MANGADU NATARAJAN BALASUNDHARAM,KANCHIPURAM vs. ITO, WARD-3(1), CHENNAI

आयकर अपीलीय अधिकरण, ‘ए ’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI

श्री जॉजज जॉजज के, उपाध्यक्ष एवं श्री एस.आर.रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2415/Chny/2025 ननर्ाजरण वर्ज / Assessment Year: 2019-20

The Income Tax Officer Mangadu Natarajan vs. Ward 3(1) Balasundharam Chennai. No.72, Main Road, Mangadu Kanchipuram – 600 122. [PAN: AAFPB9440C] (प्रत्यथी/Respondent) (अपीलाथी/Appellant)

अपीलाथी की ओर से/Appellant by : Shri. K.Vishva Padmanaban, CA : Shri. A.T.Krishnamoorthy, Addl.CIT प्रत्यथी की ओर से/Respondent by सुनवाई की तारीख/Date of Hearing : 05.03.2026 घोषणा की तारीख/Date of Pronouncement : 05.05.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee against the order dated 28.07.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the penalty order dated 19.08.2024 passed u/s.270A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2019-20.

:-2-: ITA. No:2415 /Chny/2025 2. Brief facts of the case are that the assessee is an individual and for the impugned Assessment Year 2019-20, the assessee filed his return of income on 31.10.2019 declaring a total income of Rs.22,66,940/-. Thereafter, notice u/s.148 of the Act was issued and the assessee filed a return in response to the same, wherein a sum of Rs.37,95,350/- was admitted as income. Subsequently, an assessment order came to be passed u/s.147 read with section 144B of the Act on 26.02.2024 accepting the return filed by the assessee in response to notice u/s.148 of the Act. Thereafter, penalty proceedings were initiated u/s.270A of the Act. The allegation of the Assessing Officer was that there was an ‘under reporting of income’ in consequence of misreporting to the tune of Rs.15,28,406/-. 3. During the course of the penalty proceedings, the Assessing Officer issued various notices on the assessee who responded to the same. The assessee furnished case laws in support of his case and also submitted that he is in process of getting immunity for the penalty. He further requested the Assessing Officer to clarify the “part of Section 270A for which the penalty initiated is sought for”. The Assessing Officer, after perusing the submission of the assessee, stated that the penalty is initiated for under reporting of income in consequence of misreporting and the same is specified in the assessment order as well as in show-cause notice. Thereafter, the Assessing Officer passed the penalty order u/s.270A on 19.08.2024, imposing a penalty of Rs.9,53,722/- while holding that the assessee failed to substantiate and explain the ‘under- reporting of income’ in consequence to misreporting. The Assessing Officer held that the assessee under reported the income to the tune of Rs.15,28,406/- and the tax payable on the same is Rs.4,76,861/- and the penalty levied at 200% on the tax payable which is Rs.9,53,722/- and passed a penalty order dated 19.08.2024 u/s.270A of the Act. 4. Aggrieved by the penalty order of the Assessing Officer, the assessee filed an appeal before the ld.CIT(A) on 24.08.2024. In the appellate proceedings, the assessee has filed detailed responses wherein the assessee

:-3-: ITA. No:2415 /Chny/2025 submitted that the return filed in response to notice u/s.148 of the Act was accepted in the assessment order dated 26.02.2019 and hence, there is no under-reporting in consequence of misreporting of income. It was further submitted that the assessee was under bona-fide belief that sale of inherited lands is not required to be admitted, although, the sale was disclosed in the return on 31.10.2019, under the schedules. Further, the assessee also pointed that penalty was levied by the Assessment Unit but as per Section 272(2A) of the Act and CBDT Notification S.O.118(E) [No.3/2021 F.No.3714] dated 12.01.2021, the penalty should only be levied by the National Faceless Penalty Unit as they are empowered to do so under the Faceless Scheme. It was also contended that there is no record for prior approval from JCIT as mandated u/s.274(2) of the Act. In support of his submission, the assessee relied on the following case: 1. CIT V. Shahabad Co-operative Sugar Mills Ltd. (2010) 322 ITR 230 (P&H). 2. National Faceless Assessment Centre, Delhi V. M/s. JMC Projects India Ltd. [ITA No.2029/Ahd/2023].

:-4-: ITA. No:2415 /Chny/2025 approval from JCIT, the ld.CIT(A) stated that faceless system has inbuilt provision for such approval. While holding so, the ld.CIT(A) confirmed the penalty-imposed u/s.270A of the Act. 6. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The ld.AR for assessee reiterated the submissions made before the lower authorities and placed further reliance on the following cases for penalty cannot be levied, if return filed in response to notice u/s.148 of the Act is accepted: 1. Archana Achyut Sail V. ITO [ITA No.5277&5278/Mum/2024]. 2. Meera Anirudha Mirgunde V. ITO [ITA No.550/Pun/2023]. 3. CIT V. Hiralal Doshi [2016] 383 ITR 19 (Bom). 4. M/s.R.G Sundar & Co. V. DIT [ ITA No.1599&1600/Chny/2023]. 7. For non-mentioning of specific clause of misreporting in show-cause notice as well as in the penalty order, thereby making the penalty order invalid, the ld.AR relied on the following decisions of the Chennai Tribunal: 1. DCIT V. E.V.Kumaran [2025] 180 taxmann.com 11 (Chennai -Trib.). 2. Jayasakthi Knit Wear V. ITO [ITA No.1758/Chny/2024]. 8. Per contra, the ld.DR argued that the assessee’s claim of specifying the particular limb under which the penalty imposed is unacceptable since the penalty order as well as the show-cause notice has already stated that the penalty is initiated for under-reporting of income in consequence of misreporting of income. Further, it was also argued that though the income returned u/s.148 of the Act was accepted in the assessment order passed u/s.147 of the Act, the income declared by the assessee in the return filed u/s.148 of the Act was higher than the income returned by him in his original return of income and the higher income was offered by the assessee in the return u/s.148 of the Act, only because the Department detected the same. It was thus prayed that the appeal be dismissed and penalty order be upheld.

:-5-: ITA. No:2415 /Chny/2025 9. We have heard rival submission, perused the materials on record and gone through the orders of the authorities along with judicial precedents relied on. We note that the show-cause notice has not specified the particular limb under sub section 9 of Section 270A of the Act under which the alleged “misreporting of income” falls. 10. Section 270A of the Act draws a clear distinction between “under- reporting” and “misreporting” of income, with sub-section (9) explicitly enumerating specific instances constituting misreporting from clauses (a) to (f). The applicability of the higher penalty is contingent upon clearly identifying and invoking one of those specific clauses. In the present case, neither the show- cause notice nor the penalty order spells out the exact clause of Section 270A(9) of the Act allegedly attracted. This omission deprives the assessee of a fair opportunity to respond to the precise charge against him and renders the penalty proceedings legally unsustainable. 11. It is a settled principle that penalty provisions must be construed strictly and the charge against the assessee should be unambiguous. Failure to indicate the specific limb of misreporting vitiates the very foundation of the penalty. 12. This Tribunal in the case of DCIT V. E.V.Kumaran [2025] 180 taxmann.com 11 (Chennai -Trib.) in Para 70 to Para 74 has discussed various precedents which has categorically held that penalty u/s.270A of the Act is not sustainable if the specific limb under sub-section 9 of section 270A of the Act for which the penalty sought to be levied is not disclosed. The relevant portions are as follows: “70. In the present case, the impugned notice does not delineate which particular limb or clause of section 270A(9) of the Act is attracted. Sub-section (9) of section 270A of the Act enumerates various instances that amount to "misreporting of income," such as misrepresentation or suppression of facts, failure to record investments, recording of false entries, or claim of expenditure not substantiated, etc. Each of these instances constitutes a distinct and independent ground, carrying serious penal consequences. It was incumbent upon the AO to state in clear and unambiguous terms which of these specific defaults was being attributed to the assessee, along with the manner in which the ingredients of the alleged

:-6-: ITA. No:2415 /Chny/2025 default stood satisfied in the facts of the case. The failure to so specify renders the notice fundamentally defective. It deprives the assessee of a fair and reasonable opportunity to defend himself, thereby vitiating the entire penalty proceedings. The requirement of issuing a valid and precise notice is not a mere procedural formality but goes to the very root of jurisdiction for levy of penalty. A defective notice cannot confer valid jurisdiction upon the AO to impose penalty. 71. We find that the Hon'ble Delhi High Court in the case of Prem Brothers Infrastructure LLP v. National Faceless Assessment Centre [2022] 142 taxmann.com 38/288 Taxman 768 (Delhi)/W.P.(C) 7092/2022 dated 31.05.2022 has observed as under:- "8. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of subsection (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 9. Consequently, the impugned penalty order dated 28th March, 2022 passed by Respondent No.1 under Section 270A of the Act is quashed and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner." 72. Further, the Hon'ble Delhi High Court in Schneider Electric South East Asia (HQ) Pte. Ltd. v. ACIT [2022] 145 taxmann.com 665 (Delhi)/W.P.(C) No. 5111/2022 vide judgment dated 28.03.2022 observed as under:- "6. Having perused the impugned order dated 9th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting. 9. This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast- track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation.

:-7-: ITA. No:2415 /Chny/2025 10. Consequently, the impugned order dated 09th March, 2022 passed by Respondent No.1 under Section 270AA (4) of the Act is set aside and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner." 73. We find that the similar issue had come up for consideration before the co- ordinate bench of this Tribunal in Prakashchand Jain v. Dy. CIT [IT Appeal No.68/Chny/2024, dated 07.03.2025], wherein following the another decision of the co-ordinate bench of this Tribunal in Enrica Enterprises (P.) Ltd. v. Dy. CIT [2024] 163 taxmann.com 105 (Chennai-Trib.)/ITA Nos. 1166 & 1167/Chny/2023 dated 06.06.2024, it was held as under:- "9. According to us, the assessee should be informed in the show- cause notice with certainty and accuracy of the exact nature of the fault alleged against him. In this case, it has been noted that the impugned notice issued by the Assessing Officer is silent about which limb/clause of subsection (9) of section 270A of the Act has been attracted in the facts of the case so as to deserve levy of penalty, and how the ingredients of subsection (9) of section 270A are satisfied. Therefore, the show-cause notice proposing penalty is found to be vague and does not meet the requirement of law to legally impose penalty. Consequently, the levy of penalty is fragile in the eyes of law and is held to be ab initio bad in law." 74. Respectfully following the precedent laid down by the Hon'ble Delhi High Court in Prem Brothers Infrastructure LLP (supra) and Schneider Electric South East Asia (HQ) PTE Ltd. (supra), as well as the coordinate bench decisions of this Tribunal in Prakashchand Jain (supra) and Enrica Enterprises (P.) Ltd. (supra), we are of the considered view that the show cause notice dated 15.09.2022 issued by the AO u/s.274 r.w.s 270A of the Act, is ex facie vague and suffers from a fundamental infirmity in law inasmuch as it fails to clearly and specifically delineate the precise charge for which penalty proceedings were initiated. A notice which does not indicate the specific limb or ground under which penalty is proposed to be levied is not only violative of the principles of natural justice but also renders the entire penalty proceedings void ab initio. In the absence of such specificity, the assessee is deprived of an effective opportunity to rebut the charge, thereby vitiating the proceedings. Consequently, the said notice cannot be sustained in law and is hereby quashed. As a corollary, the penalty orders passed by the AO u/s.270A of the Act for the AYs 2017-18 to 2020-21, being consequential in nature, are unsustainable in the eyes of law and are also liable to be set aside. We further note that the CIT(A), having appreciated the aforesaid legal position, has rightly deleted the penalty levied by the AO u/s.270A of the Act for the impugned assessment years. We find no error, infirmity, or perversity in the order so passed by the CIT(A). It is further observed that the omission on the part of the Revenue to raise any specific grounds of appeal assailing the order of the CIT(A) in deleting the penalty on account of defective notices renders the Revenue's entire appeal infructuous. Accordingly, we see no reason to interfere with the order of the CIT(A). In the result, the grounds of appeal raised by the Revenue for the AYs 2017-18 to 2020-21 are devoid of merit and are dismissed. Consequently, all the four appeals of the Revenue in ITA Nos.1651 to 1654/Chny/2025 stands dismissed.” 13. In the present facts and circumstances of the case and by respectfully following the above decision, we hold that the penalty imposed u/s.270A of the

:-8-: ITA. No:2415 /Chny/2025 Act is liable to be deleted on this legal ground alone. The other grounds are rendered academic in nature and hence not being adjudicated upon. Hence, the penalty of Rs.9,53,722/- levied by the Assessing Officer and confirmed by the ld.CIT(A) stands deleted. 14. In this result, the appeal of the assessee is allowed.

Order pronounced in the court on 05th May, 2026 at Chennai.

Sd/- Sd/- (जॉजज जॉजज के) (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) (GEORGE GEORGE K) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT

चेन्नई/Chennai, ददनांक/Dated, the 05th May, 2026. Devadas आदेश की प्रतितलतप अग्रेतिि/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. तिभागीय प्रतितनति/DR 5. गार्ज फाईल/GF DEVADAS Digitally signed by DEVADAS GOPALANA GOPALANACHARY Date: 2026.05.11 CHARY 14:49:23 +05'30'