AJIT KUMAR JHA,RANCHI vs. INCOME TAX OFFICER, WARD 2(1), RANCHI

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER AND SMT. RAJANI GUDURI, JUDICIAL MEMBER I.T.A. No. 353/RAN/2026 (Assessment Year: 2020-21) (Physical Hearing) Ajit Kumar Jha, I.T.O., Om Lila Bhawan, Near Shiv Mandir, Ward 2(1), Vs. Sainik Colony, Buti, Ranchi-835217 Ranchi. (Jharkhand) PAN No. ACOPJ 6259 L Appellant/ Assessee Respondent/ Revenue

Assessee represented by Shri Ranjot Singh, Advocate. Department represented by Shri Sandipan Khan, Sr.DR Date of hearing 05/10/2026 Date of pronouncement 14/10/2026 O R D E R PER: BENCH 1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, [in short, the ld. CIT(A)] dated 02/04/2026 for the Assessment Year (AY) 2020-21 wherein the assessee has raised following grounds of appeal: "1. That having regard to the facts and circumstances of the case, the Assessment Unit and the National Faceless Appeal Centre has erred in imposing penalty under Section 270A of the Income Tax Act, 1961 despite due disclosure of income and reasons for non-filing of Income Tax Return 2. That having regard to the facts and circumstances of the case, the Notice under Section 274 read with Section 270A of the Income Tax Act, 1961 is bad in law, as it did not specify under which limb of Section 270A the penalty proceedings had been initiated, i.e., whether the notice was issued for mis-reporting of Income OR under-reporting of Income,

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO and also failed to specify the sub-limb of Section 270A(2) in the Order dated 21.05.2025 3. That having regard to the facts and circumstances of the case, the Penalty Order dated 21.05.2025 issued Section 270A of the Income Tax Act, 1961 is illegal and contrary to Section 270A(6)(a) of the Income Tax Act, 1961. 4. That having regard to the facts and circumstances of the case, mere non-filing of application for immunity from imposition of penalty despite meeting conditions set under Section 270AA of the Income Tax Act, 1961 does not render the Appellant liable to Penalty under Section 270A of the Income Tax Act, 1961. 5. That having regard to the facts and circumstances of the case, the judicial precedents relied upon by the National Faceless Appeal Centre are distinguished and not applicable in the case of the Appellant. 6. That the appellant craves, leave to add, alter, amend OR vary and/OR withdraw any OR all of the aforesaid grounds of Appeal OR at time of hearing of the above appeal."

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO at ₹ 1,60,000/- The assessee also submitted breakup of the salary receipts of ₹ 81,26,474/- and produced supporting documents in the form of bank statement and Form No. 16. The Assessing Officer, after examining the same, accepted the return of income as declared by the assessee. The AO, however, initiated penalty proceedings for underreporting of income and issued notice to the assessee u/s 270A (2) of the Act. In response to that notice several opportunities of being heard were provided to the assessee and assessee made part compliance. After giving due consideration on the facts and circumstances of the case, the Assessing Officer imposed a penalty of ₹ 5,43,092/- (being 50% of the tax of Rs.10,86,184/-) on unreported income under Section 270A r.w.s 274 of the Act. 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who vide the impugned order dated 02/04/2026 dismissed the appeal of the assessee and confirmed the penalty imposed by the AO under Section 270A of the Act on the ground that the appellant has consciously and deliberately evaded the tax by resorting to underreporting his income and liable to pay penalty @50% u/s 270A (7) of the Income Tax Act. 4. Further aggrieved by the order of the ld. CIT(A), the assessee has preferred the appeal before this Tribunal. During the appellate proceedings before us, the appellant has filed written submission as under: "1. The Appellant, being a retired Colonel, has been duly discharging his national duties from inception of his career, and has regularly discharged taxes by filing returns within the time allowed under Section 139(1) of the IT Act. In the AY 2020-21, the setback of loss of family member and the

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO challenges faced due to onset of COVID-19, the Appellant had not been able to file their Income Tax Return within the due time. 2. The Appellant humbly submits that the Appellant's Income in the AY 2020-21 was INR 83,70,584/- (without adjusting for deductions), breakup of which is provided below: a) Salary received from the Ministry of Defence, Government of India taxable to the extent of INR 26,51,588/-. b) Pension, Gratuity and Commuted Pension received from the State Bank of India of INR 54,74,886/- taxable to the extent of INR 15,40,978/-. c) Interest from deposits received from State Bank of India taxable to the extent of INR 1,15,897/-. d) Interest from savings received from State Bank of India taxable to the extent of INR 1,28,213/-. 3. It is submitted that the Salary received from the Ministry of Defence; Pension, Gratuity and Commuted Pension received from the State Bank of India; and Interest from State Bank of India were duly reported in Form 26AS of the AY 2020-21, and TDS to the extent of INR 8,68,161/- was deducted at the time of receipt of such income. The Appellant had further deposited self-assessment tax of INR 1,10,060/- on 16.09.2021 for discharging the tax liability for the AY 2020-21. 4. Considering that the Appellant is a regular taxpayer and has been diligently filing their Income Tax Return under the IT Act of 1961, there can be no intention of the Appellant to under-report income for a single Assessment Year 2020-21, and more particularly when the entire income stands reported in Form 26AS of the AY 2020-21. 5. The act of depositing part of the self-assessment tax is in itself evident of the fact that the Appellant had all intentions to file the return of Income for the AY 2020-21, as nothing was concealed from the eyes of the Income Tax Department, being the entire income was already forming part of Form 26AS. 6. It is even further submitted that out of the income of INR 83,70,584/-, income to the extent of INR 43,16,680/-is taxable for the AY 2020-21, as reported in Income Tax Return filed on 30.04.2024 in response to notice issued under Section 148 of the IT Act. The Appellant in no distant thoughts could have any reason to under-report his income, when the

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO income reported by TDS Deductors computed as per Form 26AS would have been much higher than the actual income earned. 7. The Appellant, on receiving an opportunity to file Income Tax Return by means of issue of Notice under Section 148 of the IT Act, had duly filed their return of Income on 30.04.2024, within a period of 30 days from the date of issue of notice on 31.03.2024. 8. In the said return of Income in Form ITR-1. the Appellant had not under- reported any income, which is evident from the fact that the Income Tax Department had made no adjustments in the Income vide Assessment Order dated 13.11.2024, duly accepting the return of income filed on 30.04.2024 in response to Notice under Section 148 of the IT Act. 9. In light of the facts of the case, the imposition of penalty under Section 270A for under-reporting of income is not justified and merits to be set aside. That having regard to the facts and circumstances of the case, the Notice under Section 274 read with Section 270A of the Income Tax Act, 1961 is bad in law, as it did not specify under which limb of Section 270A the penalty proceedings had been initiated, i.e., whether the notice was issued for mis-reporting of Income or under-reporting of Income, and also failed to specify the sub-limb of Section 270A (2) in the Order dated 21.05.2025. 10. The Appellant submits that the Assessment Unit, during the course of initiation of Penalty Proceedings under Section 274 read with Section 270A, had failed to specify the limb of Section 270A under which the penalty is proposed to be imposed upon the Appellant. The Notice for Penalty dated 13.11.2024 and the Show Cause Notice dated 07.03.2025 merely refer to Section 270A without specifying the limb under which the penalty is to be imposed. 11. It is even further submitted that the Notice for Penalty 13.11.2024 and the Show Cause Notice dated 07.03.2025 have also failed to specify which income has been under-reported by the Appellant, when the Assessment Unit had themselves accepted the Return of Income filed on 30.04.2024 in response to notice under Section 148 of the IT Act. 12. The Appellant further submits that the Assessment Unit had only in the Order dated 21.05.2025 specified the imposition of Penalty under Section

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO 270A(2) of the IT Act for under-reporting of Income, but had again failed to specify the sub-limb of sub-section (2) of Section 270A of the IT Act under which such penalty has been confirmed and demanded from the Appellant. 13. Such non-specification of the limb under which the penalty proceedings have been initiated restrains the Appellant from effective representation and denies an effective opportunity of being heard. Such non-specification of the limb renders the entire process of show-cause otiose, and is bad in law. 14. To support the submissions of the Appellant, reliance is placed upon the judgment of this Hon'ble Bench in M/s Central Coalfields Ltd. v. D.C.I.T in ITA No. 212/Ran/2024, wherein the Hon'ble Bench had deleted the penalty imposed by the Assessing Officer for failure to specify the limb under which penalty was levied. 15. The Appellant further places their reliance on the following judgments, where the penalty was deleted for failure to specify the specific clause under which penalty was proposed to be imposed: a) Hon'ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory (359 ITR 165)(Kar) b) This Hon'ble Bench in M/s Bharat Coking Coal Ltd. v. A.C.LT. in ITA No. 121, 122, 124, 125, 127 & 128/RAN/2018 c) This Hon'ble Bench in Raj Kumar Agrawal v. CIT in ITA No. 255- 258/RAN/2023 d) Hon'ble Bengaluru Bench of ITAT in Shri Rajan R Srinivasan v . ACIT in ITA No. 521/Bang/2019 e) Hon'ble Pune Bench of ITAT in Smita Virendra Lodha v. ITO in ITA No. 1980/PUN/2024 16. Considering the judicial precedents, the Notice under Section 274 read with Section 270A dated 13.11.2024, Show Cause Notice under Section 270A dated 07.03.2025, and the consequent Order under Section 270A dated 21.05.2025 are bad in law. That having regard to the facts and circumstances of the case, the Penalty Order dated 21.05.2025 issued Section 270A of the Income Tax Act. 1961 is illegal and contrary to Section 270A(6)(a) of the Income Tax Act, 1961. 17. The Appellant humbly submits that the Assessment Order dated 13.11.2024 had duly accepted the Income of INR 41,06,360/-reported in

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO Form ITR-1 filed on 30.04.2024 in response to the Notice issued under Section 148 of the IT Act. 18. Such acceptance primo-facie depicts that the Appellant had duly disclosed the income, explained the same and duly disclosed all material facts to substantiate the income and explanations submitted during the course of assessment. Such disclosure was duly accepted by the Assessment Unit without any adjustments. 19. In light of such facts, the accepted income of INR 41,06,360/- ought to be excluded from the under-reported income in accordance with Section 270A(6)(a) of the IT Act, which reads as: "(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: 20. In the case of the Appellant, the Assessing Officer and the Commissioner (Appeals) did not question the income of INR 41,06,360/- disclosed by the Appellant in Form ITR-1 and duly accepted the submissions of the Appellant during the course of assessment, but yet proceeded to treat the income of INR 41,06,360/- as under-reported income and imposed penalty under Section 270A of the IT Act. 21. Such treatment of accepted income of INR 41,06,360/- as under-reported income and consequent imposition of penalty under Section 270A of the IT Act is contrary to Section 270A(6)(a) of the Income Tax Act of 1961. That having regard to the facts and circumstances of the case, mere non- filing of application for immunity from imposition of penalty despite meeting conditions set under Section 270AA of the Income Tax Act, 1961 does not render the Appellant liable to Penalty under Section 270A of the Income Tax Act, 1961. 22. Before any submission is made, the Appellant has re-produced Section 270AA of the IT Act for ease of reference: "(1) An assessee may make an application to the Assessing Officer to grant immunity from imposition of penalty under section 270A and

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO initiation of proceedings under section 276C or section 276CC. if he fulfils the following conditions, namely:- (a) the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and (b) no appeal against the order referred to in clause (a) has been filed. (2) 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 and shall be made in such form and verified in such manner as may be prescribed. (3) The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and after the expiry of the period of filing the appeal as specified in clause (b) of sub-section (2) of section 249, grant immunity from imposition of penalty under section 270A and initiation of proceedings under section 276C or section 276CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A". 23. The Legislature has in its own conscience granted immunity from imposition of penalty under Section 270A of the IT Act read with Section 270AA of the IT Act on fulfilling the following conditions: a) The tax and interest payable as per order of assessment under Section 147/143(3) has been paid within the period specified in the notice of demand; b) No Appeal has been filed against the Assessment Order 24. For receiving such immunity from imposition of penalty, the Legislature has prescribed for filing an application within one month from the end of the month in which assessment order has been passed. 25. It is clear that the Legislature has desired to grant immunity from imposition of penalty under Section 270A if the twin conditions of payment of tax within specified time and non-filing of appeal are satisfied. 26. In the case of the Appellant, the Notice of demand dated 13.11.2024 had demanded payment of sum of INR 2,98,108/- within a period of 30 days from 13.11.2024, i.e., by 12.12.2024. The Appellant had duly discharged the taxes along with interest, ie., the sum of INR 2,98,108/- (rounded off to INR 2,98,110/-) on 14.11.2024 with Challan No. 00914. With such payment being within 30 days from the time allowed in Notice of demand,

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO the Appellant had duly fulfilled first condition for being eligible for immunity from imposition of penalty under Section 270A. 27. Since the Appellant did not file any appeal against the Assessment Order dated 13.11.2024, the Appellant had duly fulfilled the second condition of non-filing of appeal against the Assessment Order. 28. It is thus apparent that the Appellant was eligible for grant of immunity under Section 270AA from imposition of penalty under Section 270A of the IT Act by fulfilling the twin conditions as laid out therein. 29. The Appellant, though eligible for immunity under Section 270AA, could not file any application for grant of immunity under Section 270AA(2) within the time prescribed therein, as the Appellant was legally advised that the Penalty under Section 270A shall be dropped as the Appellant had duly disclosed income in return filed in response to notice under Section 148 of the IT Act. 30. Despite such non-filing, the Appellant should be granted immunity under Section 270AA of the IT Act, as the filing of form for grant of immunity is a mere procedure, and cannot override substantive justice. 31. Reliance is placed on the following judicial precedents involving 'Procedural irregularity cannot defeat Substantive Right": a) Hon'ble Supreme Court in Jai Jai Ram Manohar Lal v. National Building Material Supply, Gurgaon in (1969) 1 SCC 869: "5 ……Rules of procedure are intended to be a handmaid to the administration of justice. A party cannot be refused just relief merely because of some mistake, negligence, inadvertence or even infraction of the Rules of procedure." b) Hon'ble Supreme Court in Uday Shankar Triyar v. Ram Kalewar Prasad Singh and Another in (2006) 1 SCC 75: "17. Non-compliance with any procedural requirement relating to a pleading, memorandum of appeal or application or petition for relief should not entail automatic dismissal or rejection, unless the relevant statute or rule so mandates, Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure, a handmaiden to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use. The well-recognised exceptions to this principle are

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO (i) where the statute prescribing the procedure, also prescribes specifically the consequence of noncompliance; (ii) where the procedural defect is not rectified, even after it is pointed out and due opportunity is given for rectifying it, (iii) where the non-compliance or violation is proved to be deliberate or mischievous, (iv) where the rectification of defect would affect the case on merits or will affect the jurisdiction of the court; (v) in case of memorandum of appeal, there is complete absence of authority and the appeal is presented without the knowledge, consent and authority of the appellant." 32. Considering the judicial precedents and the facts of the case, the Appellant is eligible for immunity under Section 270AA from imposition of penalty under Section 270A of the IT Act as the twin conditions envisaged therein have been fulfilled. 33. Thus, the Appellant humbly submits that the Penalty Order dated 21.05.2015 is contrary to Section 270AA of the Income Tax Act of 1961. That having regard to the facts and circumstances of the case, the judicial precedents relied upon by the National Faceless Appeal Centre are distinguished and not applicable in the case of the Appellant. 34. The Appellant distinguishes their own case with judgments relied upon by the National Faceless Appeal Centre (NFAC) in their Order dated 02.04.2026, and submits that all the judgments relied upon by NFAC inter- alia pertain to "Whether imposition of penalty is justified when there is no mens-rea?.... 35 ln the Appellant's own case, though the Appellant had no such intention of under-report the income for the AY 2030-21. the Appellant submits that the Appellant's own case relied upon due disclosure and acceptance of such disclosure of income, as reported in Form ITR-1 filed on 30.04.2024 in response to notice under Section 148 of the IT Act. 36. The NFAC has on its own framed the sole question of presence of mens rea and dismissed the appeal vide Order dated 02.04.2026 relying on the judgments that the penalty is imposable even when the mens rea is absent, and that the Appellant's case involved the presence of mens rea. 37. The NFAC had lost sight of the fact that the Appellant's own case involved the declaration of income vide return of income filed on 30.04.2024 in

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO response to the Notice under Section 148 of the IT Act, and its consequent acceptance vide Assessment Order dated 13.11.2024, by which the Appellant had discharged the onus to offer a bona-fide explanation and disclosed all the material facts to substantiate the explanation offered. 38. The NFAC has failed to discuss and decide on the entire set of grounds relied upon by the Appellant, and such appeal order merits to be set aside." The ld. Counsel for the appellant then submitted before us that in view of the above submissions, the appellant’s prayer for grant of immunity u/s 270AA of the Income Tax Act may kindly be granted. 5. The ld. Sr. DR, on the other hand, vehemently supported the orders of the lower authorities. 6. We have carefully considered the entire facts and circumstances of the case and the rival submissions. On the claim of the appellant that his case is covered under Section 270AA of the Act, we find that to get immunity from the imposition of penalty following conditions are required to be fulfilled:- "(1) the assessee has to make an application to the Assessing Officer to grant immunity from imposition of penalty under Section 270A of the Act and initiation of proceedings under Section 276C and 276CC of the Act, if he fulfills the following conditions namely: (a) the tax and interest payable as per the order of assessment or reassessment under sub-section (3) of section 143 or section 147, as the case may be, has been paid within the period specified in such notice of demand; and (b) no appeal against the order referred to in clause (a) has been filed. (2) The said application referred to as above, 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 and shall be made in such form and verified in such manner as may be prescribed.

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO (3) The Assessing Officer shall, subject to fulfillment of the conditions specified in sub-section (1) and after the expiry of the period of filing the appeal as specified in clause (b) of sub-section (2) of Section 249, grant immunity from imposition of penalty under section 270A. (4) The Assessing Officer, shall within a period of (three months) from the end of the month in which the application under sub-section (1) is received, pass an order accepting or rejecting such application: Provided that no order rejecting the application shall be passed unless the assessee has been given an opportunity of being heard. (5) The order made under sub-section (4) shall be final. (6) No appeal under [section 246 or] section 246A or an application for revision under section 264 shall be admissible against the order of assessment or reassessment, referred to in clause (a) of sub-section (1), in a case where an order under sub-section (4) has been made accepting the application. However, in the present case, we find that, though, no appeal was filed against the assessment order passed under Section 147 read with section 144 read with section 144B of the Act dated 13/11/2024 and the tax and interest whatsoever was demanded by the Income Tax Department has been paid by the assessee, it is found from the record that the appellant has not filed any application to the Assessing Officer for grant of immunity from imposition of penalty under Section 270A of the Act. We also find that the other conditions as mentioned in the provisions under Section 270AA have also not been fulfilled. We have also considered the case laws as cited by the appellant in support of its contentions that he was eligible to get immunity from penalty but we find that the basic conditions as provided u/s 270AA of the Act have not been fulfilled and thus, we hold that the appellant is not entitled to get that immunity u/s 270AA of the Act.

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO 7. Now coming to the penalty imposed under Section 270A (2) of the Act and confirmed by the ld. CIT(A) under Section 270A (7) of the Act, we find that Section 270A provided that "(1) the Assessing Officer or the Joint Commissioner (Appeals) or Commissioner (Appeals) or the Principal Commissioner or the Commissioner may, during the course of 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) A person shall be considered to have under-reported his income, if-the income assessed is greater than maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; Here in the present case, we find that the Act provides that the Assessing Officer may which implies that the penalty is not automatic and the AO has to consider and decide whether in a given set of facts and circumstances the assessee has under-reported or misreported his income. We find from the impugned penalty order that the Assessing Officer has not considered the facts and circumstances of the case as mentioned in the appellant’s submissions that how he couldn’t file his return u/s 139(1) of the Act and how he immediately filed his ITR immediately in response to notice u/s 148 of the Act and how he paid the due tax and interest without filing appeal before the Ld. CIT(A) against the impugned assessment order. Thus, considering the above facts and circumstances, we find that reasons given by the appellant seem to be a bonafide case where the appellant was prevented by some reasonable cause which the lower authorities have failed to appreciate. Thus, considering the facts and circumstances of the case, we hold that this is not a

I.T.A. No. 353/RAN/2026 Ajit Kumar Jha Vs ITO fit case where penalty under Section 270A(2) can be imposed and accordingly, we direct to delete the same. 8. In the result, this appeal of the assessee stands allowed. Order pronounced in open court on 14/10/2026.

Sd/- Sd/- (RAJANI GUDURI) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Ranchi, Dated: 14/10/2026 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File

Sr. Private Secretary, ITAT, Ranchi