REDDAPPA SRINIVASA,BENGALURU vs. DCIT CIRCLE 4(1)(1), BANGALORE, BENGALURU

ITA 654/BANG/2026Status: DisposedITAT Bangalore28 September 2026AY 2018-201910 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the penalty imposed under section 270A was unsustainable in law. The primary reasoning was that the show-cause notice issued by the Assessing Officer did not specify the specific limb of section 270A(9) under which the assessee was alleged to have under-reported income due to misreporting. The Tribunal noted that without this specific disclosure, the assessee could not know the precise nature of the alleged misreporting. Citing the Delhi High Court's decision in Schneider Electric South-East Asia (HQ) Pte. Ltd. v. Assistant Commissioner of Income Tax, the Tribunal stated that a penalty notice is erroneous and liable to be quashed if the AO fails to specify the limb of under-reporting or misreporting. While acknowledging a conflicting view from the Rajasthan High Court in Spun Well Tex Private Limited, the Tribunal preferred the Delhi High Court's view, which had been followed by several coordinate benches of the Tribunal. The Tribunal found that several coordinate benches had deleted penalties in similar circumstances, relying on the Delhi High Court's decision, even though that decision pertained to the rejection of immunity under section 270AA. The Tribunal concluded that a penalty cannot be sustained where the Assessing Officer neither specifies the applicable limb of section 270A(9) in the show-cause notice nor makes it discernible from the assessment order. Consequently, the penalty of ₹15,972,186 was cancelled. Grounds 2 to 5 were allowed, and remaining grounds were dismissed as infructuous.

What were the facts?

The assessee, Reddappa Srinivasa, proprietor of Srinivasa Flower Trading Company, appealed against the penalty of ₹15,972,186 imposed under section 270A of the Income-tax Act, 1961. This penalty was confirmed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2018-19. The penalty was levied by the National Faceless Assessment Unit (AO) for alleged under-reporting of income due to misreporting. The original assessment order determined total income at ₹37,203,723, disallowing ₹21,896,983 of construction expenditure claimed under section 54. Subsequent revisionary proceedings under section 263 led to a consequential assessment order dated 23 February 2024, recording long-term capital gains of ₹47,540,970, resulting in an addition of ₹33,710,810 to the returned income. The AO initiated penalty proceedings under section 270A for under-reporting arising from misreporting, holding that the assessee had misrepresented facts and failed to substantiate the section 54 deduction.

What were the issues?

1. Whether the penalty levied under section 270A of the Income-tax Act, 1961, is opposed to law, equity, weight of evidence, probabilities, facts, and circumstances of the case (mixed law and fact). 2. Whether the learned CIT(A)/NFAC erred in upholding the penalty of ₹15,972,186 for alleged under-reporting of income due to mis-reporting of Long-term Capital Gains of ₹3,37,10,820, when no specific limb under section 270A(9) was mentioned in the show-cause notice (question of law). 3. Whether the learned CIT(A)/NFAC was justified in upholding the penalty for under-reporting in consequence of misreporting without appreciating that the restriction of deduction under section 54 of the Act cannot be labelled as misreporting of income (question of law). 4. Whether the penalty levied is excessive and requires substantial reduction, especially since it was computed under section 270A(3)(i) instead of section 270A(3)(ii) of the Act (question of law). 5. Whether the penalty proceedings under section 270A are discretionary and not mandatory, and if the AO ought to have exercised his discretion not to impose the penalty (question of law). Assessee's Contentions: The assessee argued that the show-cause notice under section 270A did not specify any limb under which the assessee was charged with under-reporting of income arising from misreporting. They relied on judicial precedents, including Deputy Commissioner of Income Tax v. L Jhaverchand Jwellers Private Limited, which deleted a penalty when the AO had not invoked a specific limb relating to under-reporting arising from misreporting. The assessee also contended that the restriction of deduction under section 54 cannot be termed as misreporting and that penalty proceedings are discretionary. Revenue's Contentions: The revenue strongly supported the orders of the lower authorities, submitting that the assessee had misreported income, resulting in under-reporting, and that the penalty was correctly imposed. They referred extensively to the facts of the case.

Which sections of the Income-tax Act were involved?

Section 270A,Section 54,Section 270A(9),Section 270A(3)(i),Section 270A(3)(ii),Section 270AA,Section 143(3),Section 263,Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDRARAJAN K.

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

01.

Shri Reddappa Srinivasa has filed this appeal [the assessee/appellant], the proprietor of Srinivasa Flower Trading Company, against the appellate order dated 28 January 2026 passed by the National Faceless Appeal Centre (NFAC), Delhi (the learned CIT(A)), for Assessment Year 2018–19. By that order, the learned CIT(A) confirmed the penalty of ₹15,972,186 imposed under section

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 270A

All 4,156 judgments and leading authorities on Section 270A →

Recent GST High Court judgments

Search GST case law →