AURELIA HOUSING COPERATIVE SOCIETY LTD.,KOLKATA vs. I.T.O., WARD - 49(4), KOLKATA

ITA 2198/KOL/2026Status: DisposedITAT Kolkata29 September 2026AY 2017-201824 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Aurelia Housing Co Operative Society Ltd., filed its return of income for Assessment Year 2017-18 declaring NIL total income. The case was selected for scrutiny, and the Assessing Officer (AO) disallowed a depreciation claim of ₹33,69,260/-, determining the total income at ₹10,84,100/-. Subsequently, the AO initiated penalty proceedings under Section 270A of the Income Tax Act, 1961, and imposed a penalty of ₹20,82,202/- for under-reporting of income, which was considered a consequence of misreporting. The assessee appealed to the Commissioner of Income Tax (Appeals) - NFAC, Delhi, who confirmed the AO's action and dismissed the appeal. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What did the Tribunal hold?

The Tribunal held that the penalty under Section 270A was not liable to be imposed. The Tribunal noted that the AO initiated penalty proceedings for under-reporting of income in consequence of misreporting of income. However, referencing the Supreme Court's decision in CIT vs. Reliance Petroproducts (P.) Ltd., the Tribunal found that the assessee had furnished all details of its expenditure and income in its return, and these details were not found to be inaccurate. A mere claim for depreciation, even if disallowed by the AO, does not amount to furnishing inaccurate particulars or concealment of income. The Tribunal observed that the assessee's claim for depreciation, which was set off against income from other sources, was a bona fide explanation. Therefore, the case did not fall under the misrepresentation or suppression of facts as contemplated by Section 270A(9)(a). The Tribunal concluded that the penalty for under-reporting of income in consequence of misreporting was not liable to be imposed and cancelled the same. The appeal was partly allowed.

What were the issues?

1. Whether the notice issued under Section 270A read with Section 274 of the Act is invalid for not mentioning the specific limb (under-reporting or misreporting) under which penalty proceedings were initiated. 2. Whether the AO erred in alleging both under-reporting and misreporting of income instead of recording satisfaction under one limb. 3. Whether the disallowance of depreciation claim, which was bona fide and reported in audited accounts, constitutes misreporting or under-reporting of income warranting penalty under Section 270A. 4. Whether the penalty of 200% imposed for misreporting is justified, or if it should be 50% for under-reporting, if at all. Assessee's Contentions: The assessee argued that the notice for penalty was invalid as it did not specify the limb of Section 270A. The claim for depreciation was bona fide, reported in audited accounts, and related to the use of the building by members, thus not constituting misreporting or under-reporting. If any penalty were leviable, it should be 50% for under-reporting, not 200% for misreporting. The assessee relied on the fact that all material was on record and the claim was a genuine legal one. The assessee also contended that the disallowance of depreciation was a legal dispute and not indicative of misreporting. Revenue's Contentions: The revenue contended that the disallowance of depreciation led to under-reporting of income, which was a consequence of misreporting of income, justifying the penalty under Section 270A. The Ld. CIT(A) confirmed the AO's finding that the conditions for misreporting were satisfied.

Which sections of the Income-tax Act were involved?

Section 270A,Section 274,Section 250,Section 143(3),Section 57,Section 71

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH AT KOLKATA

Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2017-18 dated 23.04.2026. ITA N

The order continues below.

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