KRISHNA KODALI KISHORE,BENGALURU vs. CIT (APPEALS), BENGALURU

ITA 1538/BANG/2026Status: DisposedITAT Bangalore29 September 2026AY 2023-249 pages
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What were the facts?

The assessee, Krishna Kodali Kishore, filed an appeal against the penalty order under section 270A of the Income Tax Act, 1961, for Assessment Year 2023-24. The penalty arose from an addition of Rs. 3,40,000/- made by the Assessing Officer (AO) during scrutiny assessment. The AO disallowed the claimed cost of improvement for an immovable property, citing lack of documentary evidence. The assessee had claimed this amount for fencing and labour costs for a plot of land, submitting only handbills and estimate slips. The AO treated this disallowed amount as short-term capital gain. The Commissioner of Income Tax (Appeals) upheld the penalty. The assessee's return was selected for scrutiny due to high-value cash withdrawals.

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 270A of the Income Tax Act, 1961, was not sustainable. The Tribunal found that the AO had not disputed the existence of the improvement work itself, such as the construction of a compound wall. The assessee, not being primarily engaged in construction, could not be expected to provide contractor-level documentation for incidental capital expenditure. The AO's insistence on strict documentation standards for expenditures incurred with local vendors and unregistered dealers, where formal bills are not typically issued, was considered unreasonable. The Tribunal concluded that there was no misrepresentation or suppression of facts, as the cost of improvement was noticed from the return and other details filed by the assessee. Therefore, the penalty was quashed.

What were the issues?

1. Whether the penalty levied under Section 270A of the Income Tax Act, 1961, is sustainable in law and on facts, considering the addition arose from non-furnishing of complete documentary evidence for cost of improvement? - Assessee's contention: The provisions of Section 270A are not attracted as there is no under-reporting or misreporting of income. The addition is due to a debatable issue or omission stemming from differing interpretations or estimates, and the assessee provided all relevant documents. The Show Cause Notice was also defective, vague, and invalid for not specifying the precise charge or applicable limb under Section 270A. - Revenue's contention: The learned Departmental Representative relied upon the orders passed by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 270A,Section 250,Section 143(2),Section 142(1),Section 143(3),Section 144B,Section 44AD,Section 194N

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL

For Respondent: Smt. Prajakta Thakur, JCIT

PER SANDEEP SINGH KARHAIL, JUDICIAL MEMBER:

The assessee has filed the present appeal against the impugned order dated 05/02/2026, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the penalty order passed u

The order continues below.

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