PARAKARMSINH LAXMANSINH VAGHELA,RAJKOT vs. ITO WD 1, MORBI, MORBI

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ITA 152/RJT/2026Status: DisposedITAT Rajkot12 May 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that there was no under-reporting of income as the assessee genuinely believed that the sale of agricultural land was not subject to capital gains tax. The sale consideration was reported in Form 26AS, and taxes were withheld, indicating no mala fide intention.

What were the facts?

The assessee sold an immovable property and received sale consideration. The assessee did not file an income tax return for the relevant assessment year. The case was reopened, and the assessee filed a return declaring income, which was accepted without additions. Subsequently, a penalty was levied for under-reporting income.

What were the issues?

Whether the non-filing of a return and subsequent filing in response to a notice constitutes under-reporting of income, and if the assessee is eligible for immunity from penalty due to a bona fide belief.

Which sections of the Income-tax Act were involved?

Section 139,Section 147,Section 148,Section 270A,Section 270AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri M. N. Manvar, Ld. AR
For Respondent: Shri Gopi Nath Chaubey, Ld. Sr. DR
Hearing: 20/02/2026Pronounced: 12/05/2026

आदेश / ORDER Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 30/01/2026, which in turn arises out of penalty order passed by the Assessing Officer dated 27/09/2022 u/s 270A of the Income Tax Act, 1961. 2. Grounds of appeal raised by the assessee are as follows: “1. CIT(A)-NFAC erred in law and facts for confirming alleged finding of Assessing Officer that non-filing return of income u/s 139(1) or 139(4) of the Act but filing of return of income in response to notice u/s 148 of the Act is under reporting of income due to misreporting of income u/s 270A(9) of the Act. assessing officer

ITA No. 152/Rjt/2026 [ A.Y. 2017-18 ] Parakarmsinh Laxmansinh Vaghela vs. ITO failed to discharge the onus to prove on record how the facts of the assessee are covered under clause (a) to (f) of section 270A(9) of the Act, more particularly when the facts are covered u/s 270A(3)(i)(b)(B) of the Act to determine under reporting of income only. 2. CIT(A)-NFAC and Assessing Officer erred in law and facts in appreciating the fact that the returned income is the assessed total income, the assessee has paid tax and interest as per assessed income and has not filed appeal u/s 246A of the Act before CIT(A) against the assessment order u/s 143(3) r.w.s. 147 of the Act and hence, the assessee is covered u/s 270AA(1) of the Act and eligible to file application for immunity from imposition of penalty u/s 270AA(2) of the Act in Form-68. 3. CIT(A)-NFAC erred in law and facts in confirming the rejection by Assessing Officer of application in Form-68 u/s 270AA(1) of the act filed on 28/03/2022 through penalty order u/s 270A of the Act dtd. 27/09/2022 without providing an opportunity of being heard and after the period of one month from the end of the month in which application is made as stipulated in section 270AA(4) of the Act. 4. The appellant craves leave to add, alter, modify or substitute any ground of appeal at the time of hearing.” 3. Succinctly, the factual panorama of the case is that assessee before me is an Individual. As per the information received by the department, the assessee along with the other co -owners sold an immovable property, that is, land situated at Survey No. 472, Moje: Garodiya, Sanand, Ahmedabad to Shri Shekharbhai Govindbhai Patel for a consideration of Rs. 1,19,00,000/-, vide registration deed No. 8119/2016, executed on 24/10/2016. As per the sale deed, the assessee has received his share of sale consideration of Rs. 4,95,835/-. Further, it was also noticed by the assessing officer that an amount of Rs. 8,00,000/-, was also transferred from the account of Shri Jayendrasinh Vaghela to the account of Shri Parakramsinh L. Vaghela, on 15/11/2016. On perusal and analysis of information available on record, it was noticed that the assessee has entered into financial transactions exceeding the taxable limits during the financial year 2016-17 relevant to assessment year 2017-18. However, the assessee had not filed return of income for assessment year (A.Y.) 2017-18. Therefore, the case of the assessee was reopened u/s 147 of the Income-tax Act, 1961, after recording reasons in writing and with the prior approval of competent authority and notice u/s 148 of

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ITA No. 152/Rjt/2026 [ A.Y. 2017-18 ] Parakarmsinh Laxmansinh Vaghela vs. ITO the Act, was issued on 31.03.2021. In compliance to the notice u/s 148 of the I.T. Act, the assessee had filed his return of income on 31-12-2021, declaring total income of Rs.4,02,820/-, in which the assessee has shown income from capital gain and income from other sources. During the course of assessment proceedings, notices u/s 142(1) of the Act, were issued to the assessee, calling for requisite details, and the assessee submitted the details called for. Thereafter, the assessment proceedings were completed u/s 143(3) r.w.s 147 of the Act, on 24/03/2022, accepting the total income declared in return filed u/s 148 at Rs.4,02,820/-. The assessee had not filed his return of income as required u/s 139(1) or within the extended time limit prescribed u/s139(4) of the Act. However, after notice u/s 148 of the I.T. Act, was issued the assessee, the assessee filed a return and offered income of Rs. 4,02,820/-. Thus, it is conclusively proved that income of Rs. 4,02,820/- has under reported his income. Satisfying that the assessee has under-reported its income to the tune of Rs.4,02,820/-, therefore, the penalty proceedings u/s. 270A of the Income Tax Act, 1961 for under-reporting was initiated. Accordingly, show cause notices were issued on 26/03/2022, 22/07/2022, 23/08/2022 requiring the assessee to show cause on or before 29/04/2022, 29/07/2022 and 29/08/2022 respectively why an order imposing a penalty should not be made under section 270A of the Income Tax Act, 1961.

4.

However, the assessee did not make the compliance of the notices issued by the assessing officer. The assessing officer further notice that the assessee had not preferred an appeal before the Ld. CIT(A), against the assessment order dated 24/03/2022, passed u/s.143(3) r.w.s. 147 of the Act. In view of the above, it was established that the assessee has wilfully and knowingly underreported his income to the tune of Rs. 4,02,820/-, in consequence of misreporting thereof as per the provisions of section 270A(9) of the Act and hence is liable to pay penalty as per the provisions of section 270A(8) of the Act. Therefore, the assessing officer imposed the penalty under section 270A(8) of the Act, to the tune of Rs. 52,662/-. Page 3 of 6

ITA No. 152/Rjt/2026 [ A.Y. 2017-18 ] Parakarmsinh Laxmansinh Vaghela vs. ITO 5. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has confirmed the penalty of under reporting u/s.270A of the Act. The ld.CIT(A) noticed that Section 270AA (4) prescribes the procedural requirement for passing an order accepting or rejecting the application for immunity. However, where the substantive conditions for immunity are not fulfilled, particularly due to applicability of section 270A(9), no vested right accrues to the appellant merely on account of filing Form-68.In the assessee’s case, adequate opportunity was granted during penalty proceedings through multiple show-cause notices. The rejection of immunity is not on procedural grounds but on statutory ineligibility arising from misreporting of income. Merely because the rejection is embedded in the penalty order does not vitiate the proceedings, when the reasons for rejection are clearly recorded and communicated. Therefore, Ld. CIT(A) confirmed the penalty imposed by the assessing officer.

6.

Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before this Tribunal. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted that mere non-filing of return under section 139(1) or 139(4) and subsequent filing of return in response to notice under section 148 cannot be equated with misreporting of income under section 270A(9), and the Assessing Officer failed to establish applicability of clauses (a) to (f) of section 270A(9). Since the returned income was accepted as assessed income, taxes and interest were paid, and no appeal was filed against the assessment order, the conditions of section 270AA (1) were satisfied and immunity ought to have been granted. The Ld. Counsel also stated that the application in Form-68 was rejected without a separate order and beyond the time stipulated under section 270AA (4) of the Act. Considering these facts, learned Counsel for the assessee contended Page 4 of 6

ITA No. 152/Rjt/2026 [ A.Y. 2017-18 ] Parakarmsinh Laxmansinh Vaghela vs. ITO that penalty imposed by the assessing officer may be deleted. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

7.

I have considered the submissions of both the parties and noted that actually there is no under reporting of income, as the assessee along with other Co-owners sold the ancestral agricultural land and was under genuine belief that sale of agricultural land is not a capital asset and therefore, not liable to capital gain tax. The ld. Counsel stated that assessee, also filed application u/s 270AA, in Form No. 68, on 28/03/2022 seeking immunity from penalty. As, I have noted above that the assessee, along with others sold ancestral agricultural and was under genuine belief that sale of agricultural land is not a capital asset liable to capital gain tax, more particularly when TDS u/s 194-IA is not deducted/paid by the purchasee and as other income (interest income) Rs. 52,657/- is also less than the maximum amount, which is not chargeable to tax, therefore, assessee, was under bona fide belief that he was not required to file income tax return under section 139(1) or 139(4) of the Act. Subsequently, in response to notice u/s 148 of the Act, assessee filed return of income, declaring income to the tune of Rs.4,02,820/- and paid self-assessment tax Rs. 26,331/- and interest Rs. 30,255/- aggregating Rs. 56,586/- and assessment was completed u/s. 143(3) r.w.s. 147 without any addition or variance. The ITAT Ahmedabad Bench 'A' in case of Parulben Vijaykumar Patel v/s. Income Tax Officer decided on 22/05/2024 (2024) 163 taxmann.com (Ahmedabad Tribunal) under Para 11 and 13 held as under: “11.In our view, the mere fact that there is a provision for automatic levy of penalty does not mean that penalty has to be imposed. The Supreme Court in the case of Hindustan Steel Ltd. v. Assistant Commissioner, held that penalty should not be imposed merely because it is lawful to do so. Even if a minimum penalty is prescribed, the authority will be justified in not imposing penalty where the breach is merely technical or is based upon the bona fide belief that a particular provision has been complied with. The Supreme Court stressed the importance of not levying penalty where the assessee acts with "honest and genuine belief".

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ITA No. 152/Rjt/2026 [ A.Y. 2017-18 ] Parakarmsinh Laxmansinh Vaghela vs. ITO i. Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC) (para 11), ii. CIT v. Om Prakash Mittal (2005) 143Taxman 373/273 ITR 326 (SC) (para 13) 13. The term "under-reporting" is defined in sub-Section (2) which provides seven situations wherein a person considered to have under-reported his income. Sub-Section (8) provides five cases which shall not be recorded as under-reporting of income. Section 270A(6)(a) provides that where the explanation for non-reporting or under- reporting of income is bona fide and all the facts material to the computation are disclosed, then it shall not be considered as a case of under-reporting of income.” 8. In view of the above, I am of the considered view that there is no under reporting of income in the facts of the assessee under consideration. Once the transaction is reported in Form 26AS, there is no mala fide intention for misrepresentation or suppression of facts. Once the sale consideration is reported in Form No. 26AS on the Government website and the amount of sale consideration has not been challenged / disputed by the Department and taxes has been withheld on such sale consideration by the purchaser of property under Section 194-IA of the Act, then, in my view, this is not case of misrepresentation or suppression of facts. Considering this factual position, I delete the penalty.

9.

In the result, the appeal of the assessee is allowed.

Order is pronounced in the open Court on 12/05/2026.

Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�/Accountant Member //True Copy// राजकोट/Rajkot िदनांक/ Date: 12/05/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, RAJKOT 6. Guard File By order

Sr. Private Secretary ITAT, Rajkot

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