DCIT (IT)1.1.2, MUMBAI, KAUTILYA BHAVAN vs. ATOS INFORMATION TECHNOLOGY HK LTD, HONG KONG

आदेश / ORDER PER BEENA PILLAI, JUDICIAL MEMBER: Present appeal filed by revenue and cross-objection by assessee arise out of the order passed by the Learned Commissioner of Income Tax (Appeals)-55, Mumbai [hereinafter referred to as “Ld.CIT(A)”] dated 26/11/2025, for A.Y. 2021-22, on the following grounds of appeal:- The Department has raised the following grounds of appeal: “1) Whether on facts circumstances of the case and in law the Ld CIT A has erred in deleting the penalty of Rs 184572960 levied by the Assessing Officer under section 270A of the Income tax Act 1961 without appreciating the fact that the penalty proceedings are independent of the quantum proceedings and can survive notwithstanding deletion of addition at the appellate stage. 2) Whether on facts circumstances of the case and in law the Ld CIT A has erred in holding that since the quantum addition of Rs 856375446 has been deleted by the Hon ble ITAT vide order dated 06 10 2025 there remains no basis for levy of penalty under section 270A of the Act ignoring the fact that the said ITAT order has not attained finality.

3) Whether on facts circumstances of the case and in law the Ld CIT A has failed to appreciate that the Department has not accepted the order of the Hon ble ITAT in the quantum appeal and that an appeal under section 260A of the Act has been recommended is proposed to be filed before the Hon ble Bombay High Court within the prescribed limitation period.

4) Whether on facts circumstances of the case and in law the Ld CIT A has erred in deleting the penalty without considering that similar issues involved in the assessees own case for earlier assessment years are pending adjudication before the Hon ble Bombay High Court and therefore the issue of taxability has not reached finality.

5) Whether on facts circumstances of the case and in law the Ld CIT A has erred in not examining whether the assessee had under reported OR misreported income within the meaning of section 270A of the Act and has deleted the penalty merely on the basis of deletion of the quantum addition without independent consideration of the facts and conduct of the assessee.

6) Whether on facts circumstances of the case and in law the Ld CIT A has failed to appreciate that the Assessing Officer had correctly initiated and levied penalty under section 270A on account of under reporting of income and the deletion of penalty is premature and contrary to the scheme and object of section 270A of the Act.

7) Whether on the facts, circumstances of the case and in law the Hon ble Tribunal was correct erred in holding that the payments received by the assessee from Atos India Private Limited are not taxable as fees for technical 2

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD services under section 9 1 vii of the Income tax Act 1961 on which penalty under section 270A of the Act was levied.

8) Whether the Hon ble Tribunal was justified in mechanically following its earlier coordinate bench decision without appreciating the material change in facts namely that the payments were received from Atos India and not directly from Standard Chartered Bank on which penalty under section 270A of the Act was levied.

9) The appellant craves leave to add amend alter OR modify any of the above grounds of appeal at OR before the time of hearing.”

The assessee has raised the following grounds of appeal in its Cross-objection:-

“1. On the facts and in the circumstances of the case and in law, the Assessing Officer erred in initiating the penalty proceedings by issuing notice dated 26 October 2023 and consequently, erred in passing an order imposing penalty under section 270A of the Income-tax Act, 1961 ('the Act) without having due regard to the provisions of section 270A(2)/270A(9) of the Act. In doing so, Ld. Assessing Officer ('the Ld. AO') failed to appreciate as under: 1.1. The notice initiating penalty proceedings was issued on the ground of under-reporting of income, whereas the penalty order was passed on the ground of mis-reporting of income; 1.2. Neither the notice nor the penalty order mentions the specific limb under which the penalty proceedings were initiated or proposed under section 270A(2) and/or section 270A(9) of the Act; 1.3. That the penalty has been levied mechanically; and 1.4. The issue is no more res integra; The Cross Objector prays that the order levying penalty under section 270A of the Act should be quashed The Cross-objector craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.” 2. Brief facts of the case are as under:- Assessee is a company incorporated in Hong Kong and is a non-resident within the meaning of the provisions of the Act. The assessee is engaged in providing electronic data processing services through its data centre facility situated in Hong Kong.

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD For the year under consideration, the assessee filed its return of income on 10/03/2022 declaring total income of Rs.6,64,89,345/- being interest on income-tax refund. The assessee also received sub-contracting receipts amounting to Rs.85,63,75,446/- from Eviden India Pvt. Ltd. in connection with the Standard Chartered Bank project. However, the assessee claimed that the said receipts were not chargeable to tax in India either as Royalty or Fees for Technical Services (FTS) under the provisions of the Act as well as the Double Taxation Avoidance Agreement (DTAA) between India and Hong Kong. The said claim was disclosed by way of a note forming part of the computation of income.

2.1. During the assessment proceedings, the Ld. AO, while passing the assessment order dated 26/10/2023 u/s 143(3) r.w.s. 144C(13) of the Act, held that the aforesaid receipts were taxable in India as Royalty and FTS under the provisions of the Act as well as the India-Hong Kong DTAA, following the directions issued by the DRP in the assessee's own case for the earlier years. Accordingly, the Ld. AO brought the said receipts to tax and simultaneously initiated penalty proceedings u/s 270A of the Act for under-reporting of income.

2.2. Aggrieved by the assessment order, the assessee preferred an appeal before this Tribunal. This Tribunal, vide order dated 06/10/2025 in ITA No.4708/Mum/2023, decided the quantum issue in favour of the assessee.

2.3. Meanwhile, pursuant to the initiation of penalty proceedings in the assessment order, the Ld. AO issued notice dated 26/10/2023 u/s 274 r.w.s. 270A of the Act and thereafter 4

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD passed an order dated 30/04/2024 levying penalty u/s 270A of the Act.

Aggrieved by the order passed by Ld.AO, assessee preferred appeal before the Ld.CIT(A).

2.4. The Ld.CIT(A) after considering the submissions of assessee, deleted the penalty by observing as under:-

“7.2. The appellant has submitted the copy of the order of Hon’ble Jurisdictional ITAT Mubmai vide order no ITA 4708/Mum/2023 pronounced on 06.10.2025 for the AY under consideration in respect of the appeal filed against the final assessment order dated 26.10.2023. As per the copy of the order submitted by the appellant, the Hon’ble ITAT, Mumbai has held that the receipts of Rs.85,63,75,446 are not to be considered as Royalty/FTS as per the provisions of the Act and thus not liable for taxation in India and in this regard has also referred to earlier decision dated 09.02.2017 in ITA 237 to 240/Mum/2016. 7.3. The appellant has claimed that the copy of decision of Hon'ble ITAT, Mumbai has been submitted to the AO, but appeal effect order is yet to be passed. It is noted that appellant has rightly pointed out that since the addition made is assessment order which formed the basis for imposition of penalty order has been deleted, there remains no basis for levy of penalty u/s 270A of the Act. It is noted that the Hon'ble Jurisdictional ITAT Mumbai had accepted the contentions of the appellant regarding the characterisation of receipts in the hands of the appellant and held that such payment shall not be considered as taxable in India. Therefore, the addition of income of Rs 85,63,75,446/- vide assessment order u/s 143(3) r.w.s 144C(13) of the Act dated 26.10.2023 has been directed to be deleted by Hon'ble ITAT, Mumbai. Consequently, the penalty imposed u/s 270A of the Act dated 30.04.2024 would also become NIL since the penalty proceedings emanate out of the findings of the referred assessment order, the addition made therein has become NIL on account of pronouncement rendered by Hon’ble ITAT, MUMBAI vide order dated 06.10.2025 in the case of the appellant for the year under consideration. Therefore, the contention of the appellant in this regard is found to be prima facie correct and the AO is directed to delete the penalty levied u/s 270A of the Act accordingly. Therefore, Grounds 1 to 7 of the appeal which pertains to levy of penalty u/s 270A of the Act are considered as Allowed.” Aggrieved by the order passed by Ld.CIT(A), revenue is in appeal before this Tribunal while the assessee raised cross-

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD objection challenging the validity of the penalty notice for being issued mechanically.

We have perused the submissions advance by both sides in light of the record placed before us.

3.1. It is noted that there is no allegation by the Revenue that the assessee suppressed any material fact or failed to disclose any particulars relating to the receipts earned during the year. On the contrary, the assessee disclosed the entire receipts received from Eviden India Pvt. Ltd. in its computation of income and had specifically appended a note stating that such receipts were not chargeable to tax in India either as Royalty or Fees for Technical Services under the provisions of the Act as well as the India-Hong Kong DTAA. Thus, all primary facts relevant for determining the taxability of the receipts were fully and truly disclosed by the assessee.

3.2. We further note that the addition made by the Ld. AO in the quantum proceedings was only on account of difference in characterization of the receipts, wherein the receipts disclosed by the assessee were treated as Royalty/FTS and brought to tax. The issue, therefore, essentially pertains to the taxability and characterization of income and does not arise from any non-disclosure or suppression of facts by the assessee.

3.3. In our considered view, none of the circumstances enumerated u/s 270A(9) of the Act can be said to exist in the 6

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD present case. The Revenue has not brought any material on record to establish that the assessee had misreported its income within the meaning of section 270A(9). Mere rejection of a legal claim or a different view taken by the Ld. AO regarding the taxability of a receipt cannot, by itself, lead to the conclusion that the assessee has under-reported or misreported income warranting levy of penalty u/s 270A of the Act.

3.4. The penalty has been levied primarily on the premise that the claim made by the assessee was found to be unacceptable to the Ld. AO. However, the provisions of section 270A do not contemplate levy of penalty merely because a claim made by the assessee is not accepted by the Revenue, particularly when all material facts have been duly disclosed and the dispute is confined to the interpretation and application of law.

Accordingly, we find no infirmity in the order of the Ld. CIT(A) deleting the penalty levied u/s 270A of the Act. The grounds raised by the Revenue are, therefore, dismissed.

Since the appeal of the Revenue stands dismissed, the Cross Objection filed by the assessee has become infructuous and is accordingly dismissed as such.

In the result, the appeal filed by the Revenue and the Cross Objection filed by the assessee stand dismissed. Order pronounced in the open court on 19/06/2026

Sd/- Sd/- JAGADISH BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 19/06/2026 SC. Sr. P.S. 7

ITA 1118/MUM/2026 ATOS INFORMATION TECHNOLOGY HK LTD Copy to: DCIT (IT)1.1.2, MUMBAI, TOOM NO 534, KAUTILYA BHAVAN, G BLOCK, BANDRA KURLA COMPLEX, 1 MUMBAI, MUMBAI-400051, MAHARASHTRA ATOS INFORMATION TECHNOLOGY HK LTD, 2 8 LAM CHAK STREET KOWLOON, KOWLOON BAY, HONG KONG, HONG KONG-999999 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE