PRAKASHCHAND JAIN,CHENNAI vs. DCIT, CC2(3), CHENNAI

आयकर अपीलीय अिधकरण, ‘सी’ ाय पीठ,चेई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH: CHENNAI

ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं
ी जगदीश, लेखा सद के सम

BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.68/Chny/2024
िनधा रण वष /Assessment Year: 2017-18

Prakashchand Jain,
39 and 40 Bakers Street,
Choolai, Chennai – 600 112. v.
The Dy. Commissioner of Income Tax,
Central Circle-2(3),
Chennai.
[PAN: AHHPP 1690D]

(अपीलाथ$/Appellant)

(%&थ$/Respondent)

अपीलाथ$कीओरसे/ Appellant by :
Mr. N. Arjun Raj, Advocate
%&थ$कीओरसे /Respondent by :
Shri
R.
Clement
Ramesh
Kumar, CIT
सुनवाईकीतारीख/Date of Hearing
:
10.12.2024
घोषणाकीतारीख /Date of Pronouncement
:
07.03.2025

आदेश / O R D E R
PER ABY T. VARKEY, J.M:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as “the Ld.CIT(A)”), Chennai-19, dated 15.12.2023 for the Assessment
Years (hereinafter referred to as "AY”) 2017-18 confirming the penalty levied by the AO u/s.270A of the Income Tax Act, 1961 (hereinafter referred to as "the Act”).
2. The brief facts regarding levy of penalty u/s.270A of the Act are that the assessee is a professional Doctor of M/s. Appollo Hospital and has filed his Return of Inco
Rs. 95,91,590/- for A u/s.132 of the Act w
08.06.2018. Pursuant t
Act was completed for A of Rs.29,30,000/-. The Act was initiated separ levied and thereby pe relevant year.
3. Aggrieved by the an appeal before the Ld the impugned order.
4. Aggrieved, the as several grounds includin
5. The Ld.AR, assai
CIT(A) erred in confirm
Act for underreporting income, by levying, 200
Ld. AR is that no specifi the show-cause notice d and therefore, in such a ITA No.68/Chny/2024 (Mr.
::2 ::

ome (ROI) on 23.10.2017 disclosing
A.Y 2017-18. A search and seiz was carried out in his residentia to which, assessment u/s.153A r.w.
AYs 2017-18 on 26.02.2021 by mak ereafter, the penalty proceedings u rately for AYs 2017-18 and penalty enalty of Rs.29,17,418/- was im penalty levied by the AO, the asse d.CIT(A) who was pleased to confirm sessee is in appeal before this Tribu ng the legal issue ling the action of Ld.CIT(A), sub ming the penalty levied by the AO u its income in consequence of m
0% of total tax. The first and foremo ic charge has been framed against t dated 04.03.2021 for the relevant as an event, according to him, the cons

. Prakashchand Jain)
(AY 2017-18) g an income of zure operations l premises on s.143(3) of the king an addition u/s.270A of the y of 200% was mposed for the essee preferred m it by passing unal and raised mitted that Ld u/s.270A of the misreporting of ost argument of the assessee in ssessment year sequent penalty imposed is bad-in-law.
without specifying in th of sec.270A of the Act a 04.03.2021 issued by Chennai, placed before under:-
“Whereas in the cour
Year 2017-18, it a consequence of misre
You are hereby requ through a duly autho and show cause why made under section 2
If you do not wish to person or through au writing on or before t such order is made un

According to him, the AO erred in he notice the specific clause under and drew our attention to the penal the AO (Mr.H. Mahendran), Cent us for AY 2018-19, contents of not rse of proceedings before me for the Asse appears to me under-reporting of inco eporting.
uested to appear before me either person orized representative at 11.17 AM on 05/0
an order imposing a penalty on you should
270A of the Income Tax Act, 1961. avail yourself of this opportunity of being h uthorized representative, you may show c the said date which will be considered bef nder section 270A of the Income Tax Act, 1
ng our attention to the show cause sentence given in the said notice in the course of the proceedings b ppears to me (AO) under-report eporting of income. And drawing o section 270A of the Act, he submi clauses/limbs which would qualify
, which reads as under:

. Prakashchand Jain)
(AY 2017-18) levying penalty sub-section (9) lty notice dated ral Circle-2(3), tice is noted as essment ome in nally or 04/2021
d not be heard in cause in fore any 1961.”
notice (supra) e wherein, the before me (AO) ting of income our attention to tted that there to attract the “(9) The cases of mis be the following, nam
(a) misreprese
(b) failure to r
(c) claim of ex
(d) recording o
(e) failure to r on total incom
(f) failure to r deemed to be transaction, to 7. The Ld.AR submit notice, which clause of s for levying of the penalt
Ld.AR, in the present c before levying penalty u was confused and co committed to attract su the dark and wondered committed which asses cause notice issued by t
8. We find force in t notice of penalty issue specific fault for which ITA No.68/Chny/2024 (Mr.
::4 ::

sreporting of income referred to in sub-sect mely:—
entation or suppression of facts; record investments in the books of account; xpenditure not substantiated by any eviden of any false entry in the books of account; record any receipt in books of account havi me; and report any international transaction or any an international transaction or any specif o which the provisions of Chapter X apply.”
ted that the AO was bound by law t sub-section (9) of section 270A has ty under misreporting of income. A ase, it can be seen that the notice u/s.270A is vague, because of whic ouldn’t comprehend as to what ch a penalty. In other words, the a d as to what kind of violation/fault ssee needs to defend while answe the AO.
the submissions of the assessee an d by the AO is vague and doesn’
h assessee has been called upon . Prakashchand Jain)
(AY 2017-18) tion (8) shall ; ce; ing a bearing y transaction fied domestic to specify in the been attracted
According to the issued (supra) ch the assessee fault assessee assessee was in t, assessee has ring the show- d note that the ’t spell out the to defend the proposed penalty viz misreporting of income’
of the Act. For easy refe assessee as noted unde
“Whereas in the cour
Year
2017-18, it inconsequence of and 9. According to us, t notice with certainty an against him. In this c issued by the AO is sile section 270A of the Ac deserve levy of penalt
Section 270A is satisfied is found to be vague an impose penalty and the of law and is held to be 10. We find that simil co-ordinate bench of th
Ltd. in ITA Nos.1166 &
held, as under: -
“12. We have hear on record and gone
ITA No.68/Chny/2024 (Mr.
::5 ::

‘underreporting of income in co
’ which falls under sub-section (9) o erence, we again reproduce the cha er;- rse of proceedings before me for the Asse appears to me
Under-reporting of d misreporting of income”
he assessee should be informed in t d accuracy of the exact nature of th ase, it has been noted that the im ent about which limb/clause of sub ct has been attracted in the facts ty and how the ingredient of sub d. Therefore, show-cause notice pro nd doesn’t muster the requirement o refore consequent levy of penalty is ab-initio bad in law.
lar issue had come up for considera his Tribunal in the case of Enrica E
& 1167/Chny/2023 dated 06.06.20
rd both the parties, perused the materials through orders of the authorities below

. Prakashchand Jain)
(AY 2017-18) onsequence of of section 270A rge against the essment income the show-cause he fault alleged mpugned notice b-section (9) of of the case, to -section (9) of oposing penalty of law to legally s fragile in eyes ation before the Enterprises Pvt.
24, and it was s available w. The AO levied penalty u/s.27
ground that the ass reporting as a conseq provisions of clauses with claim of expe recording of any false at the above conclusi where income admitt response to notice u revised return filed taxable income of Rs filed u/s.139(1) of th reporting of incom misreporting of incom evident from informa with statement record also enquiries conduc of assessment proce was not taken place under reporting as a have come to light.
‘under reporting of misreporting of incom
Act, and thus, levied reporting of incom misreporting of incom
13. The fact with the course of search admitted fact that the Rs.16.39 Crs. & R marketing expenses
‘marketing expenses during the course of offered by the asses expenses. The asses u/s.153A of the Act, f income admitted duri marketing expenses a income filed by the a without any further assessment order th entirety, the incom disallowance of portio accepted. In other marketing expenses, accepting additional disallowance of marke
14. In light of ab passed by the AO imp to refer to provisions
ITA No.68/Chny/2024 (Mr.
::6 ::

70A of the Act, for both the assessment ye sessee has ‘under reporting of income a quence of misreporting of income’. The A s (c) & (d) of Sec. 270A(9) of the Act, w enditure not substantiated by any evid e entry in the books of accounts. The AO h ion on the basis of findings in the assessm ted by the assessee in the return of incom u/s.153A of the Act, has been accepted u/s.153A of the Act, the assessee has s.2,55,35,485/- which is higher than the l e Act. According to the AO, the assessee h e and under reporting as a conseq me’ in respect of marketing expenses, which ation gathered during the course of searc rded from the Director of the assessee com cted with suppliers of ‘gift articles’ during t edings. The AO further observed that h u/s.132 of the Act, ‘under reporting of in consequence of misreporting of income’
Therefore, the AO opined that it is a cle income and under reporting as a conse me’ which attracts provisions of Sec.270A d penalty for both the assessment years e and under reporting as a conseq me’.
regard to seizure of huge unaccounted ca h on 6-12-1018 was not disputed. It i e assessee company has offered additional s.23.62 Crs. towards disallowance of @ 1/3rd of total expenses incurred under ’ for both the assessment years. The ca f search was telescoped against addition ssee towards estimated disallowance of ssee has filed return of income in response for both the assessment years and offered ing the course of search in respect of disall and paid taxes. The AO has also accepted assessee in response to notice u/s.153A o addition and also recorded a clear findi hat after going through the circumstan e offered by the assessee, including on of marketing expenses, is found to be in words, there is no separate addition s, but the assessment has been comp income offered by the assessee towards eting expenses for both the assessment ye bove factual back ground, if we examine posing penalty u/s.270A(9) of the Act, it is s of Sec.270A of the Act, and the reasons

. Prakashchand Jain)
(AY 2017-18) ears on the and under AO invoked which deals dence and has arrived ment order, me filed in d. In the s admitted last return has ‘under quence of h is clearly ch coupled mpany and the course had search ncome and would not ear case of equence of A(9) of the for ‘under quence of ash during is also an income of estimated r the head ash seized nal income marketing e to notice additional lowance of d return of of the Act, ing in the ces in its estimated order and n towards pleted by estimated ars.
the order necessary s given by the AO to impose p
Sec.270A of the Act, and under reporting section 1 to 6 of Se income and under rep has been specified in & 9 deals with ‘und consequence of misre cases of ‘misreportin specified in sub sec.
manifestly clear that two charges for which is ‘under reporting o been specifically refer
In the present case, has not invoked unde
‘under reporting of i thereof and in the pre of Sec.270A of the substituted by the Fin
AY 2017-18 onwards.
provision was existed concealment of par particulars of income having two limbs or income and ii) furnish provisions of Sec. 2
wordings therein bot other. Although, the ‘under reporting of misreporting of incom of income or furnishi is necessary to exam
Act, is mandatory in without providing an the Act.
15. The order imp order u/s.246A of the u/s.270A of the Act provision of appeal penalty Sec.270A of said that penalty u/s.
penalty u/s.270A of required to give an op penalty should not be the AO issued notice deals with the proced order imposing penalt or has been given a r that the penalty u/s assessee has given a ITA No.68/Chny/2024 (Mr.
::7 ::

penalty u/s.270A(9) of the Act. The pro
, deals with penalty for ‘under reporting as a consequence of misreporting of incom ec.270A of the Act, deals with ‘under re porting as a consequence of misreporting o sub-section 7 of Sec.270A of the Act. Sub der reporting of income and under repor eporting of income’ thereof by any person ng of income’ referred to in sub-sec.8
.9 of Sec.270A of the Act. From the ab provisions of Sec.270A of the Act, has tw h penalty can be levied. The first limb or fi of income and such under reporting of in rred to in sub-section 2 to 6 of Sec.270A o these provisions are not relevant, becaus er reporting of income. The second limb or income as consequence of misreporting o esent case, the AO invoked second limb of e Act. Admittedly, these provisions h nance Act, 2016 w.e.f.01.04.2017 and app
. Prior to insertion of Sec.270A of the Act d in the statue by way of sec.271(1)(c) of th rticulars of income or furnishing of e. Provisions of Sec.271(1)(c) of the Act, two charges i.e. i) for concealment of pa hing of inaccurate particulars of income. If 271(1)(c) of the Act & Sec.270A of the th provisions are similar and para materi e term ‘tax evasion’ has been redefined income and under reporting as a conse me’ but it is synonymous to concealment of ing of inaccurate particulars of income. Th mine whether penalty proceedings u/s.27
n nature and further, such penalty can b opportunity to the assessee as required posing penalty u/s.270A of the Act, is an a e Act before the First Appellate Authority.
t, has been mandatory, there have not u/s.246A of the Act. Since, the order the Act, is an appealable order, then, it .270A of the Act, is not mandatory in natu f the Act, is not mandatory in nature, pportunity to the assessee to show cause ‘
e levied in terms of sec.274 of the Act. A u/s.274 r.w.s.270A of the Act. Sec.274
dure for levy of penalty, wherein, it direc ty shall be made unless the assessee has b reasonable opportunity of hearing. Thus, it s.270A of the Act, cannot be imposed u a reasonable opportunity and the assesse

. Prakashchand Jain)
(AY 2017-18) ovisions of of income me’. Sub- eporting of of income’, b-section 8
rting as a n and such has been bove, it is wo limbs or first charge come’ has of the Act.
se, the AO r charge is of income’
provisions ave been plicable for t, a similar he Act, for inaccurate
, was also articular of f you go by e Act, and ia to each by way of equence of f particular herefore, it 70A of the be invoked u/s.274 of appealable
If penalty been any r imposing cannot be re. Since, the AO is ‘as to why’
Admittedly, of the Act cts that no been heard t is evident unless the ee is being heard. Once, the AO reasonable opportuni requirement of impos not a mere formality,
Therefore, in our con mandatory and it is b
16. Having said r.w.s.270A of the Act of the Act dated 26
reporting of incom misreporting of incom penalty has been init
270A (1) to (6) or Sec.270A of the Act.
specifying under whi liable for penalty. Th imposed penalty u/s specified in the show view, notice u/s.274
reason that the AO di had either ‘under rep absence of proper n penalty, because, it because, issuing a v which limb the propos entire proceedings, b to explain its case on penalty levied on the ab initio.
17. The concepts income’ are two differ already discussed in Sec.270A of the Act, and for this, separate concept of ‘misreport is provided. Therefo income’ shall not be each operates under Since, ‘under reportin concepts and separ proceedings should s for which charge, he present case, if you g is no satisfaction in r of the Act, whether reporting as a conse clearly evident from t
AO simply referred t
Act. Further, said laps u/s.274 r.w.s.270A o
ITA No.68/Chny/2024 (Mr.
::8 ::

O is bound to act to hear the assessee ity to explain its case, then, there is no m sing penalty, because the opportunity of but it is to adhere to the principle of natur sidered view, the penalty u/s.270A of the based on the facts and merits placed before so, let us come back to notice issued t. We have gone through notice u/s 274 r.
.07.2021, wherein, the AO has stated th e and under reporting as a conseq me’. From the notice, it is not discernabl tiated for ‘under reporting of income’ as p
‘misreporting of income’ as per section The AO issued a notice in a routine mann ich clause of Sec.270A of the Act, the a hough, the AO while passing the impugned
/s.270A(9) of the Act, but no such gr w cause notice dated 26.07.2021. In our c r.w.s.270A of the Act, is not a valid noti id not specify the satisfaction as to whethe porting of income’ or ‘misreporting of inc notice, which is mandatory, the AO cann is a clear violation of principles of natur vague notice without specifying the cha sed penalty proceedings is initiated, would because, the assessee was not given an o n specific charge. Therefore, in our consid e basis of invalid or vague notice is invalid of ‘under reporting of income’ and ‘misre rent charges with very clear boundaries. A earlier part of this order, sub-section 2 t
, deals with concept of ‘under reporting o e rate of penalty is provided. Sub-sec.9
ting of income’ and for this, separate rate re, ‘under reporting of income’ and ‘misre used interchangeably nor are they synony r strict definition and do not overlap ea ng of income’ and ‘misreporting of incom rate charges, the AO before initiating specifically arrive at a satisfaction to the e e has initiated penalty Sec.270A of the A go by the assessment order passed by the respect of initiation of penalty proceedings r it is for ‘under reporting of income a equence of misreporting of income’ thereo the assessment order passed by the AO, w to initiation of penalty proceedings u/s.27
se is even continued while issuing show ca of the Act, where, the AO simply specifi

. Prakashchand Jain)
(AY 2017-18) and give mandatory hearing is ral justice.
Act, is not e the AO.
d u/s.274
.w.s. 270A hat ‘under quence of le whether per section 8 & 9 of ner without ssessee is d order has round was considered ice for the r assessee come’. In ot impose ral justice, rge under vitiate the opportunity ered view, d and void eporting of As we have to 6 of sec of income’
deals with of penalty eporting of ymous, but ach other.
e’ are two g penalty effect that,
Act. In the AO, there s u/s.270A and under of which is where, the 70A of the ause notice fied ‘under reporting of incom misreporting of incom is directed to pay pen which limb of Sec.270
sub-sec.9 of Sec.270
particulars, the mere the assessment orde order manifestly arbit show cause notice i without specifying th of the Act, is a clear c show cause notice a assessee, the assess notice issued by the A In view of vague not 270A of the Act is specified, initiation o income’ is not only proceedings cannot b the decision of the Ho
Infrastructure LLP ( following the earlier d
Asia (HQ) Pte Ltd. v.
2022 dated 28.03.20
whisper as to which l ingredients of sub-se the Act for ‘misrepo arbitrary and bereft passed by the AO,
Hon’ble Delhi High Co
6. This court in PTE Ltd. Vs. A and Ors. W.P.
observed as un
“6. Ha
2022, action that th
Act for also ar notice
"under the pen
7. This to whic how th satisfie referen in the of pen manife
ITA No.68/Chny/2024 (Mr.
::9 ::

e and under reporting as a conseq me’, without specifying for which charge the nalty u/s.270A of the Act. There is no whi
0A of the Act, is attracted and how the ingr
0A of the Act are specified. In absenc e reference to the word ‘misreporting of i r or in the show cause notice makes the trarily. Therefore, we are of the considered issued by the AO u/s.274 r.w.s.270A of e charge under which penalty is proposed case of non-application of mind at the time and thus, in absence of specific charge a see is not in a position to counter the sh
AO as well as cogent reply to the show cau tice without any whisper as to which limb attracted and how ingredients of sub-se of penalty u/s.270A of the Act for ‘misre erroneous, but also arbitrary and thus be sustained. This legal position is streng on’ble Delhi High Court in the case of Prem
(supra), where the Hon’ble Delhi High decision in the case of Schneider Electric S
ACIT, International Taxation in WP (C) N
022, held that in view of vague notice wi limb of section 270A of the Act is attracted ection 9 is specified, initiation of penalty u/
orting of income’ is not only erroneous, t of any reason and consequently, pena cannot be sustained. The relevant findin ourt are as under:
n the case of Schneider Electric South East
CIT, International Taxation Circle 3(1)(2),
(C) No. 5111/2022 vide judgment dated 2
nder:- ving perused the impugned order dated 9th M this Court is of the view that the Respond of denying the benefit of immunity on the gr he penalty was initiated under Section 270A o r misreporting of income is not only erroneou rbitrary and bereft of any reason as in the pe the Respondents have failed to specify the li rreporting" or "misreporting" of income, under w nalty proceedings had been initiated.
s Court also finds that there is not even a whisp ch limb of Section 270A of the Act is attracted he ingredient of sub-section (9) of Section 27
ed. In the absence of such particulars, the nce to the word "misreporting" by the Respond assessment order to deny immunity from impo nalty and prosecution makes the impugned estly arbitrary.

. Prakashchand Jain)
(AY 2017-18) quence of e assessee isper as to redients of ce of such income’ in impugned d view that f the Act, d u/s.270A e of issuing gainst the how cause use notice.
of section ection 9 is eporting of s, penalty gthened by m Brothers
Court by South East
No.5111 of ithout any d and how
/s.270A of , but also alty order ngs of the t Asia (HQ)
New Delhi
28.03.2022
March, dents’
round of the s but enalty imb - which per as d and 70A is mere dents sition order

. Prakashchand Jain)
(AY 2017-18) of the tually ner to n duly ll and g.
ugned vowed ct to -track d (iii)
.P.(C) ndent e and under ion in the respect of tioner has ecomputed s is a case sequent to e assessee.
ases where of income, erreporting eporting as ransactions he Act and o arrive at nces under ion can be sper as to d how the ed. In the the word er to deny makes the 8th March, f the Act is unity under 18. At this stage,
Madras High Court in 430 ITR 259 (Madras issue of show cause considering its earlie
ACIT reported in [201
form of notice withou charging the assesse proceedings, includin u/s.271(1)(c) of the Karnataka High Court
Factory reported in [
notice and consequen held that penalty pr becomes invalid and has upheld the decisi of CIT v. SSA’s Eme
241. From the ratio satisfaction of the AO issued by the AO u/
particular charge for 270A of the Act, entir be quashed.

it is relevant to consider the decision o n the case of Babuji Jacob v. ITO reported s), where the Hon’ble High Court has deal notice u/s.274 r.w.s.271(1)(c) of the Act, er decision in the case of Sudaram Finan
18] 93 taxmann.com 250, held that issuing ut striking inapplicable portion in the notic ee for particular evasion vitiates the entir ng the order passed by the AO imposin
Act. A similar view has been taken by th t in the case of CIT v. Manjunatha Cotton
[2013] 359 ITR 565, where the issue of sh nt penalty proceedings has been dealt in roceedings consequent to vague and inva liable to be quashed. The Hon’ble Supre ion of the Hon’ble Karnataka High Court in erald Meadows reported in [2016] 73 tax o of above case laws, it is undisputedly
O should be discernable from the show ca
/s.274 r.w.s.270A of the Act. In absen which, the assessee is directed to pay p re penalty proceedings becomes invalid an f the matter and by following the ratio laid me Court and various High Courts re of the considered view that show cause no w.s.270A of the Act, is vague, non specific nd liable to be quashed. Thus, we quash posing penalty u/s.270A(9) of the Act.”
wing the decision of the Hon’ble Delh
Electric South East Asia (HQ) Pte in WP(C) No.5111 of 2022 dated 2
he case of Enrica Enterprises Pvt. L notice issued by the AO u/s.274 r.w s vague, doesn’t spell out the spec

. Prakashchand Jain)
(AY 2017-18) of Hon’ble d in [2021]
lt with the and after nce Ltd. v.
g a printed ce and not re penalty ng penalty he Hon’ble
& Ginning how cause detail and alid notice eme Court n the case xmann.com clear that use notice nce of any penalty u/s nd liable to d down by eferred to tice issued c to charge the order hi High Court in e Ltd. v. ACIT,
28.03.2022 and Ltd.(supra), we w.s.270A of the cific charge and thus, is illegal and liable passed by the AO u/s.27
12. In the result, appe

Order pronounced (जगदीश)
(JAGADISH)
लेखासद /ACCOUNTANT
चेई/Chennai,
िदनांक/Dated: 07th March,
EDN
आदेशकी%ितिलिपअ,ेिषत/Copy

ITA No.68/Chny/2024 (Mr.
::12 ::

e to be quashed. Thus, we quash th
70A(9) of the Act for AY 2017-18. eal filed by the assessee is allowed.
d on the 07th day of March, 2025, in MEMBER
(एबीटी.
(ABY T. VA
ाियकसद /JUDIC
, 2025. y to:
nai / Madurai / Salem / Coimbatore.

. Prakashchand Jain)
(AY 2017-18) e penalty order n Chennai.
-
वक
)
ARKEY)
CIAL MEMBER