DARGABHAI BHERAJI PATEL,BANASKANTHA vs. INCOMETAX OFFICE WARD-1 PALANPUR, PALANPUR

ITA 898/AHD/2026Status: DisposedITAT Ahmedabad14 October 2026AY 2019-206 pages
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What did the Tribunal hold?

The Tribunal held that the case is one of under-reporting of income, not under-reporting in consequence of misreporting. While the assessee did not file the original return and filed it only after a Section 148 notice, and the declared income exceeded the maximum amount not chargeable to tax, thus falling under Section 270A(2), the AO failed to establish misreporting under Section 270A(9). The cash deposits were explained as business sale proceeds, and the AO accepted the returned income without additions. Therefore, the penalty at the higher rate of 200% for misreporting is not justified. However, the Tribunal rejected the assessee's contention that the case falls under the exclusions of Section 270A(6), as no explanation was provided for the failure to file the original return despite having taxable income. The Tribunal directed the AO to re-compute the penalty under Section 270A at the rate of 50% of the tax payable on the under-reported income, subject to verification. The penalty imposed at 200% was deemed unsustainable.

What were the facts?

The assessee, Dargabhai Bheraji Patel, proprietor of Maan Automobiles, failed to file his return of income for Assessment Year 2019-20. The Assessing Officer (AO) reopened the case based on information about cash deposits in the assessee's current account. A notice under Section 148 was issued on March 23, 2023. The assessee subsequently filed a return disclosing a total income of Rs. 11,81,710/-. The assessment was completed on March 20, 2024, under Section 147 read with Section 144B, accepting the returned income. The AO initiated penalty proceedings under Section 270A for under-reporting and misreporting of income due to the non-filing of the original return. A penalty of Rs. 3,50,508/- was imposed. The assessee appealed to the CIT(A), who dismissed the appeal. The assessee is now before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the imposition of penalty under Section 270A for under-reporting, which resulted in misreporting of income, by the AO and upheld by the CIT(A) is illegal and incorrect? The assessee contends that the cash deposits were sale proceeds accepted by the AO, and the assessment was completed as per the return. The assessee argues that none of the conditions under Section 270A(9) for misreporting were met and that the case falls under Section 270A(6), making penalty imposition unwarranted. 2. Whether the CIT(A) erred in not considering the assessee's submissions and documents, including those against the show cause notice, which indicated that the assessee falls under Section 270A(6)(a) for non-imposition of penalty? The assessee claims to have provided explanations for non-filing of the ITR and cited legal decisions. The Revenue, through the Sr. DR, supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 270A,Section 270A(2),Section 270A(3),Section 270A(6),Section 270A(6)(a),Section 270A(9),Section 148,Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri Kunal Shangvi, AR
For Respondent: Ms. Kalpana Singh, Sr. DR
Hearing: 24.09.2026Pronounced: 14.10.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal has been filed by the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 28.01.2026 for the Assessment Year (A.Y.) 2019-20 in the proceeding u/s 270A of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee did not file his return of income for A.Y. 2019-20. The case of the assessee was reopened on the basis of the information received by the AO that the assessee had made certain cash deposits in his current account. Accordingly, a notice Dargabhai Bheraji Patel Vs ITO, AY- 2019-20 2 u/s. 148

The order continues below.

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