ABHISHEK JAYRAJ KARNANI,AHMEDABAD vs. ITO, WARD 3(3)(1), AHMEDABAD, AHMEDABAD

ITA 1500/AHD/2026Status: DisposedITAT Ahmedabad30 September 2026AY 2019-207 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 270A(9)(c) was unsustainable. The Tribunal noted that the assessee had disclosed the claim of deduction under Section 80GGC in the original return and subsequently withdrew it during reassessment, offering the amount to tax and paying the due tax and interest. The reassessment order accepted the returned income without any further addition. The Tribunal reasoned that the mere withdrawal of a deduction claim, by itself, does not conclusively establish that the assessee furnished inaccurate particulars or that the case falls within the specific circumstances contemplated by Section 270A(9)(c). The claim was openly made and not concealed, and upon reopening, the assessee did not persist with the claim. There was no finding of any false entry or fabrication by the assessee. The Tribunal relied on its own coordinate bench decisions in Hiro Mulchand Tanwani Vs. ITO and Siddharth Laxminkant Vaderkar vs. ITO, which held that a claim of deduction made transparently in the return, even if ultimately found inadmissible, does not automatically lead to a conclusion of misreporting. The penalty of Rs. 3,12,000 was directed to be deleted.

What were the facts?

The assessee, Abhishek Jayraj Karnani, filed an appeal against the penalty order under Section 270A of the Income Tax Act, 1961, for Assessment Year 2019-20. The assessee had originally claimed a deduction of Rs. 5,00,000 under Section 80GGC for donations to a political party. Following information from a search related to the political party, proceedings under Section 148A and 148 were initiated. The assessee then filed a revised return, withdrawing the Section 80GGC deduction and offering Rs. 5,00,000 to tax, along with consequential tax and interest. The reassessment was completed under Section 147 read with Section 144B, accepting the returned income without further additions. The Assessing Officer imposed a penalty of Rs. 3,12,000 under Section 270A, treating the withdrawal of deduction as under-reporting in consequence of misreporting.

What were the issues?

1. Whether the penalty levied under Section 270A(9)(c) of the Act for under-reporting income in consequence of misreporting of income is sustainable when the assessee withdrew a claim of deduction during reassessment proceedings, having initially claimed it in the original return. Assessee's contention: The assessee argued that Section 270A(9)(c) pertains to claiming expenditure not substantiated by evidence. The assessee claimed the deduction openly in the original return and voluntarily withdrew it during reassessment, offering the amount to tax and paying due tax and interest. The reassessment order accepted the returned income without additions, and there was no finding of false entry or fabrication. The assessee also contended that the donation was made in good faith and they were unaware of any non-compliance by the recipient political party. The penalty provision, being penal, requires strict application of statutory conditions, and mere withdrawal of a deduction does not automatically establish misreporting. Revenue's contention: The revenue, through the lower authorities, treated the withdrawal of deduction as under-reporting in consequence of misreporting, leading to the penalty.

Which sections of the Income-tax Act were involved?

Section 270A,Section 270A(9)(c),Section 139(1),Section 148A,Section 148,Section 147,Section 144B,Section 250,Section 80GGC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI RAHUL CHAUDHARY, JUDICIALMEMBER &SHRI GANGADHAR PANDA

For Appellant: Shri Prakash D Shah & Shri Saiyam Shah, ARs
For Respondent: Ms. Madhulika Satpute, Sr. DR
Hearing: 06.08.2026Pronounced: 30.09.2026

PER GANGADHAR PANDA - ACCOUNTANTMEMBER:

The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi dated 26.02.2026 under Section 250 of the Income Tax Act, 1961 arising out of the Penalty Order, dated 18.06.2023 passed under Section 270A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2019-20. 2. The assessee has raised the following grounds of appeal:

“1. That the learned National Faceless Appeal Centre, Delhi has erred in

The order continues below.

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