SANDEEP DINESH KULKARNI,KOLHAPUR vs. THE INCOME TAX OFFICER, WARD 1(1), KOLHAPUR, KOLHAPUR

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ITA 2599/PUN/2026Status: DisposedITAT Pune14 October 2026AY 2020-217 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 found merit in the assessee's arguments. It acknowledged that IDBI Bank was a PSU until assessment year 1999-2000, and employees were entitled to exemptions under Sections 10(10), 10(10A), and 10(10AA) until assessment year 2019-2020. While the CIT(A)/NFAC noted that the change in IDBI Bank's status was a significant public record, the Tribunal opined that there was a bonafide belief on the part of the assessee that he was entitled to these exemptions for assessment year 2020-21 as well, considering his past employment with a PSU. Applying Section 270A(6) of the Act, the Tribunal considered the assessee's explanation as bonafide for the purpose of penalty levy. Consequently, the Tribunal held that the CIT(A)/NFAC was not justified in upholding the penalty. The order of the CIT(A)/NFAC was set aside, and the Assessing Officer was directed to cancel the penalty. The grounds raised by the assessee were allowed.

What were the facts?

The assessee, Sandeep Dinesh Kulkarni, filed an appeal against the order of the CIT(A)/NFAC, Delhi, dated 20.03.2026, which confirmed a penalty of Rs. 5,04,496/- levied under Section 270A of the Income Tax Act, 1961, for the assessment year 2020-21. Initially, the assessee declared a total income of Rs. 9,48,870/-. However, the case was reopened due to incorrect claims for exemptions under Sections 10(10), 10(10A), and 10(10AA) for gratuity, commuted pension, and leave encashment. The revised return declared a total income of Rs. 14,50,830/-. The Assessing Officer determined the total income at Rs. 17,74,399/- and initiated penalty proceedings, levying Rs. 5,04,496/- on the grounds of misreporting and false claims of exemption amounting to Rs. 8,25,529/-.

What were the issues?

1. Whether the penalty levied under Section 270A of the Income Tax Act, 1961, is justified when the assessee claimed exemptions under Sections 10(10), 10(10A), and 10(10AA) based on a bonafide belief that IDBI Bank was still a Public Sector Undertaking (PSU) after LIC acquired a majority stake. Assessee's contentions: The assessee argued that he was under a bonafide belief that IDBI Bank, previously a PSU, continued to be one even after LIC's takeover of 51% of its share capital. He contended that as an employee of a PSU, he was entitled to the claimed exemptions. He relied on Section 270A(6) of the Act, which excludes certain amounts from under-reported income if the explanation is bonafide and all material facts are disclosed. The assessee cited decisions from various ITAT Benches, including Chundayil Kalam Girijadevi vs. ITO, Ravindra Madhukar Kharche vs. ACIT, and Adinath Vasantrao Wandhekar vs. ITO, where penalties under Section 270A were cancelled in similar circumstances. Revenue's contentions: The Revenue relied on the orders of the Assessing Officer and the CIT(A)/NFAC.

Which sections of the Income-tax Act were involved?

Section 270A,Section 10(10),Section 10(10A),Section 10(10AA),Section 147,Section 144B,Section 192,Section 270A(6),Section 270A(9)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA

For Appellant: Shri Pramod Shingte
For Respondent: Ms. Bhavya I.V., Jt. CIT-DR

PER R.K. PANDA, VP:

This appeal filed by the assessee is directed against the order dated 20.03.2026 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2020-21. 2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) / NFAC in confirming the penalty of Rs.5,04,496/- levied by the Assessing Officer u/s 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

3.

Facts of the case, in brief, are that the assessee is an individual and has filed his return of income on 20.10.2020 declaring total income of Rs.9,48,870/- after claiming deduction of Rs.1,76,938/- under Chapter VI-A. The case of the assessee was reopened on account of wrong claim of exemption u/s 10(10) for death cum

2 retirement gratuity, u/s 10(10A) for commuted value of pension and u/s 10(10AA) of the Act for leave encashment. Accordingly notice u/s 148 of the Act was issued and served on the assessee in response to which the assessee filed his return of income on 16.05.2024 declaring total income of Rs.14,50,830/- after claiming deduction of Rs.1,76,938/- under Chapter VI-A.

4.

During the course of assessment proceedings the Assessing Officer observed that the assessee has received gross salary of Rs.50,59,159/- which included amount of Gratuity of Rs.22,46,005/-, commuted pension of Rs.17,97,956/- and leave encashment of Rs.10,16,732/- on which TDS had been made u/s 192 of the Act as per TDS statement for the financial year 2019-20 relevant to assessment year 2020-21. After considering the various replies given by the assessee from time to time, the Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the Act determining the total income of the assessee at Rs.17,74,399/-. Subsequently the Assessing Officer initiated penalty proceedings u/s 270A of the Act. Rejecting the various explanations given by the assessee, the Assessing Officer levied penalty of Rs.5,04,496/- on the ground that the assessee has misreported the facts by making false claim of exemption to the extent of Rs.8,25,529/-.

5.

In appeal the Ld. CIT(A) / NFAC confirmed the penalty so levied by the Assessing Officer by observing as under:

3

6.

Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal.

7.

The Ld. Counsel for the assessee reiterated the same arguments as made before the Assessing Officer and the Ld. CIT(A) / NFAC and submitted that the assessee was under bonafide belief that he is entitled to exemptions u/s 10(10), 10(10A) and 10(10AA) of the Act for the employees working under the IDBI Bank which continued to be a Public Sector Bank even after the takeover of 51% of its total share capital by LIC. He submitted that the assessee was not aware of the RBI Press Release in which RBI has categorized IDBI Bank as a Private Sector Bank.

8.

Referring to the provisions of section 270A(6) of the Act, he drew the attention of the Bench to the same which read as under: “Penalty for under-reporting and misreporting of income. 270A. (1)…. ……

4 (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 or29-30[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 or29-30[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.”

9.

He submitted that the assessee was under bonafide belief that he is entitled for all these exemptions since IDBI Bank was earlier a Public Sector Undertaking and only from this assessment year it ceased to be a PSU. Relying on following decisions, he submitted that under somewhat similar circumstances, the various Benches of the Tribunal have cancelled the penalty levied u/s 270A of the Act: i) Chundayil Kalam Girijadevi (Deceased) vs. ITO & TPS vide ITA No.564/COCH/2025 order dated 22.09.2025 for assessment year 2018-19 ii) Ravindra Madhukar Kharche vs. ACIT vide ITA No.228/NAG/2023 order dated 16.04.2024 for assessment year 2017-18 iii) Adinath Vasantrao Wandhekar vs. ITO vide ITA No.1388/PUN/2023 order dated 08.03.2024 for assessment year 2018-19

10.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

5

11.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case levied penalty of Rs.5,04,496/- being the penalty @ 200% of tax sought to be evaded u/s 270A(9) of the Act on the ground that the assessee has under-reported his income to the extent of Rs.8,25,529/- which is in consequence of mis-reporting thereof. We find the Ld. CIT(A) / NFAC upheld the penalty levied by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee was under bonafide belief that IDBI Bank which was a PSU till the immediately preceding assessment year continues to be so even after takeover of 51% stake by LIC of India and the assessee was being an employee of the PSU, is entitled for all the exemptions u/s 10(10), 10(10A) and 10(10AA) of the Act. Therefore, in view of the provisions of section 270A(6) the penalty levied by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC is not justified.

12.

We find some force in the above arguments of the Ld. Counsel for the assessee. It is an admitted fact that IDBI Bank was a Public Sector Undertaking till the assessment year 1999-2000 and therefore, being an employee of PSU the assessee was entitled to various exemptions / deductions prescribed u/s 10(10), 10(10A) and 10(10AA) of the Act till assessment year 2019-2020. We find the Ld. CIT(A) / NFAC while sustaining the penalty has observed that the change in the 6 status of IDBI Bank was a significant public record and financial reporting. As an assessee, the burden of ensuring the accuracy of claims for exemption rests solely on the individual. In our opinion, there was a bonafide belief on the part of the assessee that being an employee of Public Sector Undertaking he is entitled to exemption u/s 10(10), 10(10A) and 10(10AA) of the Act for assessment year 2020- 21 also. Therefore, in the light of the provisions of section 270A(6) of the Act, we are of the considered opinion that the explanation given by the assessee that being an employee of PSU he is entitled to the exemptions as per the provisions of section 10(10), 10(10A) and 10(10AA) of the Act can be considered as a bonafide one for the purpose of levy of penalty. We, therefore, are of the opinion that the Ld. CIT(A) / NFAC is not justified in upholding the penalty levied by the Assessing Officer u/s 270A of the Act. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to cancel the penalty. The grounds raised by the assessee are accordingly allowed.

13.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 14th October, 2026. (ASTHA CHANDRA) VICE PRESIDENT पुणे Pune; दिन ांक Dated : 14th October, 2026 GCVSR

7 आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपील र्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent

3.

The concerned Pr.CIT, Pune

4.

DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, Sunil Kumar More //// More Date: 2026.10.24 13:02:43 +05'30'

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