RAMESH CHINNAPPA SIDDANAHALLI,BENGALURU vs. DCIT, CIRCLE 6(1)(1), BENGALURU

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ITA 1762/BANG/2026Status: DisposedITAT Bangalore12 October 2026AY 2020-215 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the non-payment of GST, while collected, would not automatically be treated as underreporting or misreporting of income under Section 270A. The Tribunal also found that the AO had failed to specify the limb under which the penalty was being imposed in the penalty notice. The assessment order and penalty notice did not mention the specific limb of violation. Although the penalty order eventually stated the penalty was levied under Section 270A(8) for underreporting in consequence of misreporting, the initial notice was deficient. The Tribunal noted that penalty proceedings are quasi-criminal in nature, requiring the AO to specify the limb in the notice to provide an effective opportunity to the assessee. Relying on coordinate bench decisions, the Tribunal set aside the penalty order on this legal ground, without adjudicating the other grounds. The ratio decidendi is that a penalty under Section 270A cannot be sustained if the penalty notice fails to specify the limb of violation, thus denying the assessee an effective opportunity to defend themselves.

What were the facts?

The assessee, Shri Ramesh Chinnappa Siddanahalli, filed an appeal against the order of the NFAC, Delhi for Assessment Year 2020-21. The assessment was completed under Section 147 read with Section 144 of the Income Tax Act, 1961, with an addition of Rs. 12,09,998/- representing unpaid GST, treated as income under Section 28. The Assessing Officer (AO) initiated penalty proceedings under Section 270A. The assessee contended that since the GST component was not claimed as an expense, Section 270A would not apply. The AO, however, confirmed the penalty at 200% under Section 270A(9)(c). The CIT(A) also upheld the AO's order. The assessee did not appear for the hearing before the ITAT.

What were the issues?

1. Whether the non-payment of GST, which was collected but not remitted, can be treated as underreporting or misreporting of income under Section 270A of the Income Tax Act, 1961, warranting a penalty. The assessee argued that since the GST was not claimed as an expense, it could not be treated as income. The revenue contended that non-payment of GST is deemed income under Section 28, and its non-disclosure constitutes underreporting in consequence of misreporting. 2. Whether the penalty imposed under Section 270A is valid when the AO failed to specify the limb under which the violation was committed in the penalty notice, thereby not providing an effective opportunity to the assessee to respond. The assessee argued that the AO did not mention the specific limb in the notice, making the penalty bad in law. The revenue did not present arguments on this specific point.

Which sections of the Income-tax Act were involved?

Section 28,Section 144,Section 147,Section 270A,Section 270A(8),Section 270A(9)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.

आदेश / ORDER PER SHRI SOUNDARARAJAN K., JUDICIAL MEMBER: This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 24/02/2026 in respect of the A.Y. 2020-21.

2.

The brief facts of the case are that the assessee is an individual and filed his return of income on 12/11/2020. The assessment has been completed u/s. 147 r.w.s. 144 of the Act in which the addition of Rs. 12,09,998/- being the unpaid GST amount was added as income u/s. 28 of the Act. The AO had initiated penalty proceedings u/s. 270A of the Act during the assessment proceedings. Subsequently, the AO initiated penalty proceedings by issuing a notice u/s. 270A of the Act. The assessee also replied that they have not claimed the GST component as expenses and therefore the provision 270A would not be applicable to the facts of the present case. The AO not satisfied with the reply had confirmed the penalty at 200% u/s. 270A(9)(c) of the Act.

3.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) also confirmed the order of the AO.

4.

The present appeal has been filed by the assessee challenging the order of the Ld.CIT(A).

5.

At the time of hearing, the assessee had not appeared and therefore, we are deciding the appeal on merits by considering the facts and the grounds filed by the assessee and from the said, we noticed that the non-payment of GST amount would not be treated as underreporting or misreporting and the non- payment of GST would be a deemed income and therefore the penalty is not warranted. Further from the submissions, we noticed that the AO had not mentioned the limb under which the penalty has been imposed while issuing the notice and therefore the penalty imposed is liable to be set aside. The assessee in their submissions relied on the orders of the Coordinate Bench of this Tribunal in a number of cases where this Tribunal had deleted the penalty imposed u/s. 270A of the Act and prayed to allow the appeal.

6.

The Ld.DR submitted that the non-payment of GST would be deemed an income u/s. 28 of the Act and therefore the non-disclosure of the same would be treated as underreporting of income in consequence of misreporting and therefore prayed to dismiss the appeal.

7.

We have heard the arguments of Ld.DR and perused the materials available on record.

8.

In the present case, the assessee had collected the GST amount but not remitted it and therefore the AO had treated the non-payment as income u/s. 28 of the Act. It is the case of the assessee that the assessee had not claimed the GST as expenses and therefore it could not be treated as income. The further case of the assessee is that the AO while making the assessment had not mentioned about the limb under which the violation has been committed and also in the show cause notice issued before the imposition of penalty, the limb was not mentioned and therefore the assessee was not granted an effective opportunity to meet out the show cause notice and therefore the imposition of penalty is bad in law.

9.

We have perused the assessment order as well as the penalty notice. We noticed that the AO had not mentioned about the limb under which the violation has been committed. The AO has simply mentioned that the penalty is leviable u/s. 270A of the Act. But finally in the penalty order, the AO had levied the penalty u/s. 270A(8) of the Act at 200% for underreporting the income in consequence of misreporting the same. For the first time, the AO had mentioned the provision as 270A(8) of the Act. In such circumstances, we are in agreement with the grounds raised by the assessee that no penalty u/s. 270A(8) could be imposed when the penalty notice does not specify under which limb the violation has been committed. The penalty being quasi criminal in nature, it is incumbent on the part of the AO to specify the limb in the notice to give an effective opportunity to assessee to rebut the same.

10.

We have also considered the orders of the Coordinate Bench of this Tribunal in which the section 270A penalty has been deleted for not mentioning the limb while issuing the notice. The order in ITA No. 20/Bang/2026 dated 20/07/2026 in the case of Sermadevi Yegnaswamy Ramakrishnan vs. ITO rendered by this Tribunal supports our view.

11.

We therefore set aside the penalty order dated 25/07/2025. Since we are allowing the appeal on the legal plea, we are not adjudicating the other grounds raised by the assessee.

12.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 12th October, 2026.

Sd/- Sd/- PRASHANT MAHARISHI SOUNDARARAJAN K. VICE – PRESIDENT JUDICIAL MEMBER

Bangalore, Dated: 12th October, 2026. /MS/ Copy to: Shri Ramesh Chinnappa Siddanahalli, No. 757, 5th Main Road, W Chord Road, 2nd Stage, Mahalakshmipura, 1 Mahalakshmi Layout, Bengaluru – 560 086, Karnataka. The Deputy Commissioner of Income Tax, 2 Circle – 6(1)(1), Bengaluru. 3 The PCIT / CIT, 4 The D.R., ITAT, Bangalore Bench BY ORDER

ASSISTANT REGISTRAR, I.T.A.T., BANGALORE.

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.21 12:11:55 +05'30'

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