SATYADEVA AGENCIES,AMALAPURAM vs. INCOME TAX OFFICER, WARD-1, AMALAPURAM

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ITA 45/VIZ/2026Status: DisposedITAT Visakhapatnam16 October 2026AY 2022-2310 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the provision of Section 270A(6) of the Act does not provide a blanket exclusion for every addition quantified on an estimated basis; exclusions are subject to conditions. It noted that Section 270A(9)(c) expressly includes a claim of expenditure not substantiated by any evidence within the scope of misreporting. In this case, the disallowance stemmed from the assessee's failure to substantiate expenditure, and the fact that the AO restricted the disallowance to 10% did not change the nature of the default. Furthermore, Section 270A(8), governing under-reporting in consequence of misreporting, operates notwithstanding Section 270A(6). Therefore, the disallowance attracted Section 270A(9)(c). Regarding the alternative contention, the Tribunal found no express requirement in the Act to mention the specific clause of Section 270A(9) in the quantum assessment order. It was sufficient that the applicable charge ('under-reporting in consequence of misreporting') was identified and the facts supporting the allegation of misreporting were discernible. The AO had expressly identified the charge and recorded the assessee's failure to substantiate expenditure, aligning with Section 270A(9)(c). The Tribunal distinguished the cited Delhi High Court case, finding that the AO in the present case had clearly identified the charge and the factual basis. Consequently, the Tribunal found no infirmity in the Ld. CIT(A)'s order confirming the penalty.

What were the facts?

The assessee, M/s. Satyadeva Agencies, is in appeal against the order of the Learned CIT(A), NFAC, Delhi, dated 05.12.2025, for Assessment Year 2022-23. The Assessing Officer (AO) had levied a penalty of Rs.3,66,220/- under section 270A of the Income-tax Act, 1961, vide order dated 18.09.2024. This penalty was levied consequent to an addition of Rs.5,86,895/- made in the quantum assessment. The addition was on account of disallowing 10% of expenditure claimed under Petrol/Diesel, vehicle maintenance, and staff welfare expenses, on an estimated basis, due to the assessee's failure to furnish requisite details and evidence. The Ld. CIT(A) confirmed the penalty. The assessee is now before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether an addition made on an estimated basis can constitute under-reported income for the purpose of penalty under section 270A of the Act, particularly when it is in consequence of misreporting? (Question of law, turning on Section 270A(6) and 270A(9)). Assessee's contention: An addition made on an estimated basis does not constitute under-reported income as per Section 270A(6). Therefore, it cannot form the basis for penalty under Section 270A for misreporting. Alternatively, the AO failed to identify the specific clause of Section 270A(9) under which the alleged misreporting fell, rendering the penalty proceedings invalid. Revenue's contention: The disallowance arose from the assessee's failure to substantiate expenditure, which falls under Section 270A(9)(c) as misreporting. The quantification on an estimated basis does not alter the nature of the default. Section 270A(8) operates notwithstanding Section 270A(6). The Act does not mandate specifying the exact clause of Section 270A(9) in the quantum assessment order; identifying the charge as 'under-reporting in consequence of misreporting' and the factual basis is sufficient.

Which sections of the Income-tax Act were involved?

Section 270A,Section 270A(6),Section 270A(8),Section 270A(9),Section 270A(9)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Visakhapatnam “Division” Bench, Visakhapatnam

Before: Shri Ravish SoodShri Madhusudan Sawdia

Hearing: 12/10/2026

आयकर अपील�य अ�धकरण, �वशाखापटणम पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Visakhapatnam “Division” Bench, Visakhapatnam �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.45/Viz/2026 (िनधा�रण वष�/Assessment Year: 2022-23) M/s. Satyadeva Agencies, Vs. Income Tax Officer AMALAPURAM Ward-1 PAN:ADDFS0183Q AMALAPURAM (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Adv. DL Narasimha Rao राज� व �ारा/Revenue by: Shri A.P. Babu, Sr. AR सुनवाई की तारीख/Date of hearing: 12/10/2026 घोषणा की तारीख/Pronouncement: 16/10/2026 ORDER Per Madhusudhan Sawdia, A.M.: This appeal is filed by M/s. Satyadeva Agencies (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi (“Ld. CIT(A)”) dated 05.12.2025 for the A.Y. 2022-23. 2. The assessee has raised the following grounds of appeal:

3.

The brief facts of the case are that the Assessing Officer (“AO”) levied a penalty of Rs.3,66,220/- under section 270A of the Income-tax Act, 1961 (“the Act”), vide order dated 18.09.2024. Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the penalty. 4. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the solitary issue arising in the present appeal is the levy of penalty of Rs.3,66,220/- under section 270A of the Act for under-reporting of income in consequence of misreporting. He submitted that, in the quantum proceedings, the AO had made an addition of Rs.5,86,895/- by disallowing, on an estimated basis, 10% of the expenditure of Rs.58,68,946/- claimed by the assessee under the head of Petrol/Diesel expenses, vehicle maintenance and staff welfare expenses. Referring to section 270A(6) of the Act, he contended that an addition made on an estimated basis does not constitute under-reported income. Consequently, according to him, such an addition could not constitute under-reporting of income in consequence of misreporting, and the penalty was liable to be deleted. 5. Alternatively, the Ld. AR invited our attention to para no. 5 of the quantum assessment order, wherein the AO recorded that penalty proceedings under section 270A of the Act for under-reporting of income in consequence of misreporting were being initiated separately. He submitted that the AO had not identified the specific clause of section 270A(9) of the Act under which the alleged misreporting fell. According to the Ld. AR, the failure to specify the applicable clause rendered the penalty proceedings invalid. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) invited our attention to the relevant portion of page no. 5 of the quantum assessment order and submitted that the AO had called upon the assessee to furnish details and supporting evidence in respect of the expenditure of Rs.58,68,946/-. However, the assessee had failed to furnish the requisite details and evidence. He submitted that the AO, taking a liberal view, restricted the disallowance to 10% of the expenditure. Referring to section 270A(9)(c) of the Act, the Ld. DR contended that a claim of expenditure not substantiated by any evidence constitutes misreporting of income. Therefore, the quantification of the disallowance at 10% did not take the underlying default outside the scope of the said provision. 7. Regarding the alternative contention, the Ld. DR submitted that the Act does not require the AO to mention the specific clause of section 270A(9) in the quantum assessment order while initiating penalty proceedings. He submitted that the AO had expressly identified the applicable limb as “under- reporting of income in consequence of misreporting”. Accordingly, he prayed that the penalty be sustained and the appeal of the assessee be dismissed. 8. We have heard the rival submissions and perused the material available on record. The first contention of the assessee is that the addition was made on an estimated basis and, therefore, could not form the basis of penalty under section 270A of the Act. We have examined the relevant portion of page nos. 4 & 5 of the quantum assessment order, which is to the following effect:

9.

On perusal of the above, we find that the AO had called for details and supporting evidence relating to the expenditure of Rs.58,68,946/- claimed by the assessee under the head of Petrol/Diesel expenses, vehicle maintenance and staff welfare expenses. The assessee did not furnish the requisite details and evidence, and the AO consequently restricted the disallowance to 10% of the expenditure. Thus, the disallowance arose from the failure on them part of the assessee to substantiate the expenditure, although its quantum was determined by applying a percentage. In this regard, we have gone through the provision of section 270A(6) of the Act, which is to the following effect:

“Penalty for under-reporting and misreporting of income. 270A. (1) The Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income. 2……… 3……… 4……… 5……….

(6) The under-reported income, for the purposes of this section, shall not include the following, namely:— (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;

(c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and (e) the amount of undisclosed income referred to in section 271AAB.” 10. On perusal of the above, we find that the provision of Section 270A(6) of the Act does not provide a blanket exclusion for every addition quantified on an estimated basis. The exclusions provided therein operate subject to the conditions prescribed in the respective clauses. Further, we have also gone through the provision of section 270A(8) and 270A(9) of the Act, which is to the following effect:

“(8) Notwithstanding anything contained in sub-section (6) or sub-section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under- reported income. (9) The cases of misreporting of income referred to in sub- section (8) shall be the following, namely:— (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.” 11. On perusal of the above, we find that the section 270A(9)(c) of the Act expressly includes a claim of expenditure not substantiated by any evidence within the scope of misreporting of income. In the present case, the factual basis of the disallowance is the assessee’s failure to substantiate the expenditure despite being called upon to do so. Merely because the AO restricted the disallowance to 10%, the nature of that default does not change. Moreover, section 270A(8) of the Act, governing under-reporting in consequence of misreporting, operates notwithstanding section 270A(6) of the Act. Accordingly, we accept the contention of the Ld. DR that the disallowance, in the circumstances of the present case, attracts section 270A(9)(c) of the Act, and reject the first contention of the assessee. 12. As regards the failure to mention the specific clause of section 270A(9) of the Act in the quantum assessment order, we do not find any express requirement in the Act that the clause number must be specified in that order while initiating penalty proceedings. What is material is that the applicable charge is clearly identified and that the facts supporting the allegation of misreporting are discernible. In the present case, on perusal of the relevant portion of page nos. 4 & 5 of the quantum assessment order (reproduced herein above), we find that the AO expressly recorded that “the penalty proceedings under section under section 270A for under-reporting in consequence of misreporting of income are hereby initiated separately”. Further, the assessment order records the failure of the assessee to furnish evidence substantiating the expenditure. Thus, both the applicable limb and the factual basis relevant to section 270A(9)(c) of the Act were identified by the AO in the quantum assessment proceedings. Further, we have also gone through para nos. 6 and 7 of the decision of the Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte. Ltd. Vs. ACIT , W.P.(C) No.5111/2022, dated 28.03.2022, which is to the following effect:

“6. Having perused the impugned order dated 09th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 13. On perusal of the above, we find that in para no. 6, the Hon'ble High Court noted that the penalty notice in that case failed to specify the limb under which the proceedings had been initiated, namely, whether the charge was "underreporting" or "misreporting" of income. Further, in para no. 7, the Hon'ble High Court observed that there was no indication as to which limb of section 270A of the Act was attracted and how the ingredients of section 270A(9) of the Act were satisfied. Hence, we find that the Hon’ble High Court emphasized the requirement to specify whether the penalty proceedings concerned under-reporting or misreporting of income and to explain how the ingredients of misreporting were satisfied. In the present case, the AO specifically identified the charge as under-reporting of income in consequence of misreporting and recorded the failure to substantiate the expenditure. Accordingly, in view of the above, we find no infirmity in the order of the Ld. CIT(A) confirming the penalty of Rs.3,66,220/- levied under section 270A of the Act. The order of the Ld. CIT(A) is upheld, and the grounds raised by the assessee are dismissed.

14.

In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 16th October, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 16th October, 2026. Vinodan/sps Copy to: S.No Addresses 1 M/s.Satyadeva Agencies, 12-3-17/4/1, Red Bridge Town, KIMS Road, Amalapuram, A.P 533201 2 Income Tax Officer, Ward-1, Amalapuram 3 Pr. CIT, Visakhapatnam 4 DR, ITAT Visakhapatnam Benches 5 Guard File

By Order

TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.10.16 14:41:08 +05'30'

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