which the assessee was proposed to be

ITA Nos.1941 & 1942/CHNY/2026 - 4 - Agraja Coir Weaver proceeded against. The show cause notice is vague and does not indicate whether the penalty was initiated for any of the specific instances of misreporting of income enumerated under section 270A(9) of the Act. Such specification is a mandatory requirement for valid assumption of jurisdiction u/s.270A of the Act.

7.

We further find that the Chennai Bench of the Tribunal in the case of Chungath Varghese Sunny, (supra) after considering the scheme of section 270A, has held that failure on the part of the AO to specify the exact clause of section 270A(9) under which penalty is proposed renders the initiation of penalty proceedings invalid and consequently the penalty order is liable to be quashed. The Revenue has not brought on record any distinguishing feature to take a different view. Respectfully following the aforesaid decision of the Coordinate Bench, we hold that the initiation of penalty proceedings in the present case is without valid jurisdiction. Consequently, the penalty order passed u/s.270A of the Act cannot be sustained and is hereby quashed. Accordingly, the appeal of the assessee is allowed.

ITA No.1476/CHNY/2026 8. The assessee has filed this appeal against the appellate order confirming the penalty levied by the AO u/s.271B of the Act for non- filing of audit report within the prescribed time limit.

ITA Nos.1941 & 1942/CHNY/2026 - 5 - Agraja Coir Weaver 9. The Ld.AR for the assessee submitted that though the tax audit report as required u/s.44AB of the Act could not be furnished within the prescribed due date, the same was filed on 28.06.2024, much before the completion of the reassessment proceedings, which culminated in the order passed u/s.147 of the Act dated 03.12.2024. The Ld. AR further invited our attention to the reassessment order dated 03.12.2024 and submitted that in para 3.2 thereof, the AO has specifically recorded that the assessee had furnished the tax audit report along with the financial statements during the course of the reassessment proceedings. Thus, the tax audit report was very much available with the AO at the time of completion of the reassessment. Therefore, the Ld. AR contended that once the tax audit report is furnished before the completion of the assessment, the delay in filing the report constitutes only a technical or venial breach and does not result in any loss of revenue. Therefore, the Ld.AR submitted that levy of penalty u/s.271B of the Act is not justified. In support of the above contention, the Ld. AR relied on the order of the Chennai Bench of the Tribunal in the case of SS75 Salem District Public Health Department Employees Co-operative Thrift and Credit Society Ltd. vs. ITO in ITA No.1441/Chny/2026 (order dated 01.07.2026), wherein, under similar facts, the Tribunal, after considering various judicial precedents, deleted the penalty levied u/s. 271B of the Act.

ITA Nos.1941 & 1942/CHNY/2026 - 6 - Agraja Coir Weaver Accordingly, the Ld. AR prayed that the penalty levied u/s.271B of the Act be deleted.

10.

The Ld.DR supported the orders of the AO and the FAA.

11.

We have heard the rival submissions and perused the material available on record. The undisputed fact is that though the assessee did not furnish the tax audit report within the due date prescribed u/s.44AB of the Act, the same was admittedly furnished on 28.06.2024, much before the completion of the reassessment proceedings u/s.147 of the Act i.e., on 03.12.2024. The AO in the reassessment order, in para 3.2, records that the assessee had furnished the tax audit report along with the financial statements during the course of the reassessment proceedings. Thus, the AO had the benefit of the tax audit report while completing the assessment. In our considered opinion, once the tax audit report has been furnished before the completion of the assessment and has been taken into consideration by the AO, the delay in furnishing the report becomes a technical or venial breach. No material has been brought on record by the Revenue to demonstrate that such delay has caused any prejudice to the Revenue or resulted in any loss to the exchequer.

ITA Nos.1941 & 1942/CHNY/2026 - 7 - Agraja Coir Weaver 12. We further find that the Coordinate Bench of the Tribunal in the case of SS75 Salem District Public Health Department Employees Co-operative Thrift and Credit Society Ltd., (supra) under similar facts, held that where the tax audit report was furnished before the completion of the assessment proceedings, levy of penalty u/s. 271B of the Act is not warranted and accordingly deleted the penalty. The Revenue has not brought any distinguishing facts before us to warrant a different view. Respectfully following the aforesaid decision of the Coordinate Bench, we hold that the penalty levied u/s.271B of the Act is unsustainable. Accordingly, we direct the AO to delete the penalty. It is ordered accordingly.

13.

In the result, the appeals filed by the assessee are allowed.

Order pronounced in the open court on 14th July,2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (प�मावती एस) (PADMAVATHY S) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 14th July, 2026 RSR, Sr.PS

ITA Nos.1941 & 1942/CHNY/2026 - 8 - Agraja Coir Weaver

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.07.17 12:15:30 +05'30'

More judgments on Section 270A

All 4,156 judgments and leading authorities on Section 270A →

Recent GST High Court judgments

Search GST case law →