ALL INDIA FOOD SUPPLY PRIVATE LIMITED,KOLKATA vs. DEPUTY CIT, CIRCLE 7(1), KOLKATA

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 02.02.2026 for the AY 2018-19.

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19 The assessee had filed the return of income on 27.09.2018 for AY 2018-19 admitting total income of ₹44,45,540/-. The case of the assessee was selected for regular scrutiny and the AO completed the assessment inter alia making disallowance on account of interest, estimate of other expenses, donation & subscription amounting to ₹68,80,977/-, for which penalty was initiated u/s 270A of the Act for under-reporting of income. It is noticed that the AO had issued show cause notice dated 16.04.2021 u/s 274 read with 270A of the Act, wherein the penalty was proposed to be levied for alleged under-reported income. The copy of the notice is extracted below:

Intentionally left blank

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19 5. In the appellate proceedings, the Ld. CIT(A) observed that the additions made by the AO on account of interest disallowance & other expenses had been considered & deleted in the quantum appeal and therefore, the penalty imposed on account of these disallowances was deleted. Since, the addition on account of donation expenses was sustained in the quantum appeal, the penalty of ₹8,93,981/- imposed qua the donation amount of ₹13,51,709/- was retained by the Ld. CIT(A).

i. Prem Brothers Infrastructure LLP vs. NFAC (288 Taxmam 768) (Delhi HC)

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19 ii. Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT [W.P.(C) 5111/2022, dated 28-3-2022 (Delhi HC)

iii. Jaina Marketing & Associates Vs DCIT (162 taxmann.com 439) (Del Trib)

iv. Saltwater Studio LLP vs. NFAC, Delhi (157 taxmann.com 749) (Mum Trib.)

7.1. The Ld.AR further pointed out that the failure to add back the donation of ₹13,51,709/- in the computation of income was an inadvertent and bona-fide error. The assessee had not made any claim on the basis of any false evidence and showed that the same was disclosed on the face of the books of accounts. The assessee thus submitted there is no ill-motive for such omission and thus even on merits, the levy of penalty was unjustified. 8. Per contra, the Ld. DR for the Revenue supported the order of the lower authorities. He submitted that the assessee had participated in the penalty proceedings and therefore cannot plead technicalities before the Tribunal. According to him, only because the notice issued by the AO stated ‘under-reporting of income’ and the penalty was levied for ‘mis-reporting of income’ cannot render the notice to be defective.

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19 penalty was to be initiated for ‘under-reporting of income’. Even the notice issued u/s 274 of the Act dated 16.04.2021 refers to the word ‘under-reporting of income’. Neither in the notice nor in the penalty order has the AO mentioned the specific provisions of clauses (a) to (g) of sub-section (2) or clauses (a) to (f) of sub-section (9) of Section 270A of the Act and, as to how the case of the assessee falls within any of the specified instances mentioned therein. As per the notice, apparently the penalty was intended for ‘under-reported income’ but the order was passed for ‘mis-reporting of income’. Various judicial forums have repeatedly held that defective penalty notice issued by the AO without mentioning the proper limbs and details will be fatal to the entire penalty proceedings. We find that this issue stands squarely covered in favour of the assessee by the decision of ITAT Delhi in the case of Jaina Marketing & Associates vs DCIT (supra) wherein on similar set of facts, the notice issued u/s 274 of the Act was held to be invalid and therefore the penalty levied u/s 270A of the Act was cancelled, by holding as under:

“15. In the instant case, on perusal of the penalty notice placed on record dated 02/06/2021, it is evident that the Ld. AO had show caused the assessee as to why the assessee should not be imposed with penalty for 'under reporting of income'. The assessee had filed its submissions stating that he had not 'under reported its income'. We are unable to comprehend ourselves to accept to the argument of the Ld. DR that assessee did not make any submissions with regard to 'mis reporting of income'. The assessee could be expected to give reply only in respect of show cause notice that is put to him. Why at all the assessee should infer/ assume/presume that the Ld. AO having recorded satisfaction in the quantum assessment order that offence of both 'under reporting' and 'mis reporting' is committed by the assessee and accordingly the penalty would be levied on the assessee for both in terms of section 270A(9) of the Act?

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19 16. It is well settled that penalty proceedings and assessment proceedings are separate and distinct. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Anantharam Veera Singhaiah & Co. v. CIT [1980] 123 ITR 457 (SC) wherein it was held that findings recorded in assessment proceedings cannot be taken as conclusive for penalty proceedings. Even the provisions of section 270A(6) of the Act provides for granting immunity from penalty if the case falls in "under reporting of income". Moreover different rates of penalty are prescribed for 'under reporting of income' alone and for 'under reporting' in consequence of 'misreporting of income'. Hence it is all the more essential to mention in the show cause notice itself as to which of the offence is committed by the assessee for which explanations are being sought for by the Id. AO. There is no whisper at all in the notice issued u/s 270A read with section 274 of the Act about "misreporting of income". In-fact two notices were issued by the Id. AO and in both the notices, the A.O. had only directed the assessee to reply with regard to 'under reporting of income'. But we find that the penalty had been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act for which show cause notice was never issued to the assessee. The ratio laid down in the aforesaid Full Bench decision of Hon'ble Bombay High Court, the decision of Hon'ble Jurisdictional High Court in the case of Sahara India Life Insurance (supra) and other decision reffered supra squarely applies to the facts of the instant case before us. Hence we direct the Ld. AO to delete the penalty levied u/s 270A of the Act for the Assessment Year 2017-18. Accordingly, we allow the Appeal of the Assessee on this technical ground and leave the grounds raised on levy of penalty on merits left open as adjudication of the same becomes academic in nature.” 9.1. Following the above decision (supra), we hold that the notice issued u/s 270A was defective and suffered from fundamental infirmity and thus the penalty levied on the addition of sustained quantum addition of ₹13,51,709/- cannot survive. And therefore, it is directed to be deleted.

Order pronounced on 24.08.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 24.08.2026 Sudip Sarkar, Sr.PS Page | 7

ITA No. 1198/KOL/2026 All India Food Supply Private Limited; A.Y. 2018-19

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

(Manish Bhoi) Dy. Registrar Income Tax Appellate Tribunal, Kolkata