ANSHUL SPECIALTY MOLECULES PVT LTD,MUMBAI vs. DCIT,CIRCLE 1(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.8509/Mum/2025 (Assessment Year: 2019-20) M/s.Anshul Specialty Molecules Pvt. Dy. Commissioner of Income Tax, Ltd., Flexcel Park, ‘C’ Wing, S.V. Circle 1(1)(1), Vs. Road,Nr. 24 Karat Multiplex, AayakarBhawan, Jogeshwari (W),Mumbai – 400 102 Mumbai – 400 020 PAN:AABCA4003H (Appellant) : (Respondent) Assessee by : ShriH.N. Motiwala, AR : Shri Surendra Mohan, Sr. DR Respondent by

: 02.03.2026 Date of Hearing Date of Pronouncement : 01.06.2026

O R D E R Per Kavitha Rajagopal, JM:

This appeal is filed by the assessee, challenging the order of the Learned

Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National Faceless Appeal

Centre (“NFAC” for short)passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'),

pertaining to the Assessment Year (‘A.Y.’ for short) 2019-20.

grounds:

“1. On the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi erred in confirming penalty under section 270A of the Act amounting to Rs.5,57,203/- levied by Assessment Unit, Income tax Department, particularly when neither the assessment order nor penalty order records Assessing Officer's satisfaction which is mandatory condition as per section 14A(2) before invoking the Rule 8D and therefore penalty under section 270A is bad-in-law, illegal and ab-initio-void. 2. On the facts and in the circumstances of the case, the said learned Commissioner of Income tax has also erred in confirming penalty under section 270A of the Act, amounting to Rs.5,57,203/- without appreciating that no amount has been borrowed for the purpose of investment and investment was out of appellant's own fund.

“(a) On the facts and in the circumstances of the case, the said learned Commissioner of income tax NFAC (Delhi) erred in confirming the order of the Assessing Office under section 270A of the Income tax Act 1961, particularly when in order of the Assessing Officer it has not been mentioned under which clause /part of section 270A (2) of the Act, the appellant has under reported the income.

(b)On the facts and in the circumstances of the case the said learned Commissioner of Income tax has also erred in confirming the order of the Assessing Officer, in respect of penalty undersection 270A of the Act, particularly when, none of the clauses of sub section (2) of section 270A of the Act, is applicable to the appellant."

nature, without requiring any further verification, we deem it fit to admit the same for

adjudication in terms of the proposition laid down by the Hon’ble Apex Court in the case

of National Thermal Power Corporation Vs. CIT (229 ITR 383 (SC).

and selling of pharma intermediates, flavour, fragrance and chemicals catering both

domestic and international market and is also engagedin investment activities and had filed its original return of income for the year under consideration dated 06.11.2019

declaring total income at Rs.20,30,62,240/- out of the income from profit and gains from

business and income from Short Term Capital Gain (‘STCG’ for short) & Long Term

Capital Gain (‘LTCG’ for short). The assessee’s case was selected for scrutiny and

notices u/s 143(2) & 142(1) of the Act were duly issued and served upon the assessee.

The Learned Assessing Officer (“Ld. AO” for short) observed that the assessee had

received dividend income of Rs.8,93,27,568/- and had claimed the said income as exempt

in its return of income. The Ld. AO further observed that the assessee has not bifurcated

the expenditure claimed by it as those incurred for earning exempt income and for taxable

income and hence the Ld. AO invoked the provisions of section 14A r.w.r 8D of the IT

Rules thereby disallowing 1% of the annual average of the monthly average of the

opening and closing balances of the total value of investment aggregating to

Rs.38,26,982/- and passed the assessment order dated 30.09.2021 u/s 143(3) r.w.s. 144B

of the Act thereby determining the total income at Rs.20,68,89,222/-. The Ld. AO also

initiated penalty proceeding u/s 270A of the Act for under-reporting of income. Further,

the Ld. AO passed the penalty order u/s 270A of the Act dated 21.03.2025 thereby

levying penalty amounting to Rs.5,57,203/- towards under-reporting of income.

challenging the penalty levied by the Ld. AO. The Ld. CIT(A)upheld thepenalty levied

on the ground that the assessee has failed to demonstrate that it had disclosed all relevant

facts with supporting documentary evidences.

CIT(A).

commenced his arguments first challenging the penalty notice issued by the Ld. AO on

the ground that the Ld. A.O. has failed to specify which clause of Section 270A(2) of the

Act, the penalty has been initiated and levied. The Ld. ARfurther contended that it is the

settled proposition of law where various decisions of the Hon'ble High Courts have held

that penalty notice cannot be issued without specifying the relevant limb pertaining to

under-reporting or misreporting of income. The Ld. AR relied on the order of the

Hon'ble High Court of Delhi in the case of Schneider Electric South East Asia (HQ) Pte.

Ltd. Vs. Asst. Commissioner of Income Tax and the Hon'ble High Court of Rajasthan in

the case of G. R. Infra Projects Ltd Vs. ACIT and ors.

(“Ld. DR” in short) and contended that the Assessee has raised this ground by way of

additional ground which is nothing but an afterthought where the Assessee has failed to

challenge this issue before the Ld. CIT(A). The Ld. DRextensively relied on the decision

of the Lower Authorities.

record.Before getting into the merits of the case, it is pertinent to decide the legal issues

raised by the Assessee by way of an additional grounds. Though the Ld. DR had

objected to the raising of the said ground, we deem it fit to admit the same and

adjudicate, as the issue is of legal nature which goes to the root of the validity of the penalty notice. It is observed that the Ld. A.O. issued a Notice u/s 274 r.w. Section 270A

of the Act dated 30/09/2021 for under-reporting of income and subsequent show cause

notice dated 14/12/2021 and 07/11/2024. On perusal of the said notice, it is evident that

the Ld. A.O. has failed to specify as to what was the actual charge as per Section 270A of

the Act, for which penalty was initiated where in the said provision there are various

Clauses from ‘a’ to ‘g’ which has categorized what would tantamount to under-reporting

of income. The relevant provision is reproduced herein as under for ease of reference:

“A person shall be considered to have under-reported his income, if—(a)the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143;(b)the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148;(c)the income reassessed is greater than the income assessed or reassessed immediately before such reassessment;(d)the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143;(e)the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148;(f)the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment;(g)the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.” 10. We draw support from the decisions relied upon by the Ld. AR in the case of G. R.

Infraprojects Ltd.(supra) where the Hon'ble High Court of Rajasthan has set aside the

penalty order on the ground that neither in the assessment order nor in the subsequent

show cause notice, the Ld. A.O. has specified under which part of sub-Section(9) of

Section 270A of the Act the Assessee’s case would fall under. It further held that even in the impugned order, the same was not specified. Further the same has been reiterated in

the decision of the Hon'ble High Court of Delhi in the Schneider Electric South East Asia

(HQ) Pte. Ltd.(supra), where it has been held that with mere reference to the word

misreporting without specifying which limb of the said provision, would render the

penalty order invalid and non-est. Though both these cases were on the issue of seeking

immunity from imposition of penalty u/s 270AA, the proposition laid down in these

Judgments reiterates that the A.O. is duty bound to specify which of the limb, the

Assessee case would fall under. Hence, we find justification in the contention raised by

the Ld. AR that the Ld. A.O. has failed to specify the relevant limb u/s 270A of the Act

as to which clause the Assessee’s case would fall under, failing which, we deem it fit to

hold that the impugned notice and the consequential penalty order is treated to be invalid

and therefore liable to be quashed. We therefore allowed the additional ground raised by

the Assessee.

merits requires no further adjudication and are hereby rendered academic in nature.

The following order is pronounced on 01/ 06/2026 as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (VIKRAM SINGH YADAV) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: -01.06.2026 * Kishore, Sr. P.S.

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai