SNEHALKUMAR BHOGILAL TRIVEDI,GANDHINAGAR vs. NFAC, ASSESSMENT UNIT, PRESENT JURIS. THE ITO, WARD-3(3)(5), AHMEDABAD

Ld. Counsel for the assessee contended that in the present case the AO himself was not sure of the default committed by the assessee citing both defaults for the levy of penalty and also pointed out that the AO initiated penalty for one default and Bhogilal Trivedi vs. ITO] A.Y. 2018-19 - 3 – issued notice for a separate default. All these acts, he stated, demonstrated the non-application of mind by the AO to a serious issue of levy of penalty and further he pointed out that it is settled law that for levy of penalty the identification of specific charge for which penalty is levied is imperative.

From the facts of the case, he pointed out that while in the assessment order passed u/s.143(3) of the Act, the AO initiated penalty u/s.270A of the Act for misreporting of income, he issued notices for both the defaults of underreporting and misreporting of income. Copy of the notice issued u/s274 of the Act dated 16- 04-21, initiating penalty proceedings was filed before us demonstrating the aforestated fact. He thereafter pointed out that in the penalty order passed u/s.270A of the Act, the AO levied penalty again for both the defaults i.e “under reporting And under reporting as consequence of mis-reporting”.

The Ld. DR, however countered by the same by pointing out that there was no confusion in the mind at all of the AO. He pointed out that the AO had noted, while disallowing the assessee’s claim of exemption u/s.54F of the Act, that the assessee had admitted to have mistakenly claimed the said exemption and that the assessee had no evidence of any sale agreement or purchase agreement of any of the capital assets. He pointed out that the assessee had also not filed any appeal against the assessment order disallowing claim of exemption u/s 54F of the Act. The Ld. DR contended that the AO accordingly had initiated penalty for misreporting u/s.270A of the Act in the assessment order and notices issued thereafter. He stated that the Bhogilal Trivedi vs. ITO] A.Y. 2018-19 - 4 – penalty order levying penalty apparently on both counts i.e. under reporting and misreporting as a consequence of under reporting was not of much consequence since the AO had clearly noted the default of the assessee in the assessment order which related to misreporting of income alone, since, the assessee had claimed exemption which he was not entitled to and had surrendered the same only when confronted during assessment proceedings. He, therefore, stated that the plea of the Ld. Counsel for the assessee that the penalty leviable was bad in law on account of AO having not mentioned the specific charge on account of which it was levied, need not to be considered and this argument be rejected.

Having heard the contentions of both the parties, I shall now proceed to adjudicate the issue of levy of penalty u/s.270A of the Act. Undoubtedly, it is a case of levy of penalty u/s.270A of the Act, which recognises two different defaults for levy of penalty i.e under reporting of income and under reporting as a consequence of misreporting. While the first default attracts penalty at a lesser rate @50% of the tax payable on the under reported income, the other charge being a more serious charge of under reporting as a consequence of misreporting, attracts penalty @200% of the tax payable on the misreported income. The above position of law is not disputed.

Having said so, it is a fact on record that the AO while levying penalty has failed to identify the specific charge or default for levying penalty. The notice initiating penalty proceedings issued u/s 274 of the Act and the penalty order reveals that he levied penalty both for under reporting and under Bhogilal Trivedi vs. ITO] A.Y. 2018-19 - 5 – reporting as a consequence of misreporting of income. Courts have repeatedly held that mentioning of two distinct faults, which have different consequences for the levy of penalty, renders notices so issued to be void ab initio as also orders so passed. In the case of St. Joseph’s Educational Trust vs. DCIT, [2025] 175 taxmann.com 284, the Co-ordinate Bench of the ITAT, Chennai, categorically held that notice issued u/s.274 r.w.s. 270A of the Act stating both under reporting and misreporting of income, which are two distinct faults with different consequences, was as a vague notice and further held the penalty levied as a consequence of such notice to be void ab initio. The ITAT noted that notice specifying the charge or fault was a must to facilitate the assessee to meet the charge alleged against him. Failing which, the assessee would be unable to properly defend an ambiguous charge, which, in turn, would vitiate assessee's right to a fair hearing guaranteed by the Constitution of India. Similar view was taken by the ITAT Pune Bench in the case of DCIT vs. Chakradhar Contractors and Engineers (P.) Ltd., [2025] 171 taxmann.com 133 (Pune-Trib.) and ITAT, Mumbai Bench in the case of Manish Manohardas Asrani vs. Int. Tax, [2025] 170 taxmann.com 792. All the aforestated decisions were cited before me by the Ld.Counsel for the assessee. The Ld. DR was unable to draw my attention to any order of either the ITAT or higher judicial authority holding to the contrary.

In the light of the same, I have no hesitation in holding that the penalty levied in the present case without specifying the exact default committed by the assessee is not sustainable in law. I Bhogilal Trivedi vs. ITO] A.Y. 2018-19 - 6 – therefore direct the deletion of penalty levied in the present case u/s.270A of the Act amounting to Rs.10,61,360/-. Appeal of the assessee is, therefore, allowed.

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