JIGNESH HASMUKHLAL SHAH,MUMBAI vs. WARD 42(2)(3), KAUTILYA BHAVAN

The Ld. Counsel for the assessee submitted that the assessee had filed additional grounds of appeal challenging the validity of the notices issued u/s. 274 read with section 270A of the Act dated 06.01.2025 and 07.04.2025 as bad in law and, consequently, contending that the penalty order was also bad in law. The Ld. Counsel for the assessee submitted that the additional grounds raised by the assessee are purely legal grounds and, therefore, the same may be admitted in the interest of substantial justice. Reliance was placed on the decisions of the Hon’ble Supreme Court in the cases of National Thermal Power Co. Ltd. v. CIT, [1998] 229 ITR 383 (SC), and Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC).

We have heard the rival contentions and perused the additional grounds raised by the assessee.

The additional grounds raised by the assessee are as under:

On perusal of the additional grounds, it is noticed that the assessee is challenging the validity of the notices issued u/s. 274 read with section 270A of the Act as bad in law. Hence, the same are admitted for adjudication as they are purely legal grounds.

The Ld. Counsel for the assessee, referring to the notice issued u/s. 270A dated 07.04.2025, which is placed at page 169 of the paper book, submitted that the Assessing Officer did not specify the limb under which the said notice was issued. Referring to page 171 of the paper book, which contains the annexure to the notice, the Ld. Counsel for the assessee submitted that the Assessing Officer stated that penalty proceedings u/s. 270A were initiated for under-reporting of income, which was in consequence of misreporting thereof at the time of completion of the assessment. The Ld. Counsel for the assessee submitted that the Assessing Officer was mandatorily required to specify in the assessment order as well as in the notice under which limb of section 270A, i.e., section 270A(2) or section 270A(9), the assessee’s case would fall, so as to enable the assessee to counter the allegations of the Assessing Officer and also to demonstrate how the ingredients of section 270A(9) were attracted. In the absence of such specification, the impugned penalty notice as well as the penalty order are bad in law.

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.).

The Ld. Counsel further submitted that the penalty u/s. 270A of the Act came to be levied in respect of the donation for which the assessee had claimed deduction u/s. 80GGC of the Act. The claim u/s. 80GGC of the Act was withdrawn by the Assessing Officer during the course of reassessment proceedings. The Ld. Counsel for the assessee submitted that the claim for deduction u/s. 80GGC of the Act was made on the basis of receipts provided by the Rashtriya Samajwadi Party (Secular), as appearing at page 9 of the paper book, wherein the donor party had clearly stated on the receipt that the donation was eligible for deduction u/s. 80GGC of the Act. The Ld.

The Ld. Counsel for the assessee submitted that, at the time of making the donation, the Rashtriya Samajwadi Party (Secular) was a recognised political party and the assessee was under a bona fide belief that donations made to such a party were eligible for deduction u/s. 80GGC of the Act. The assessee had donated ₹6,00,000/-. When the assessee filed its return of income in response to the notice issued u/s. 148 of the Act, the assessee voluntarily withdrew the deduction, and the assessment was completed on the returned income. Therefore, the Ld. Counsel for the assessee submitted that there was no variation between the returned income and the assessed income.

The Ld. Counsel placed reliance on the decision of the Surat Bench of the Tribunal in the case of Mr. Dipesh Narendrakumar Patel v. ITO in ITA No. 1379/SRT/2025, dated 04.06.2026 and submitted that when the Assessing Officer accepts the return of income filed u/s. 148 of the Act without any additions or disallowances, no penalty can be levied on the returned income. The Ld. Counsel for the assessee submitted that this decision squarely applies to the facts of the assessee’s case. Thus, the Ld. Counsel submitted that the penalty levied u/s. 270A should be deleted.

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.

On perusal of the notice issued u/s. 270A of the Act, we noticed 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 proceedings u/s.

We further noticed that the return filed by the assessee in response to the notice issued u/s. 148 of the Act was accepted by the Assessing Officer without any variation as the assessee itself had withdrawn the deduction claimed u/s. 80GGC of the Act. On identical facts, the Surat Bench of the Tribunal, in the case of Mr. Dipesh Narendrakumar Patel v. ITO in ITA No. 1379/SRT/2025, dated 04.06.2026 following the decision of the Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (Hq) Pte. Limited v. ACIT (supra) held that since the Assessing Officer had accepted the return of income and had not made any addition, the income could not be termed as under-reported or misreported by the assessee. Consequently, the penalty levied u/s. 270A of the Act was quashed.

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

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