SAJI KOPA JOHN,RANGA REDDY vs. DCIT, CENTRAL CIRCLE-3(3), HYDERABAD

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ITA 500/HYD/2026Status: DisposedITAT Hyderabad14 October 2026AY 2020-2119 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 penalty levied under Section 270A for AY 2019-20 was incorrect. The assessee had a bona fide belief regarding the taxability of capital gains and promptly disclosed them in the revised return. The voluntary withdrawal of the Section 54F deduction and payment of taxes indicated under-reporting, not misreporting. The Tribunal noted that the assessee fulfilled substantial conditions for immunity under Section 270AA by paying taxes and not filing an appeal, and the delay in filing Form 68 was a procedural lapse that could be cured. Therefore, immunity should have been provided, and the penalty deleted. For AY 2020-21, the facts and issues were identical, with capital gains disclosed in the revised return and accepted by the AO. The Tribunal applied the same reasoning, setting aside the CIT(A)'s order and deleting the penalty. The appeals were allowed.

What were the facts?

The assessee, Saji Kopa John, filed appeals against orders of the CIT(A) for Assessment Years (AY) 2019-20 and 2020-21, upholding penalties under Section 270A of the Income Tax Act, 1961. A search operation on March 15, 2023, revealed a sale deed dated April 17, 2019, for land sold for Rs. 1,66,00,000. The assessee did not offer capital gains in the original return for AY 2019-20. During the search, the assessee admitted capital gains and agreed to pay taxes. A notice under Section 148 was issued, and the assessee filed a revised return declaring total income of Rs. 80,01,720. The Assessing Officer (AO) recomputed capital gains, adding Rs. 56,33,333, and initiated penalty proceedings under Section 270A, treating it as misreporting of income. The assessee claimed exemption under Section 54F, which was later withdrawn as the investment was beyond the due date. The penalty levied was Rs. 29,73,754 for AY 2019-20 and Rs. 34,18,310 for AY 2020-21.

What were the issues?

1. Whether the penalty levied under Section 270A for AY 2019-20 is warranted, considering the assessee's voluntary withdrawal of Section 54F deduction and payment of taxes, and whether it constitutes misreporting of income. - Assessee's contention: The penalty is unwarranted as the income was voluntarily offered, taxes paid before assessment completion, and the withdrawal of Section 54F deduction was bona fide. It should be considered under-reporting, not misreporting. Immunity under Section 270AA should be granted despite a delay in filing Form 68. - Revenue's contention: Not recorded. 2. Whether the penalty levied under Section 270A for AY 2020-21 is warranted, given that capital gains were disclosed in the revised return and accepted by the AO without additions. - Assessee's contention: Immunity under Section 270AA should be provided as income was voluntarily surrendered and taxes paid. - Revenue's contention: Not recorded. 3. Whether the delay in filing Form 68 for seeking immunity under Section 270AA should be condoned in deserving cases of voluntary disclosure and tax payment.

Which sections of the Income-tax Act were involved?

Section 270A,Section 270AA,Section 54F,Section 132,Section 148,Section 143(3),Section 147,Section 276C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “A” Bench, Hyderabad

आदेश / ORDER PER MANJUNATHA G., A.M :

The above two appeals filed by the assessee are directed against the separate orders of learned Commissioner of Income Tax (Appeals) – 1, Hyderabad, dated 15.01.2026 passed u/s 270A of Income-tax Act, 1961 for A.Ys. 2019-20 and 2020-21, respectively. Since common issues are involved in both these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.

2.

The has raised more or less common grounds of appeal in both the assessment years. Therefore, for the sake of brevity, ITA No.499/Hyd/2026 for A.Y. 2019-20 is taken as lead appeal and its grounds are re-produced as under:

“1. The Ld. Commissioner of Income-Tax (Appeals)/CIT(A) erred in affirming the order of the Assessing Officer without appreciation of facts and legal position presented before him. 2. The learned CIT(A) erred in upholding the levy of penalty of Rs. 29,73,754/- u/s 270A, treating the case as one of “misreporting of income”, by narrowly interpreting the conditions specified under Section 270A(9). 3. The Ld. CIT (Appeals) erred in confirming the penalty levied u/s 270A of the Act despite the fact that deduction claimed u/s 54F was voluntarily withdrawn just to purchase peace with the department, even

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though reinvestment was actually made merely because it was not made before the due date for filing return of income. 4. The Ld. CIT (Appeals) ought to have appreciated the fact that no separate addition was made in the reassessment proceedings but for the addition which was voluntarily accepted, which categorically proves the bonafides of the Appellant and thus levy of penalty u/s 270A of the Act is unwarranted as per provisions of Sec. 270A(6) of the Act. 5. The ld. CIT(A) failed to appreciate that income was voluntarily offered, entire tax and interest were paid before completion of assessment. Thus, at best it is a case of under-reporting and not misreporting attracting 200% penalty. 6. The Ld. Commissioner(Appeals) erred in rejecting the Form-68 filed by the Appellant seeking immunity on the alleged ground that said form was not filed within statutory time period and statutory requirements were not complied for getting immunity but the fact remains that Courts have time and again held that delay in filing Form 68 needs to be condoned in deserving case i.e, in cases where there is a voluntary disclosure of income and payment of tax. 7. For these and other grounds that may be urged during the course of Appeal proceedings, the penalty levied by the Assessing Officer may be quashed/deleted.”

3.

The brief facts of the case are that, the assessee, an individual, and is a trustee of M/s. John Foundation and M/s. Asha Jyothi. Assessee is also the Director of M/s. Ben Holistic Enterprises Private Limited. The assessee filed his return of income for the assessment year 2019-20 on 22.07.2019, declaring total income of Rs.79,40,180/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the group cases of M/s. John Foundation on 15.03.2023. During the course of search, at the residential premises of the assessee, a

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sale deed dated 17.04.2019 was found and seized. As per the said sale deed, the assessee had entered into agreement for sale of land admeasuring Acre 1-00 Guntas in Survey No.244 situated at Athavelly Village, Medchal Mandal, for a consideration of Rs.1,66,00,000/- and out of which, the assessee had received Rs.1,66,00,000/-. It is further noted that, the assessee did not offer capital gains in the return of income filed. Further, during the course of search, a statement was recorded from the assessee, where the assessee has admitted resultant capital gain and also agreed to pay taxes.

4.

Consequent to search, notice under Section 148 of the Act, dated 22.02.2024 was issued and in response to notice, the assessee filed return of income on 21.05.2024, admitting total income of Rs.80,01,720/-. The case was selected for scrutiny, and during the course of assessment proceedings, the A.O., on the basis of incriminating material found in the course of search, called upon the assessee to file relevant details of computation of capital gain, along with supporting evidences for exemption claimed under Section 54F of the Act. In response, the assessee submitted that he has sold the property by way of sale agreement

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dated 17.04.2019 and received an amount of Rs. 1,66,00,000/-. However, the date of registration of the property is not clearly established from the assessment order. The assessee further submitted that, he has computed capital gain by taking into account relevant cost of acquisition and other expenses, and also claimed exemption under Section 54F of the Act, for purchase of another property. However, the investment made in purchase of property is beyond the due date specified under Section 54F of the Act, the assessee willing to withdraw exemption claimed under Section 54F of the Act, and to support his contention filed a revised statement of total income. The A.O., after considering relevant submissions of the assessee and also taking note of relevant facts, observed that, although the assessee has sold property and received consideration, but failed to disclose relevant capital gain in the original return of income filed for the year under consideration. Further, although the assessee has filed a return of income in response to notice under Section 148 and declared capital gain, but claimed incorrect exemption under Section 54F of the Act. Therefore, the A.O. rejected explanation of the assessee and recomputed capital gain and made additions of Rs.56,33,333/- towards long-term capital gain derived from sale of

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property. The A.O. also initiated penalty proceedings under Section 270A of the Act.

5.

During penalty proceedings, the A.O. called upon the assessee to file his submissions for proposed penalty for under-reporting of income in consequence of misreporting. In response, the assessee submitted that, voluntary surrender of income during assessment proceedings cannot be considered as misreporting of income and instead, it can be considered as under-reporting of income. The assessee further submitted that, the assessee has voluntarily withdrawn exemption claimed under Section 54F of the Act, and also paid taxes, immunity provided under Section 270AA of the Act, should be provided, and in this regard, filed relevant details of Form No.68 filed along with proof of payment of taxes. The A.O., after considering the submissions of the assessee and also taking note of relevant facts, observed that the assessee disclosed the transaction of sale of property and consequent capital gain in the return of income filed in response to notice under Section 148 and not in the original return of income. Further, the assessee has claimed incorrect deduction under Section 54F of the Act, and later withdrawn said deduction, which resulted in addition of

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Rs.56,33,333/-. Therefore, the explanation offered by the assessee that, the deduction claimed under Section 54F was bona fide, and as per the advice of the tax consultant, who has advised the assessee that time limit available for making investment was up to 30th September 2019 as against 31st July 2019, is devoid of merit and cannot be accepted. The assessee's request for immunity under Section 270AA cannot be accepted since the penalty initiated was for under-reporting in consequence of misreporting. Therefore, the A.O. rejected explanation of the assessee and levied penalty of Rs.29,73,754/- for under-reporting of income which is in consequence of misreporting thereof.

6.

Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee reiterated submissions made before the A.O. and argued that, although the assessee has not disclosed capital gain in respect of sale of property, but the fact remains that the assessee had a bona fide belief that capital gain can be offered to tax only when the sale deed was executed, and further, when the department noticed the transaction, the assessee came forward and disclosed capital gain in the return of income filed in response to notice

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issued under Section 148 of the Act. Further, the claim of exemption under Section 54F of the Act, has been withdrawn by noticing the fact that investment made in new asset was beyond the due date and said mistake was on bona fide belief that the due date for filing return of income was up to 30th September 2019, whereas as per law, the due date was 31st July 2019. Since the claim was made with a bona fide belief that the assessee is eligible for deduction under Section 54F, and further, said claim was withdrawn and paid relevant taxes, the case of the assessee should have been considered as under-reporting of income, and since the assessee paid taxes and also filed Form No.68 for immunity under Section 270AA of the Act, the A.O. ought not to have levied penalty under Section 270A for under-reporting of income in consequence of misreporting thereof. Therefore, submitted that the penalty levied by the A.O. should be deleted.

7.

The learned CIT(A), after considering submissions of the assessee and also taking note of relevant facts, rejected explanation of the assessee and sustained penalty levied by the A.O. under Section 270A of the Act, by holding that it is a clear case of under-reporting of income which is in consequence of

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misreporting thereof, because the assessee has not disclosed capital gain arising on account of transfer of property in the original return of income filed under Section 139 of the Act. Further, although the assessee has disclosed capital gain in the return of income filed under Section 148, but made an incorrect claim of 54F and later withdrawn during the course of assessment proceedings. Therefore, it is a clear case of under-reporting of income and is in consequence of misreporting, which attracts penalty under Section 270A(9) of the Act. Further, the A.O. was right in rejecting application filed by the assessee in Form No.68 for immunity under Section 270AA, because penalty had been initiated for under-reporting of income in consequence of misreporting thereof and once penalty has been initiated for misreporting, then immunity provided under Section 270AA is not applicable. Therefore, the Ld. CIT(A) rejected the explanation of the assessee and upheld the penalty levied by the A.O.

8.

Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal.

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9.

The learned counsel for the assessee, Shri Sashank Dundu, submitted that, the learned CIT(A) erred in sustaining penalty levied by the Assessing Officer under section 270A(9) of the Act, without appreciating the fact that it is not a case of misreporting of income, but a case of under-reporting of income for which immunity provided under section 270AA of the Act, is applicable. The learned counsel for the assessee further submitted that, although the assessee had not disclosed capital gain in original return of income, but fact remains that he has admitted capital gain in the return of income filed in response to notice under section 148. Further, the assessee had also withdrawn deduction under section 54F and paid relevant taxes within the time provided under section 270AA of the Act, and also filed Form No.68. Although Form number 68 filed by the assessee is belated, but, fact remains that once substantive conditions are satisfied, then filing of Form 68 is only directory in nature, and the A.O. ought to have provided immunity to the assessee and not levied penalty under section 270A of the Act. In this regard, he relied upon the decision of ITAT, Hyderabad Bench in the case of Ratna Show Reddy Singareddy Vs. DCIT reported in (2026) 186 taxmann.com 432.

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10.

The learned Senior A.R. for the Revenue, Shri Ashish Shukla, on the other hand, supporting the order of the A.O. and Ld. CIT(A), submitted that, it is a clear case of under-reporting of income is in consequence of misreporting thereof, it is evident from relevant discussions in the assessment order as well as penalty order where the A.O. has brought out clear facts to the effect that the assessee has not disclosed capital gain arising on account of transfer of property. Further, even though the assessee has disclosed capital gain subsequent to search in the return of income filed in response to notice under section 148, but fact remains that the assessee has made an incorrect claim of deduction under section 54F of the Act, and the same has been subsequently withdrawn during the course of assessment proceedings. Therefore, the arguments of the counsel for the assessee that, it is not a case of misreporting is incorrect. The learned Senior A.R., for the revenue further submitted that, once penalty has been initiated for under-reporting of income is in consequence of misreporting as per sub-section (9) of section 270A, then immunity provided under section 270AA of the Act, is not applicable, and therefore the A.O. has rightly rejected

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application filed by the assessee. Therefore, he submitted that, the orders passed by the A.O. and Ld. CIT(A) should be upheld.

11.

We have heard both the parties, perused the materials on record and had gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee has not disclosed the relevant capital gain arising on account of transfer of property in the original return of income filed under Section 139 of the Act. It is also an admitted fact that the assessee has filed return of income in response to notice under Section 148 and disclosed capital gain after claiming deduction under Section 54F of the Act. Further, deduction under Section 54F of the Act has been withdrawn by filing a revised statement of total income along with payment of self-assessment tax before the A.O. The A.O. levied penalty under Section 270A(9) of the Act for under- reporting of income in consequence of misreporting thereof on the ground that the assessee has reported capital gain subsequent to date of search in the return of income filed in response to notice under Section 148 and further, he has made an incorrect claim of deduction under Section 54F of the Act, which falls within the ambit of under-reporting of income which is in consequence of

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misreporting thereof. It was the arguments of the assessee before the A.O. that non-disclosure of capital gain is on bona fide belief that capital gain is taxable only in the year of execution of sale deed and further, claim of deduction under Section 54F of the Act, was also on account of incorrect advice given by the consultant who filed the return of income, where he has stated that due date for filing return of income was up to 30th September 2019 as against 31st July 2019 and the assessee, on the basis of said advice, claimed deduction under Section 54F on investment made for purchase of new asset on or before 30th September 2019. However, when he came to know that due date was only up to 31st July 2019, deduction under Section 54F of the Act was withdrawn and relevant taxes have been paid before the assessment was completed. Therefore, claimed that immunity provided under Section 270AA of the Act is applicable and the A.O. ought to have provided immunity and not levied penalty under Section 270A(9) of the Act.

12.

We have given our thoughtful consideration to the reasons given by the A.O. in light of the facts of the present case and arguments advanced by the counsel of the assessee and learned

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Senior A.R. for the Revenue and we find that, although the assessee has not disclosed the capital gain arising on account of transfer of property in the original return of income filed under Section 139 of the Act, but disclosed said capital gain in the return of income filed in response to notice under Section 148 of the Act. Further, deduction claimed under Section 54F of the Act has also been withdrawn by filing a revised statement of total income along with payment of self-assessment tax before the A.O. completed the assessment upon noticing the fact that investment made in new asset was beyond the due date provided under Section 54F of the Act. From the above facts, it is very clear that, the assessee, under bona fide belief, that capital gain was not liable to tax when he had filed original return of income and further, has promptly disclosed relevant capital gain in the revised return filed in response to notice under Section 148 of the Act. Further, the assessee has also voluntarily withdrawn deduction under Section 54F and paid relevant taxes. Therefore, in our considered view, the reasons given by the A.O. to levy penalty under Section 270A(9) of the Act on the ground that it is a case of under-reporting of income in consequence of misreporting thereof is incorrect. In our considered view, it is not a case of under-

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reporting of income in consequence of misreporting, but at best, it can be considered as the case of under-reporting of income.

13.

Having said so, let us come back to the other arguments of the assessee in light of the provisions of Section 270AA of the Act. The provisions of Section 270AA provide immunity from levy of penalty, if the conditions provided therein are satisfied. As per Section 270AA, an assessee may make an application to the A.O. to grant immunity from imposition of penalty under Section 270A and initiation of proceedings under Section 276C, if he pays tax and interest payable as per the order of assessment or reassessment under Section 143(3) or Section 147 and no appeal against the order has been preferred. Further, an application referred to in sub-section (1) shall be made within one month from the end of the month in which the order referred to in clause (a) of sub-section (1) has been received. In the present case, the assessee satisfied conditions provided under sub-section (1) by paying relevant tax and interest and also not preferred an appeal. However, an application referred to in sub-section (1) has been filed beyond the due date provided under sub-section (2) of the Act. The A.O. rejected the application filed by the assessee on the

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ground of initiating penalty under Section 270A(9) of the Act, and also belated filing of Form No. 68. In our considered view, once substantial conditions of sub-section (1) are satisfied, then, filing of Form No. 68 is a procedural lapse and the same can be cured. Therefore, the A.O., having noticed the fact that the assessee has paid relevant taxes and interest within the due date provided under the Act, ought to have considered application filed by the assessee in Form No. 68 and provided immunity to the assessee for imposition of penalty under Section 270A of the Act. Therefore, in our considered view, the case of the assessee squarely falls under the provisions of Section 270A of the Act, and therefore, the A.O. ought to have provided immunity from imposition of penalty under Section 270A of the Act, since the assessee has fulfilled substantial conditions on payment of taxes and not filing appeal against the assessment order. The CIT(A), without considering relevant facts, rejected explanation of the assessee and upheld penalty levied by the A.O. Accordingly, the appeal filed by the assessee is allowed and the penalty levied by the A.O. is deleted.

14.

In the result, the appeal filed by the assessee in ITA No.499/Hyd/2026 is allowed.

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ITA No. 500/Hyd/2026 for A.Y. 2020-21

15.

In this case, the facts and issue involved are identical to the facts and issue which we had considered for the Assessment Year 2019-20, except change in facts to the effect that the assessee has disclosed capital gain arising on account of transfer of property in the return of income filed in response to notice under Section 148 of the Act, and paid relevant taxes and the A.O. had also accepted the income returned by the assessee without any additions to total income. They have initiated penalty under Section 270A and levied penalty of Rs. 34,18,310/- under Section 270A(9) of the Act, for under-reporting of income is in consequence of misreporting thereof.

16.

The assessee claimed that, since he has voluntarily surrendered income and paid relevant taxes, immunity provided under Section 270AA is applicable, and accordingly, filed Form No. 68 along with proof of payment of taxes. The A.O. rejected Form No. 68 filed by the assessee on the ground that it is a case of misreporting of income and penalty has been initiated for under- reporting of income is in consequence of misreporting and therefore, immunity provided under Section 270AA of the Act,

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cannot be provided and accordingly, rejected Form No. 68 and levied penalty.

17.

We have considered an identical issue in assessee's own case for Assessment Year 2019-20 in ITA No.499/Hyd/2026. But for the figures, the facts and issues are exactly identical. Therefore, the reasons given by us in preceding paragraph nos. 11 to 13 shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we set aside the order of the Ld. CIT(A) and delete penalty levied by the A.O.

18.

In the result, the appeal filed by the assessee in ITA No.500/Hyd/2026 is allowed.

19.

To sum up, both the appeals filed by the assessee are allowed.

Order pronounced in the Open Court on 14th October, 2026.

Sd/- Sd/- श्री विजय पाल राव (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER

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Hyderabad, dated 14.10.2026. TYNM/sps आदेशकी प्रतिलिपि अग्रेषित/ Copy of the order forwarded to:- 1. निर्धारिती/The Assessee : SAJI KOPA JOHN, 5-1007, B.R. NAGAR, OLD ALWAL, SECUNDERABAD, BOLARUM BAZAR S.O, RANGA REDDY-500010, TELANGANA 2. राजस्व/ The Revenue : DCIT, CENTRAL CIRCLE-3(3), AAYKAR BHAWAN, OPP LB NAGAR STADIUM, BASHEER BAGH, HYDERABAD-500004, TELANGANA 3. The Principal Commissioner of Income Tax (Central), Hyderabad. विभागीयप्रतिनिधि, आयकर अपीलीय अधिकरण, हैदराबाद / DR, ITAT, Hyderabad 4. गार्डफ़ाईल / Guard file 5.

आदेशानुसार / BY ORDER Digitally signed by TIRUPATI TIRUPATI YAMINI YAMINI NAGA MALLESWARI NAGA MALLESWARI Date: 2026.10.14 13:14:25 +05'30' Senior Private Secretary, ITAT, Hyderabad.

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