Loading judgment…
Facts
The assessee filed a return declaring income of Rs. 77,09,300/-. During scrutiny, the AO disallowed Rs. 17,13,600/- for unrecorded purchase returns, treating it as under-reported income due to misreporting, and initiated penalty proceedings under Section 270A. The assessee applied for immunity under Section 270AA, explaining that the purchase return was duly recorded, but the AO and CIT(A) rejected the immunity application, stating the case fell under Section 270A(9) for misreporting.
Held
The Tribunal found that there was no misrepresentation or suppression of facts by the assessee, as the purchase returns were duly explained. The assessee's act of paying taxes and seeking immunity was to maintain peace, not an admission of misreporting. Thus, the Tribunal concluded that the assessee's case was not covered under Section 270A(9)(a), and consequently, the penalty imposed under Section 270A was deleted on merits.
Key Issues
Whether penalty under Section 270A for alleged misreporting of income was justified when the assessee had explained the transaction, and whether the assessee was eligible for immunity under Section 270AA despite the penalty being initiated under Section 270A(9).
Sections Cited
250, 270A, 270A(3), 270A(8), 270A(9), 270A(9)(a), 270A(9)(c), 270AA, 274, Chapter X
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI VIMAL KUMAR & SMT. RENU JAUHRI
This appeal is filed by the assessee is preferred against the order of the Ld. CIT(A), National Faceless Appeal Centre (for short, NFAC), passed in DIN & Order No. ITBA/NFAC/S/250/2025-26/1078380742(1), for A.Y. 2022-23, u/s 250 of the Income Tax Act, 1961(hereinafter referred to as, “Act”), order dated 11.07.2025, affirming the penalty order passed u/s 270A of the Act.
1 | P a g e Nirjeet Singh VS. ITO WARD 52(1), DELHI 2. The grounds of appeal are reproduced as under: “(a) On the facts and circumstances of the case and in law the Ld. CIT(A) at NFAC, Delhi erred in confirming the penalty u/s 270A of the Act imposed by the Assessment Unit of the National Faceless Assessment Centre. (b) The order being arbitrary, fallacious, and unwarranted must be quashed with directions for appropriate relief. ”
Brief facts of the case are that the assessee had filed return for A.Y. 2022-23 on 07.10.2022, declaring income of Rs. 77,09,300/-. The case was selected for scrutiny during the course of which the Ld. AO noted some discrepancies in the purchase transactions made with M/s. Manish Overseas Private Limited, appearing in the list of Sundry Creditors. It was the case of the Ld. AO that the assessee had not properly accounted the purchase return of Rs. 17,13,600/- which was included in purchases to reduce the profit. The excess purchases of Rs. 17,13,600/- was disallowed and added to the income of the assessee and penalty proceedings u/s 270A were initiated for under-reporting in consequence of misreporting of income to the extent of Rs. 17,13,600/-.
3.1 During the course of the penalty proceedings, the assessee explained that the purchase return was duly recorded in the books of account and copy of the ledger account as well as confirmation from the supplier was also filed before the Ld. AO. The assessee claimed immunity from penalty u/s 270A by filing requisite form u/s 270AA of the Act in respect of the impugned addition. However, the Ld. AO held that the immunity u/s 270AA cannot be granted to the assessee as the penalty proceedings had been initiated for “under-reported income which is in consequence of misreporting thereof” u/s 270A(9) of the Act. As the immunity is not available in respect of cases covered u/s 270A(9), the application of immunity was rejected being not maintainable. 2 | P a g e 3.2 Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). However, Ld. CIT(A) dismissed the assessee’s appeal with the following observations:
“ 3.2.4 On considering the facts of the case and submission of appellant, it is observed that during the assessment proceedings, an addition of Rs. 17,13,600/- was made by the AO vide order dated 18.03 2024 and further, penalty u/s 270A was initiated for furnishing under reported of income in consequence of misreporting of Income, In compliance to the same, the appellant paid due tax with interest as per section 270AA along with Form-68 as prescribed on 20.042024. Further, on Scrutinizing the penalty order, it is observed that in para 1st of the same the AO stated that “….. the excess purchase of Rs. 17.13,600/- has been disallowed and penalty proceedings on this for under reporting in consequences of misreporting of income has been initiated within the meaning of sub- section(9) of section 270A. The assessee was issued a show- cause notice u/s 270A read with section 274 was issued on 18/03/2024." 3.2.5 On considering the AO's order and the challan receipt produced by the appellant, it is observed that the show- cause notice u/s 270A(9) r.w.s. 274 was issued by the AO on 18.03.2024 which indicates that the appellate is very well aware of the fact that the notice was issued u/s 270A(9) of the Act in which no immunity from imposition of penalty can be granted. Accordingly, the application for immunity u/s 270AA was rejected by the AO being non-maintainable. 3.2.6 In light of the above facts, it is concluded that on perusal it is noticed that the section states that “where the proceedings for penalty u/s section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A", the application for immunity has not been considered. In this case, the AO had levied the penalty u/s 270A(9)(c) for misreporting of income, in which no immunity from penalty will be granted as per section 270AA(3) of the IT Act. In this case the appellant had not fulfil the condition laid down ln section 270A(9) of 3 | P a g e Nirjeet Singh VS. ITO WARD 52(1), DELHI the IT Act, therefore, the contention of the appellant is not found to be acceptable. 3.2.7 In view of the above factual discussions of the case, the penalty levied of Rs.10,69,286/- is confirmed. Thus the grounds of appellate no. 1 to 4 are dismissed.”
Further aggrieved, the assessee has filed an appeal before the Tribunal.
Before us, the Ld. AR has vehemently argued that the assessee was entitled to get immunity from imposition of penalty u/s 270AA of the Act as at the time of passing the assessment order and even in the show- cause notice issued for the penalty, there is no mention of section 270A(9) of the Act and, it is only mentioned at the time of passing order. Accordingly, the assessee, under a bonafide belief and in order to buy peace, had filed an application in Form 68, seeking immunity u/s270AA even though there was no under-reporting/mis-reporting of income on the part of assessee and the transaction had been fully explained during the course of assessment proceedings. Thus, the assessee ought to have been allowed the benefit of immunity u/s 270AA of the Act.
4.1 Alternatively, Ld. AR has submitted that on merits also, there is no case of under-reporting of income as the transactions stand fully explained by the assessee and the case is not covered under any of the clauses of section 270A(9) of the Act. Thus, on merits also, the penalty levied by the Ld. AO is liable to be deleted.
On the other hand, Ld. DR has argued that immunity u/s 270AA is available only for under-reporting of income and not for mis-reporting. The cases of mis-reporting have been mentioned in clauses (a) to (f) of sub-section 9 of Section 270A and the assessee’s case is clearly covered under Clause (a). She has, therefore, argued that the claim of immunity has rightly been rejected by the Ld. AO and, therefore, penalty levied u/s 270A deserves to be upheld. 4 | P a g e
We have heard the rival submissions and carefully considered the material available on record. We note that the cases of mis-reporting of income as enumerated in section 270A(9) of the Act are as under: “270A(9) The cases of misreporting of income referred to in sub- section (8) shall be the following, namely:— (a) misrepresentation or suppression of facts; (b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence; (d) recording of any false entry in the books of account; (e) failure to record any receipt in books of account having a bearing on total income; and (f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply. ”
From the discussion in the assessment order and the explanation filed by the assessee during the course of assessment proceedings, it is seen that there is no case of misrepresentation or suppression of facts as envisaged in clause (a) of section 270A(9) of the Act. In fact, the assessee has duly explained the discrepancy arising due to purchase returns which was, however, not accepted by the Ld. AO and the addition of this account was made during the assessment proceedings. Subsequently, in order to buy peace, the assessee did not file further appeal against the impugned addition and instead chose to settle the matter by paying due taxes along with an application in Form 68 for grant of immunity u/s 270AA of the Act.
7.1 Under these facts and circumstances, it cannot be said that there was any misrepresentation or suppression of facts on the part of the assessee. Accordingly, we are of the considered view that the 5 | P a g e
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 23-12-2025.