SONAL JAIN,SHIKOHABAD vs. ITO WARD 2(2)(2)FIROZABAD, FIROZABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH “SMC”, AGRA BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITANo.135/AGR/2026 (Assessment Year : 2017-18) Sonal Jain, vs. ITO, Ward 2 (2)(2), Gurmandi, Bara Bazar, Ferozabad. Shikohabad – 205 135 (Uttar Pradesh). (PAN: AMRPJ5770D) (APPELLANT) (RESPONDENT) ASSESSEE BY : Ms. Prarthana Jalan, CA REVENUE BY : Shri Harsh Siddharth Gautam, Sr. DR Date of Hearing : 22.04.2026 Date of Order : 16.06.2026 O R D E R PER S. RIFAUR RAHMAN, AM : 1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 29.10.2025 for the Assessment Year 2017-18 raising following grounds of appeal :- “1) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts by dismissing the appeal as infructuous as appellant had filed Form-1 under the Direct Tax Vivad Se Vishwas Scheme, 2024 ignoring the fact that neither the appellant had filed an application for withdrawing of the appeal and nor the complete formalities were finished under the scheme.

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2) That the National Faceless Appeal Centre (NFAC),Delhi has erred in law and on facts in not considering the submissions filed before it. 3) That the penalty imposed under section 270A of Income Tax Act ,1961 amounting to Rs.2,07,818/- is unlawful and excessive in nature. 4) That the authorities below have erred in law and on facts in not considering the fact that income was assessed on estimated basis and penalty under section 270A cannot be imposed on the estimated income. 5) That the authorities below have erred in law and on facts in not considering that in the notices issued for imposition of penalty, it was not clearly disclosed that whether the penalty was being imposed for misreporting of income or of underreporting of income. 6) That the order passed by authorities below is bad in law. 2. At the time of hearing, ld. AR of the assessee brought to our notice the relevant facts of the case and her submissions as under. She submitted that the assessee is a businessman and ITR was selected under Limited Scrutiny through CASS for AY 2017-18. In the course of assessment proceedings, difference of Rs.69,64,365/- in net sales was found (As per VAT return Rs.4,14,76,332/ as per audit report Rs.3,45,11,967/-). In order to substantiate the explanation, the assessee stated that this difference is because of wrong audit report filed by the professional. She submitted that the assessee filed the correct return by declaring correct turnover as per the sales declared in

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VAT return. She further submitted that income on this short declared turnover was calculated on estimated basis i.e. 8% of short turnover of Rs.69,64,365/- i.e. Rs.5,57,150/- and accordingly tax was paid by the assessee which is also taken in to consideration by the AO in his assessment order. She submitted that the AO imposed penalty order under section 270A of the Income-tax Act, 1961 (for short ‘the Act’) without appreciating the facts of the case thereby imposing penalty of Rs.2,07,818/- being 200% of amount of tax payable on under-reported income which is in the consequence of misreporting of income as per provision of section 270A(9)(a) of the Act in the case of the assessee for A.Y. 2017-18 for under reporting of income. 3. She submitted that on appeal, the ld. CIT (A) dismissed the appeal as infructuous as assessee had filed Form-1 under the Direct Tax Vivad Se Vishwas Scheme, 2024 ignoring the fact that neither the assessee had filed an application for withdrawing of the appeal nor the complete formalities were finished under the scheme. Aggrieved with the above order, assessee is in appeal before us. 4. Ld. AR of the assessee submitted that assessee has not done under reporting of income instead accepted the difference in turnover once came into notice after the assessment proceedings and the assessee accepted the addition to

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the income and paid the tax on estimated income of Rs.5,57,150/- with another challan. Thus, the assessee had not willfully made any default. 5. Ld. AR further submitted that the AO erred by imposing the penalty as the income was assessed on estimated basis and penalty u/s 270A cannot be imposed on the estimate basis. Further, ld. AR submitted that the assessee had accepted the addition of estimated income @ 8% of short turnover which is evident from the penalty order u/s 270A of the Act. Ld. AR further submitted that estimation of addition cannot provide foundation for under- reported income for the purpose of levy of penalty u/s 270A of the Act. Further, she submitted that limb of section 270A is not mentioned whether it is under-reported income or misreporting of income. 6. Ld. AR further submitted that the assessee’s case is squarely covered by the decision of the ITAT, Agra Bench in the case of Tasavver Husain vs. ACIT in ITA Nos.95 & 96/Agr/2023 order dated 19.05.2025 and Hon’ble High Court of Delhi in the cases of Prem Brothers Infrastructure LLP vs. NFAC in WP (C) 7092/2022 order dated 31st May 2022 and WP (C) 5111/2022 in Schneider Electric South East Asia (HQ) Pte Ltd. order dated 28th March, 2022. 7. On the other hand, ld. DR of the Revenue relied on the order of the Assessing Officer.

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accounts of the assessee. Accordingly, we are of the considered opinion that estimation of addition cannot provide foundation for under-reported income for the purpose of levy of penalty u/s 270A of the Act. 11. As for the levy of penalty for misreporting as a consequence of under reporting of income, we find that Section 270A(9) of the Act specifically identifies the circumstances of misreporting as a consequence of under- reporting in Clause (a) to (f) as under:

“(9) The cases of misreporting of income referred to in sub- section (8) shall be the following, namely:— (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.”

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Delhi High Court, as relied upon by the ld. AR of the assessee. 14. In the light of the above discussion, we hold that the penalty levied in the present case is not sustainable in law and direct deletion of the same. 15. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 16th day of June, 2026.

Sd/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER Dated : 16.06.2026 TS