KAMALJEET SINGH, RUPNAGAR, PUNJAB vs. ACIT CIRCLE 1(1) CHANDIGARH, CHANDIGARH

ITA 426/CHANDI/2026Status: DisposedITAT Chandigarh06 October 2026AY 2017-188 pages
AI SummaryAllowed

What were the facts?

The assessee, Kamaljeet Singh, is an individual engaged in real estate and property renting. For Assessment Year 2017-18, he filed an original return declaring a loss. During scrutiny assessment under Section 143(3), the Assessing Officer (AO) made additions of Rs. 2,54,78,798/- (disallowed exemption under Section 54B, surrendered by the assessee), Rs. 8,85,000/- (disallowed legal fees), and Rs. 9,46,204/- (50% of interest expense, surrendered by the assessee). Consequently, the AO initiated penalty proceedings under Section 270A and levied a penalty of Rs. 32,39,679/-. The Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi, sustained the penalty. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

What did the Tribunal hold?

The Tribunal held that the penalty order passed under Section 270A of the Income-tax Act, 1961, dated 28.02.2022, cannot be sustained. The Tribunal found that the statutory notices issued under Section 274 read with Section 270A of the Act were fundamentally defective. Specifically, the show-cause notice dated 19.05.2021 vaguely mentioned "under-reporting and/or misreporting of income" without specifying the distinct categories under Section 270A, which attract different penalty rates. Furthermore, the notice mistakenly directed the assessee to explain why penalty under Section 271A (failure to keep books of account) should not be levied, indicating a lack of application of mind. Following the precedents set by the Delhi High Court in GE Capital US Holdings Inc. vs. DCIT and coordinate benches, the Tribunal quashed the penalty order of Rs. 32,39,679/-.

What were the issues?

1. Whether the penalty levied under Section 270A of the Income-tax Act, 1961, is valid when the penalty notice and show-cause notice fail to specify the relevant clause of Section 270A under which the penalty is proposed. Assessee's contention: The penalty notice dated 13.12.2019 and the show-cause notice dated 19.05.2021 are defective as they do not specify the relevant clause under Section 270A. This failure renders the penalty proceedings invalid ab initio. The assessee relies on the decisions in GE Capital US Holdings Inc. vs. DCIT, DCIT vs. Chakradhar Contractors & Engineers (P) Ltd., and Divya Burman vs. Assessment Unit. Revenue's contention: The penalty was rightly sustained as the assessee had improperly claimed deduction under Section 54B and failed to fully substantiate business expenses. The revenue relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 270A,Section 274,Section 143(3),Section 54B,Section 271A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE BEFORE: SHRIMANOJ KUMAR AGGARWAL, AM & SH. RAJESH DAMODARLAL SHARMA, JM आयकरअपीलसं./ITA No. 426/Chd/2026 "नधा"रण वष" / Assessment Year : 2017-18 Kamaljeet Singh बनाम ACIT 1(1), House No. 11, Ward 14, Chandigarh Bhabhat, Rupnagar, Zirakpur 140603 "ायीलेखासं./PAN NO: AVSPS5259C अपीलाथ"/Appellant ""थ"/Respondent िनधा"रतीकीओरसे/Assessee by : Sh. Parikshit Aggarwal, CA – Ld. AR राज"कीओरसे/ Revenue by : Sh. Vivek Vardhan, Add. CIT, Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 30.09.2026 उदघोषणाकीतारीख/Date of Pronouncement : 06.10.2026

आदेश/Order

PER RAJESH DAMODARLAL SHARMA, J.M: This appeal preferred by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'Ld. CIT(A)'] dated 25.01.2026, which in turn arises out of a penalty order passed by the Assessing Officer (AO) under Section 270A of the Income-tax Act, 1961 (for short "the Act") dated 28.02.2022. The penalty levied in this case stands at Rs.32,39,679/- for Assessment Year (AY) 2017-18. 2 426/Chd/2026

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