PRABHAKARAN MALLI CHANDRASEKARAN,BENGALURU vs. INCOME TAX OFFICER, BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI BALAKRISHNAN S, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER ITA No.416/Bang/2026 Assessment Year : 2020-21 Shri. Prabhakaran Malli Vs. ITO, Chandasekaran, Bengaluru. 6 First Floor 3rd Cross Manjunatha Layout, Marathahalli, Bengaluru North, Bengaluru – 560 037. PAN : AIHPC 9721 D APPELLANT RESPONDENT Assessee by : Shri. D. Anand, Advocate Revenue by : Shri. Subramanian S, JCIT(DR)(ITAT), Bengaluru. Date of hearing : 30.04.2026 Date of Pronouncement : 25.05.2026 O R D E R Per Balakrishnan S, Accountant Member :

This appeal is filed by the assessee against the order of CIT(A) (NFAC, Delhi), vide DIN and Order No. ITBA/PNL/S/270A/2020-21/1031104960(1) dated 01.03.2021 for Assessment Year 2020-21, arising out of the penalty order passed under section 270A of the Income Tax Act, 1961 (hereinafter referred to as “Act”) on 31.07.2025.

ITA No.416/Bang/2026 Page 2 of 9

case was reopened under section 147 of the Act after following the due procedure. In response, assessee filed the return of income on 21.03.2024 declaring a total income of Rs.41,52,170/-. Thereafter, notices under sections 143(2) and 142(1) of the Act were issued. The learned Assessing Officer (in short “AO”) concluded the assessment under section 147 r.w.s. 144B of the Act on 28.01.2025 accepting the return of income as declared by the assessee. The learned AO thereafter initiated penalty proceedings under section 270A of the Act. A show cause notice was also issued to the assessee to show cause why penalty cannot be imposed under section 270A of the Act. The show cause notice under section 274 r.w.s. 270A of the Act was issued on 28.01.2025. Assessee furnished his response on 20.02.2025. Another show cause notice was issued on 22.05.2025 for which assessee responded on 28.05.2025. After perusing the reply furnished by the assessee, the AO proceeded to initiate penalty proceedings for “under reporting” of income and also rejected Form 68 filed by the assessee belatedly after a period of 3 months.

ITA No.416/Bang/2026 Page 3 of 9

ITA No.416/Bang/2026 Page 4 of 9

AO is not justified and void ab initio. He also pleaded that the belated filing of Form 68 cannot be fatal to the assessee as it is only directory and not mandatory since the assessee has fulfilled the substantive conditions prescribed. The learned AR relied on the decision of the Co-ordinate Bench of Chennai in the case of New Dawath Traders Vs. ITO in ITA No. 2717/Chny/2024 and the decision of the Mumbai Bench in the case of Prathamesh Vivek Khot Vs. ITO in ITA No. 2602/Mum/2023.

ITA No.416/Bang/2026 Page 5 of 9

deals with “under reporting of income as a consequence of misreporting of income”. From the above, it is clear that section 270A of the Act has 2 limbs or 2 charges for which penalty can be imposed. The first limb is for “under reporting” of income specifically referred to in sub-section 2 to 6 of section 270A of the Act. The second limb is “under reporting as a consequence of misreporting of income” and in the present case, the AO invoked 2nd limb of section 270A of the Act while issuing notice under section 274 r.w.s. 270A of the Act. However, as pointed out by learned AR, the learned AO proposed to initiate penalty proceedings by invoking the 1st limb for “under reporting” of income as mentioned in the Assessment Order. On perusal of the notice issued under section 274 r.w.s. 270A of the Act, dated 28.01.2025, we notice that the AO has stated “under reporting of income which is in consequence of misreporting thereof”. The copy of the notice is extracted below:

ITA No.416/Bang/2026 Page 6 of 9

9 of section 270A of the Act, whereas the satisfaction recorded in the assessment order was for “under reporting” of income and penalty levied u/s 270A(7) of the Act. The learned AO issued notice in a routine manner without specifying under which clause of section 270A of the Act the assessee is liable for penalty though the AO has imposed penalty under section 270A(3) r.w.s 270A(10) of the Act by passing the impugned order but no such ground was specified in the notice dated 28.01.2025. In our considered view, the notice issued under section 274 r.w.s. 270A of the Act is not valid notice for the reason that the AO did not specify the limb for which satisfaction was recorded. In the absence of proper notice which is mandatory, the AO cannot impose penalty. It is clear violation of principles of natural justice without specifying the charge under which limb the proposed penalty charge has been initiated which may vitiate entire proceedings. The assessee was not given opportunity to explain its case on specific charge. The learned AO in the penalty order in para 9.4 observed as follows:

ITA No.416/Bang/2026 Page 7 of 9

notice issued for “under reporting of income which is in consequence of misreporting thereof”. The Co-ordinate Bench in Chennai in ITA No.1890/Chny/2024 in the case of Shri Melekandy Puthalath Farook ACIT, held as follows: 9. We find that the appeal before us has similar facts. In the assessment order, Ld. AO has not specified the exact charge against the assessee but initiated penalty proceedings simplicitor. In the show-cause notice issued to the assessee u/s 274 r.w.s. 270A on 18-12-2019, Ld. AO initiated penalty on both the limbs i.e., under-reporting as well as misreporting of income. Finally, in the penalty order, Ld. AO held that it was a case of under-reporting of income in consequence of misreporting of income. Therefore, it was a fit case for levy of penalty u/s 270A(9)(a). We find that no specific charge has been framed against the assessee in the show-cause notice dated 18-12-2019. Respectfully following the aforesaid decision of coordinate bench, we would hold that in such a case, the impugned penalty would be bad-in-law. Therefore, we direct Ld. AO to delete the same. Delving into the merits has been rendered infructuous.

“5. We have heard both the parties and perused the material available on record. We note that the assessee-firm filed its RoI admitting total income at Rs.6,52,740/- on 30.10.2017. Pursuant to survey on 17.03.2017, u/s.133A of the Act, the return was selected for scrutiny and the AO made an addition of Rs.55,46,812/- and since, the assessee offered Rs.30 lakhs under PMGKY

ITA No.416/Bang/2026 Page 8 of 9

scheme, the net-assessed income was computed at Rs.25,46,812/-. Pursuant thereto, assessee paid tax & New Dawath Traders interest within the period/time given in the assessment order/demand notice and thus it is an undisputed fact that the assessee has fulfilled conditions prescribed u/s.270AA of the Act for claiming immunity from imposition of penalty u/s.270A of the Act by duly remitting the tax & interest as per the order of the assessment as well as didn't file any appeal against the assessment order dated 30.12.2019. Thus, it is noted that the assessee has fulfilled the conditions under Clause (a) & Clause (b) of sub-section (1) of section 270AA of the Act. However, the assessee didn't file before the AO the application for immunity in Form 68 as prescribed by sub-section (2) of section 270AA of the Act. In case, if the assessee had filed Form 68 within the prescribed period stated in sub- section (2), [i.e. within one month from the end of the month in which the assessment order was received by assessee] then the AO should have granted immunity from imposition of penalty u/s.270A of the Act. At the cost of repetition, it is noted that the assessee has fulfilled both the conditions for grant of immunity as stipulated under clause (a) & (b) of sub-section (1) of section 270AA of the Act, which are substantive in nature except didn't file Form 68 before AO. Therefore, in substance assessee was entitled for claiming immunity from imposition of penalty u/s.270A of the Act. In this context, it has to be kept in mind that courts are meant to do substantial justice between the parties, and that technical rules or procedure should not be given precedence over doing substantial justice. Undoubtedly, justice according to the law, doesn't merely mean technical justice, but means that law is to be administered to advance justice [refer the decision dated 30.10.2017 of the Hon'ble Supreme Court in the case of Pankaj Bhai Rameshbhai Zalavadiya v. Jethabhai Kalabhai Zalavadiya in Civil Appeal No.155549 of 2017]. In the given factual background, according to us, non-filing of Form 68 is only a technical or venial breach which should not snatch away the substantive right to claim immunity from levy of penalty, which assessee got vested with on fulfillment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s.270AA of the Act. Be that as it may be, it has been further brought to our notice that assessee has filed Form 68 [a copy of which is found placed at Page Nos.1-3 of the Paper Book which has been uploaded in the IT portal]. Hence, considering the overall facts in this case, we are of the view that no penalty ought to have been levied u/s.270A of the Act for under-reporting of income and therefore, we direct deletion of the same.”

ITA No.416/Bang/2026 Page 9 of 9

claim immunity from levy of penalty, which assessee got vested with on fulfillment of substantive conditions mandated in Clause (a) & (b) of sub-section (1) of section u/s.270AA of the Act. Respectfully following the judicial precedents as stated above, we hold that impugned penalty is bad in law both on the validity of notice and on entitlement for immunity and therefore the penalty deserves to be deleted. Thus the ground Nos 2 to 5 raised by the assessee are allowed.

Pronounced in the open court on the date mentioned on the caption page.

Sd/- Sd/- (SOUNDARARAJAN K) (BALAKRISHNAN S) Judicial Member Accountant Member Bangalore. Dated: 25.05.2026. /NS/* Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order

Assistant Registrar, ITAT, Bangalore.