DCIT-15(3)(2), MUMBAI, MUMBAI vs. STRIDES PHARMA SCIENCE LIMITED, NAVI MUMBAI

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ITA 1911/MUM/2026Status: DisposedITAT Mumbai14 October 2026AY 2018-198 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal and directed the deletion of the penalty levied under Section 270A. The Tribunal noted that the Assessing Officer did not specify any of the variations mentioned under Section 270A(2) or Section 270A(9) of the Act. Instead, the AO stated that penalty proceedings were initiated for under-reporting of income which was a consequence of misreporting. The Tribunal found that the notice issued under Section 270A did not specify the limb of the provision attracted. Relying on the decisions of the Hon'ble Delhi High Court in Schneider Electric South East Asia (Hq) Pte Ltd. v. ACIT, Prem Brothers Infrastructure LLP v. NFAC, and GE Capital US Holding, Inc. v. DCIT, the Tribunal held that in the absence of details specified by the AO as to which limb of Section 270A was attracted, the impugned penalty was liable to be quashed. Consequently, the notice issued under Section 270A was held to be bad in law, and therefore, the penalty order passed was also bad in law. The Tribunal did not decide on the other grounds raised by the assessee as the issue of the notice being bad in law was decisive.

What were the facts?

The assessee, Strides Pharma Science Limited, and the Revenue are in appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, against the order of the NFAC, Delhi, dated 27.11.2025. The appeals pertain to Assessment Year 2018-19 and concern a penalty levied under Section 270A of the Income Tax Act, 1961. The Assessing Officer (AO) made several additions/disallowances during the assessment, including ESOP expenses, deductions under Section 35(2AB), write-off of inventory, disallowance under Section 14A, business promotion expenses, and non-deduction of TDS on professional fees. The AO initiated penalty proceedings under Section 270A on the disputed demand. The NFAC partly sustained the penalty, reducing it to 50% of the assessed income for misreporting and under-reporting of income, and directed the AO to levy it accordingly.

What were the issues?

1. Whether the penalty order under Section 270A of the Income Tax Act, 1961, is bad in law due to the Assessing Officer failing to specify the limb of the provision (under-reporting under Section 270A(2) or misreporting under Section 270A(8)) under which the penalty was levied? 2. Whether the penalty under Section 270A of the Income Tax Act, 1961, is sustainable when the additions/disallowances were based on items fully disclosed in the return and accounts, with bona fide explanations and reliance on judicial precedents, thus not constituting under-reporting or misreporting under Section 270A(6)? 3. Whether the penalty is sustainable when it is levied based on a difference of opinion by the AO rather than misrepresentation or suppression of facts? 4. Whether the penalty order is bad in law for being non-speaking and lacking independent reasoning? Assessee's contentions: The penalty was initiated for misreporting but levied for under-reporting. The AO failed to specify the limb of Section 270A. Additions/disallowances were on disclosed items with bona fide explanations, thus not under-reporting or misreporting under Section 270A(6). The penalty is based on a difference of opinion. The penalty order is non-speaking. Reliance was placed on Delhi High Court decisions in Schneider Electric South East Asia (Hq) Pte Ltd. v. ACIT, Prem Brothers Infrastructure LLP v. NFAC, and GE Capital US Holding, Inc. v. DCIT. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 270A,Section 35(2AB),Section 14A,Section 40(a)(i),Section 251(2),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: CHALLA NAGENDRA PRASAD & SHRI MAKARAND VASANT MAHADEOKAR

For Respondent: Shri Nishant Samaiya (CIT DR)
Pronounced: 14/10/2026

Heard together (2 matters)

ITA 930/MUM/2026
ITA 1911/MUM/2026

Read from the judgment's own cause title. This page is filed under one of them.

आदेश / ORDER

PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: Both these appeals are filed by the assessee and the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi, dated 27.11.2025 for the assessment year 2018-19 in partly sustaining the penalty levied u/s. 270A of the Act.

2.

First, we take up the appeal of the assessee. The grounds of appeal are as under:

“1. That the order passed by the Learned Commissioner of Income-Tax (Appeals) - National Faceless Appeal Centre ('Ld. CIT(A)') is bad in law, contrary to the facts of the case, provisions of Income- tax Act, 1961 ('the Act') and principles of natural justice and therefore is liable to be quashed. 2. In the facts and circumstances of the case and in law, the impugned penalty order u/s 270A passed by the Assessment Unit, National Faceless Assessment Centre ["the NFAC" or "the Ld. AO" for short] as partly affirmed by the Ld. CIT(A) deserves to be quashed and set aside in toto, since the Ld. CIT(A) failed to appreciate that: a. the penalty was initiated for misreporting of income whereas the same was levied for under-reporting of income; b. the Ld. AO failed to specify the limb of the provision under which the penalty was levied by him, for "under-reporting" under section 270A(2) or even "misreporting of income" under section 270A(8) of the Act; c. All the additions / disallowances made by the Ld. AO (including those made on estimates) are in respect of items duly and completely disclosed in the return and accounts, for which due and complete explanation was given and the said explanation was bona fide based on the judicial precedents in this regard, including the previous Appellate orders passed in the case of the Appellant itself and therefore in terms of section 270A(6) of the Act there was neither any under-reporting nor any misreporting of income; d. Admittedly, there is neither any misrepresentation or suppression of facts and the penalty is levied purely based on difference of opinion of the Ld. AO with that of the Appellant; e. The penalty is even otherwise contrary to the extant law and therefore unsustainable. 3. That the Ld. CIT(A) grossly erred in directing the jurisdictional assessing officer to levy penalty @ 50% of tax on 'assessed income' instead of 'under-reported income' which is contrary to the provisions of Section 270A of the Act. 4. That the Ld. CIT(A) grossly erred in enhancing the quantum of penalty without providing an opportunity of being heard and thereby violated the provisions of section 251(2) of the Act. 5. Without prejudice to the above, the Ld. CIT(A) erred in confirming the impugned order despite the fact that the appeal against the Assessment order under section 143(3) of the Act is still pending adjudication before the Hon'ble CIT(A). 6. In the facts and circumstances of the case and in law, the orders of the Ld. AO as well as the Ld. CIT(A) are completely non-speaking orders, sans any independent reasoning and even for this reason the same are bad in law. 7. In the facts and circumstances of the case and in law, the penalty u/s 270A as levied by the Ld. AO and as confirmed by the Ld. CIT(A) deserves to be deleted and it is prayed accordingly.” 3. Briefly stated, the facts are that the Assessing Officer while completing the assessment made the following additions/disallowances:

(i) disallowance of ESOP expenses (ii) disallowance of excess deductions claimed u/s. 35(2AB) (iii) disallowance of write-off of inventory and other assets (iv) disallowance u/s. 14A read with Rule 8D (v) disallowance out of Business Promotion Expenses claimed (vi) disallowance u/s. 40(a)(i) for non-deduction of TDS on professional fees towards reimbursement. 4. The Assessing Officer levied penalty u/s. 270A of the Act on the disputed demand. On appeal, the Ld. CIT(A) held that the penalty was levied for under-reporting as a consequence of misreporting of income. The Ld. CIT(A) also observed that the Assessing Officer had wrongly calculated the penalty on the disputed demand at 200%. The Ld. CIT(A) reduced the penalty to 50% of the assessed income for misreporting and under- reporting of income.

5.

Before us, the Ld. Counsel at the outset, referring to Ground No. 2 of the grounds of appeal submitted that the penalty was initiated for misreporting of income whereas the same was levied for under-reporting of income. The Ld. Counsel for the assessee further submitted that the Assessing 4 Officer failed to specify the limb of the provision under which the penalty was levied, i.e., for under-reporting of income u/s. 270A(2) of the Act or for misreporting of income u/s. 270A(8) of the Act.

6.

The Ld. Counsel for the assessee submitted that all the additions/disallowances made by the Assessing Officer including those made on estimates were in respect of items duly and completely disclosed in the return and accounts for which due and complete explanations were furnished. The said explanations were bona fide and based on judicial precedents, including the provisions and previous appellate orders passed in the case of the assessee and therefore, in terms of section 270A(6) of the Act, there was neither any under-reporting nor any misreporting of income.

7.

Reliance was placed on the decision of the Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (Hq) Pte Ltd. v. ACIT, W.P.(C) No. 5111/2022 and C.M. Nos. 15165-15166/2022 dated 28.03.2022. The Ld. Counsel also placed reliance on the decisions of the Hon’ble Delhi High Court in the cases of Prem Brothers Infrastructure LLP v.

NFAC, [2022] 288 Taxman 768 (Del.), and GE Capital US Holding, Inc. v. DCIT, [2024] 468 ITR 746 (Del.)

8.

Heard rival contentions and perused the orders of the authorities below. We have gone through the decisions of the Hon’ble Delhi High Court cited above and observed that the Hon’ble Delhi High Court held that in the absence of details specified by the Assessing Officer as to which limb of section 270A was attracted, the impugned penalty was liable to be quashed.

9.

On perusal of the notice issued u/s. 270A of the Act, we observed that the Assessing Officer did not specify any of the variations mentioned under section 270A(2) of the Act or section 270A(9) of the Act but stated that the penalty proceedings u/s. 270A of the Act were initiated for underreporting of income which was in consequence of misreporting thereof. Therefore, the ratio of the above decisions squarely applies to the facts of the assessee’s case. Respectfully following the said decisions, we hold that the notice issued u/s. 270A of the Act is bad in law and consequently, the penalty order passed is also bad in law.

10.

In view of the above discussion, we allow grounds of appeal of the assessee and direct the Assessing Officer to delete the penalty levied u/s. 270A of the Act.

11.

In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed.

Order pronounced in the open court on 14/10/2026

Sd/- Sd/-

MAKARAND VASANT MAHADEOKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai Dated: 14/10/2026 Prabhat Copy to: STRIDES PHARMA SCIENCE LIMITED, CYBER ONE, UNIT NO. 902, PLOT NO - 4 & 1 6, SECTOR 30A, VASHI, NAVI MUMBAI-400703, MAHARASHTRA ASSISTANT COMMISSIONER OF INCOME- TAX, 2 CIRCLE 15(3)(2), AAYAKAR BHAVAN, MAHARISHI KARVE ROAD,, NAVI MUMBAI-400020, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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