SANTANU MAJUMDAR,BANGALORE vs. DEPUTY COMMISONER OF INCOME TAX - CIRCLE4(1)(1), BANGALORE

The brief facts of the case are that the assessee is an individual and filed his return of income. Subsequently, the case was selected for scrutiny through CASS to verify the deduction claimed by the assessee under Chapter VIA. The assessee also furnished the details sought for by the AO. The AO after going through the said documents had not accepted the rent paid since the assessee had not deducted the TDS. After giving deduction u/s. 80E and house building rent, the AO had finally arrived the income at Rs. 35,88,051/- and assessed the same. In the said assessment order, the AO had stated that penalty proceedings u/s. 270A would be initiated separately for misreporting of income. Subsequently, the AO had issued a notice for imposing the penalty u/s. 270A of the Act. The assessee submitted a reply stating that the assessee had opted for immunity u/s. 270AA and also filed form 68. The AO rejected the said application on the ground that the penalty has been initiated for misreporting of income and not for the underreporting of income. Thereafter, another show cause notice was issued to the assessee on the ground that the assessee had underreported the income which is in consequence of misreporting of income. The assessee filed his reply but the AO not satisfied with the reply and confirmed the penalty u/s. 270A(8) r.w.s. 270A(9) of the Act. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had confirmed the penalty levied u/s. 270A of the Act.

As against the said order, the assessee is in appeal before this Tribunal.

At the time of hearing, the Ld.AR submitted that the AO had not mentioned under which limb of section 270A of the Act, the penalty has been levied and also submitted that the ingredients of section 270A(9) are not attracted. The Ld.AR further submitted that without mentioning the correct limb in the show cause notice and without mentioning the limb in the penalty order, the order passed by the AO is bad in law and against the various orders of this Tribunal and prayed to delete the said penalty.

The Ld.DR submitted that the authorities below had correctly invoked the penalty proceedings since the assessee had underreported the income in consequence of the misreporting of income and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

We have perused the assessment order dated 29/01/2024 in which the AO had observed that penalty proceedings u/s. 270A would be initiated separately for misreporting of income. While issuing notice u/s. 270A, the AO had stated that why penalty u/s. 270A should not be imposed for under reporting of income which is in consequence of misreporting of income. Initially in the assessment order, the AO had observed that it is a misreporting of income whereas in the penalty notice, he had stated that underreporting of income is in consequence of misreporting of income. Finally, the AO had levied the penalty u/s. 270A(8) r.w.s. 270A(9) of the Act at 200% of the tax difference.

In the assessment order as well as in the penalty notice and in the penalty order, the AO had not specifically mentioned under which limb, the underreporting has been done by the assessee which is in consequence of misreporting of income. The non-mentioning of the limb in the penalty proceedings are held to be invalid by the several orders of the Coordinate Bench of this Tribunal. In ITA No. 20/Bang/2026 dated 20/07/2026 in the case of Sermadevi Yegnaswamy Ramakrishnan vs. ITO, this Tribunal had held that the non-mentioning of the limb under which the penalty has been proposed and imposed u/s. 270A of the Act is bad in law and the order imposing the said penalty has been set aside. The Revenue had not brought before us any decision of the higher forums on this issue.

In view of the above said facts, we are setting aside the order of the AO as well as the Ld.CIT(A) and deleted the penalty levied u/s. 270A of the Act.

In the result, the appeal filed by the assessee is allowed.