RUSSEL PREMNATH RAJAPPA,CHENNAI vs. ITO, WARD-92,, CHENNAI

आयकर अपीलीय अधिकरण ‘बी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI माननीय श्री जॉजज जॉजज के., उपाध्यक्ष एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE GEORGE GEORGE K., VICE PRESIDENT AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1388 & SA-92/Chny/2026 ननिाजरण वर्ज /Assessment Years: 2018-19 Russel Premnath Rajappa v. Income Tax Officer, No.16/10, Ramanujan Street, Ward-92, Choolaimedu High Road, Chennai. Near Moor Market, Chennai-600 094. [PAN: AGXPR1041D] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Ms. Gayathri, Advocate, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr. Beesam Narasing Rao, JCIT Ld. DR सुनवाईकीतारीख/Date of Hearing : 24.06.2026 घोषणाकीतारीख /Date of Pronouncement : 02.07.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (A) / NFAC (hereinafter referred as the ‘Ld.CIT(A)’), dated 13.01.2026 for the assessment year (hereinafter referred as the ‘AY’) 2018-19.

GROUNDS OF APPEAL 1. The impugned order is contrary to law, facts and circumstances of the case and the judicial discipline is not followed and the impugned order is passed without application of mind. 2. The Hon'ble Appellate Authority ought to have taken into the consideration the fact that the assessment order does not deals with the finding in respect to misreporting of the income to invoke penalty under Section 270A (8) 3. The Hon'ble Appellate authority ought to have taken into the consideration that the Appellant voluntary disclosed Rs. 4,78,407/- as deemed income at the time of reassessment and further paid additional tax of Rs. Rs. 2,20,501/- as determined by the Respondent within the due date.

ITA No.1388 & SA-92/Chny/2026 (2018-19) Russel Premnath Rajappa 4. It is humbly submitted that mere non- challenging of the assessment order cannot be the sole reason to impose the penalty. 5. It is humbly submitted that deemed income is arrived based on the estimate, therefore the question of misreporting or under reporting of income does not arise and therefore penalty cannot be imposed for variation in deemed income. 6. It is humbly submitted that the provision of Section 270A (6) of the Act stipulates that the amount of under-reported income on the basis of addition made in conformity with Arm's Length Price determined by the TPO, does not qualify for imposition of penalty under Section 270A of the Act. It is humbly submitted the same principle is applicable to the addition added by the Respondent based on the stamp duty valuation or valuation by DVO. In Narayan Bhai Shiva Bhai Patel v. Income-tax Officer [2025] 178 taxmann.com 576 (Ahmedabad - Trib.) it was held as under: "It is found that the assessee had disclosed all the material facts and explanation as to why the purchase price of the property was less than the stamp duty value was also given by the assessee. However, the Assessing Officer had held that the explanation of the assessee was not bona-fide as no supporting evidence for the explanation was brought on record. The addition made under Section 56(2)(x) of the Act is not absolute addition, as the assessee has an option to dispute the stamp value of the property on the grounds mentioned in Section 50C of the Act and, thereafter, the Assessing Officer is required to refer the matter to the Valuation Officer. Further, if the value as determined by the Valuation Officer is within 20% of the purchase consideration, then no addition is required to be made under Section 56(2) (x) of the Act. Therefore, no penalty u/s 270A can be automatically levied for all the additions made u/s 56(2) (x) of the Act. It is also relevant to consider that the value determined by the DVO is also an estimate, based on the sale consideration of other properties in the same vicinity or on the basis of other yardsticks as prescribed. Therefore, any addition made under Section 56(2) (x) of the Act on the basis of difference in the stamp duty value and the purchase price or between the value determined by the DVO and the purchase consideration, cannot be considered as underreporting of income by the assessee so as to invoke the provisions of Section 2704 of the Act. The provision of Section 2704(6) (d) of the Act stipulates that the amount of under-reported income on the basis of addition made in conformity with Arm's Length Price determined by the TPΟ, does not qualify for imposition of penalty under Section 270A of the Act. Following the same rationale, the amount of under-reported income determined on the basis of the report of the DVO also cannot qualify for imposition of penalty under Section270A of the Act. Merely because the assessee didn't opt to refer the matter to the Valuation Officer, it doesn't make a case fit for imposition of penalty w/s 2704 of the Act. In view of the above facts and discussions, we are of the considered view that no penalty under Section 270A was leviable in this case as there was no underreporting or misreporting of income by the assessee. Therefore, the penalty imposed by the Assessing Officer under Section 270A of the Act is quashed." 7. It is humbly submitted that the impugned order failed to consider the Appellant's submission that the Appellant submits that in order to invoke powers under section 270A of the Act to impose penalty, the assessing officer is obligated to specify the exact limb contemplated in section 270A (2) of the Act that to forms the basis to conclude that there is an under-reporting of income. In the present case, neither in the show cause notice issued under section 270A read with section 274 nor in the assessment order, the assessing officer had indicated the

ITA No.1388 & SA-92/Chny/2026 (2018-19) Russel Premnath Rajappa exact limb envisaged under section 270A of the Act. The failure to indicate the specific limb would vitiate the penalty proceedings under section 270A read with section 270A (9) of the Act. To support the aforementioned submission, reliance is placed on the decision of the Hon'ble Pune Bench of Income Tax Appellate Tribunal in the case Kishore Digambar Patil vs ITO in 149 taxmann.com 502, wherein the Hon'ble Tribunal held as under: "In the light of afore stated reasoning and discussion, we observed that, the notice initiating the penal proceedings is silent on the circumstance or incidence triggering the very initiation in this case? Further the order of penalty did neither mention the circumstance or incidence nor make a mention of alleged action in reaching the final imposition. In the event respectfully applying similar analogy as laid in a fore stated judicial precedents to the case in hand, we find force in the argument of the appellant that, the failure on the part of lower tax authorities to identify and communicate the specific circumstance or incidence from clause (a) to (g) of s/s (2) of section 270A by virtue of which the income of the appellant held as under-reported and further failure on the part of lower tax authorities to showcase which of the specific action of the appellant from clause (a) to (f) of s/s (9) was determinant before imposing the impugned penalty u/s 270A of the Act has rendered the entire proceedings invalid and thus untenable in the eyes of law. Consequently, the penalty-imposed u/s 2704 of the Act being had in law deserves to be quashed, ergo we order accordingly" 7. It is humbly submitted that the Appellate Authority have held that the above case law is not applicable to the present case and have held erroneously held that applicability of section 270A (9) have been clearly brought out in the penalty order which is contrary to the facts that there is no findings in respect to which limb section 270A (9) of the Act the present case falls under. 8. It is humbly submitted that Mak Data Pvt. Ltd. v. CIT [2013] 358 ITR 593 (SC) and Union of India v. Dharmendra Textiles Processors [2008] 306 ITR 277 (SC) is not applicable to the present case as here the penalty is invoked for variation in the deemed income and as deemed income is only an estimate the question of misreporting or under reporting of the income does not arise at all 9. The Appellate authority failed to consider the fact that error by the Appellant was inadvertent error only 10. The Appellant craves leave to file additional grounds at the time of hearing. PRAYER In the light of the grounds stated above and such other grounds that may be adduced before or during the hearing of the Appeal, it is prayed that this Hon'ble Tribunal may be pleased set aside the impugned order No DIN & Order No: ITBA/NFAC/S/250/2025-26/1084724761(1) dated 13.01.2026 and pass such other orders as this Hon'ble Tribunal deems fit in proper in the facts and circumstances of the case and thus render justice.

ITA No.1388 & SA-92/Chny/2026 (2018-19) Russel Premnath Rajappa an information that the assessee had deemed income of Rs. 8, 78, 407/- u/s. 56(2)(iv)(b) of the Act on account of purchase of immovable property and also made financial transactions related to sale of equity shares amounting to Rs. 18, 842/-. In the backdrop of the above, a notice u/s. 148 of the Act was issued to the assessee vide dated 06.04.2022. In response to the same the assessee filed return declaring income of Rs. 8, 80, 837/- under the head salary and Rs. 4, 78, 407/- under the head income from other sources. Ultimately, the case of the assessee was assessed at Rs. 16, 05, 098/- i.e. after making addition u/s. 56(2) (x) of the Act amounting to Rs. 4 lakhs. Penalty proceedings u/s. 270A are also initiated separately for under reporting of the income in consequence to misreporting of income. Here, it is pertinent to mention that the assessee has not preferred any appeal against the assessment order passed u/s. 147 r.w.s. 144B of the Act.

ITA No.1388 & SA-92/Chny/2026 (2018-19) Russel Premnath Rajappa amount of Rs. 4, 78, 444/-, so there is no question of having any relief as far as penalty levied on Rs. 4, 78, 444/-.

“Section 270A clearly deal with deeming income only in the case of additions made in section 115JB i.e. MAT provisions. As far as the present appeal is concerned, additions were being made by virtue of section 43CA r.w.s. 56(2) (x) i.e. deeming provisions. In case of applicability of deeming provisions there is no option provided in the statute except to make adjustment as per the figures derived from deeming sections vis-a-vis figures disclosed by assessee. In that situation, case of the assessee does not fall in the category of under reporting of the income. In the cases where deeming provisions applied for addition of income neither concealment of income nor under reporting of income can be established against the assessee as there is no active participation of the assessee can be established in doing so.[Para 4] Penalty was initiated and imposed under section 270A for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the revenue have failed to specify the limb "under-reporting" or "misreporting" of income, under which the penalty proceedings had been initiated. It is also found that there is not even a whisper as to which limb of section 270A 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 revenue in the assessment order, for imposition of penalty makes the impugned order manifestly arbitrary. It is opined that the entire edifice of the assessment order framed by Assessing Officer was actually voluntary acceptance by assessee 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.[Para 5] In view of above discussion, it is viewed that no penalty can be imposed in this case, as there is no misreporting by assessee for the purposes of section 270A.”

ITA No.1388 & SA-92/Chny/2026 (2018-19) Russel Premnath Rajappa 7. In the result, the appeal of the assessee is partly allowed in view of our observations and directions above and the stay application of the assessee is dismissed as substantial relief has already been provided in the main appeal. Order pronounced on the 2nd day of July, 2026, in Chennai.

Sd/- Sd/- (जॉजज जॉजज के.) (गगन गोयल ) (GAGAN GOYAL) (GEORGE GEORGE K.) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT चेन्नई/Chennai, ददनाांक/Dated: 2nd July, 2026. KB आदेश की प्रततललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रतततनधि/DR 5. गार्ड फाईल/GF Digitally signed K BABU by K BABU Date: 2026.07.06 14:24:41 +05'30'