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Facts
The assessee, engaged in road development on Build Operate and Transfer (BOT) basis, claimed depreciation @ 25% on 'Right under service agreement' as an intangible asset for Assessment Year 2018-19. The Assessing Officer considered this not an asset and allowed amortization, subsequently initiating penalty proceedings under Section 270A for under-reporting of income in consequence of misreporting.
Held
The Tribunal found a critical variance between the penalty show-cause notice, which alleged 'under reported income' under Section 274 read with Section 270A, and the final penalty order, which imposed penalty for 'under reporting income in consequence of any misreporting thereof' invoking Section 270A(8). The Tribunal ruled that if proceedings were initiated for a lighter form of violation, penalty could not be levied for an aggravated violation, and the CIT(A) erred by attempting to substitute the charge. Consequently, the Tribunal allowed the appeal and deleted the penalty.
Key Issues
Whether a penalty under Section 270A is sustainable when there is a material variance between the charge specified in the show-cause notice and the specific ground for which the penalty is finally imposed; and whether the First Appellate Authority can modify the charge from an aggravated form of violation to a lighter one during appeal.
Sections Cited
270A, 274, 270A(2), 270A(8), 270A(9)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA&
This appeal is preferred by the assessee against the order dated 05.06.2025 of the Ld. National Faceless Appeal Centre (NFAC) Delhi,
P a g e | Umri Pooph Pratappur Tollway Private Ltd. (AY: 2018-19) (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order No : ITBA/NFAC/S/250/2025-26/1076737706(1) arising out of the penalty order dated 22.02.2022 u/s 270A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed National Faceless Assessment Centre, Delhi for AY: 2018-19.
Heard and perused the records. The primary contention of ld. counsel was that there is grave variance in the reason for initiating of the penalty as mentioned in the assessment order, show cause notice for levy of penalty and the impugned penalty order. Going through the material on record we find that the assessee is engaged in development of roads, on build operate and transfer basis in Madhya Pradesh and assessee had claimed depreciation @ 25% on ‘Right under service agreement’ as intangible asset. However, the AO considered it to be not an asset and allowed the project to be amortized.
In para 2 Assessing Officer mentions that since assessee ‘under reported’ his income in consequence of misreporting within meaning of Section 270A of the Act penalty proceedings u/s 270A of the Act were initiated for under reporting of income in consequence of misreporting.
P a g e | Umri Pooph Pratappur Tollway Private Ltd. (AY: 2018-19) 3. Ld. Counsel has filed before us the notice of penalty issued u/s 274 r.w.s 270A of the Act available at page No. 19 where assessee was called upon show caused for allegation that assessee ‘under reported income’.
However, as we go through the impugned penalty order we find that invoking subsection (8) of Section 270A the penalty was imposed for ‘under reporting income in consequence of any misreporting thereof’ and penalty equal to 200% of the amount of tax payable on under reporting income was imposed. The Ld. CIT(A) has sustained the same, however, directing to impose penalty at the same equal to 50% of the amount of tax payable on under reported income and also rejected the contention of inconsistency in a notice and the order.
Ld. DR has submitted that Ld. CIT(A) has adequately deal with the contention and as such there is no prejudice to the assessee and assessee has not challenged the quantum.
However what ld. DR was unable to defend was that there was apparent variance and divergence in the grounds for initiating the penalty, as to violation for which notice was actually issue and the one for which penalty is P a g e | Umri Pooph Pratappur Tollway Private Ltd. (AY: 2018-19) actually levied. We are of considered view that if proceedings were initiated invoking subsection (8) of Section 270A of the Act, which is an aggravated form of fiscal violation and notice is for lighter form, then the penalty could not have been levied for aggravated violation. Though vice versa may be legal. We are of further view that as first appellate authority, CIT(A), while dealing with allegation and ground of challenge of levy of penalty under wrong charge CIT(A) cannot substitute the charge and modify the penalty order, as done in the case before us by the CIT(A), by observing in para 5.3.2 as follows;
“5.3.2 Therefore, the appellant’s ground, that there was no misreporting, is accepted and it is held that section 270A(8), empowering the Assessing Officer to impose penalty of an amount equal to two hundred per cent of the amount of tax payable on under-reported income, is not applicable in the case of the appellant. With this, all the arguments and grounds of the appellant regarding misapplication of provisions of Section 270A(9) stands allowed. The penalty is held to have been initiated u/s 270A(2) for under-reporting only. “
P a g e | Umri Pooph Pratappur Tollway Private Ltd. (AY: 2018-19) 7. Thus we sustain the ground of challenge and allow the appeal. The impugned penalty is deleted.
Order pronounced in the open court on 31.12.2025