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Facts
The assessee company filed its return of income declaring Rs. 85,03,260/-. The case was selected for limited scrutiny, and a sum of Rs. 5,76,822/- was disallowed from Sales Promotion Expenses. The Assessing Officer (AO) initiated penalty proceedings under section 270A for under-reporting of income due to misreporting or suppression of facts.
Held
The Tribunal held that the AO failed to specify the exact sub-clause of section 270A(9) under which the penalty proceedings were initiated in the show cause notice. Following the precedent set by the Delhi High Court in Schneider Electric South Asia (HQ) PTE Ltd. vs. ACIT and the coordinate bench of the Tribunal in DD Target PMT Pvt. Ltd. vs. DCIT, the Tribunal quashed the penalty.
Key Issues
Whether the penalty levied under section 270A is valid when the AO fails to specify the specific sub-clause of section 270A(9) under which the proceedings were initiated in the show cause notice.
Sections Cited
270A, 270A(9), 274, 250, 270AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DEHRADUN BENCH: DEHRADUN
Before: SHRI YOGESH KUMAR U.S. & SHRI MANISH AGARWAL
Date of hearing 07.07.2025 Date of pronouncement 26.09.2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeal), [“CIT(A)”, in short] National Faceless Appeal Centre (NFAC), Delhi in Appeal No. NFAC/2017-18/10082144 dated 20.01.2025 passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for Assessment Year 2018-19.
Brief facts of the case are that assessee is a company and e-filed its return of income declaring total income of Rs.85,03,260/-. The case was selected for limited scrutiny for examination of business expenses and after considering the submissions made by the assessee, a sum of Rs. 5,76,822/- was disallowed out of Sales Promotion Expenses and penalty proceedings u/s 270A of the Act were initiated for under reporting of income in consequence of misreporting.
2 IT No.43/DDN/2025 M/s Himalayan Vacations Pvt. Ltd. vs. ACIT Thereafter, the AO has levied the penalty u/s 270A(9)(a) of the Act of Rs.3,56,478/- being 200% of the tax payable on such income for under reporting of income for misrepresentation or suppression of facts.
Against the said penalty order, an appeal was preferred before the Ld. CIT(A) who vide impugned order dated 20.01.2025 dismissed the appeal of the assessee.
Aggrieved by the said order, assessee is in appeal before the Tribunal wherein the assessee all the grounds taken by the assessee are in respect to the levy of penalty u/s 270A of the Act thus they are taken together for consideration.
Before us, the Ld.AR submits that from the perusal of show cause notice issued for initiation of penalty proceedings on 08.02.2021 does not spelt out under which sub-clause (a) to (f) of sub-section 9 of section 270A of the Act are initiated. He further submits that neither the assessment order nor the show cause notice dated 08.02.2021 specified on which instance as provided in sub clause (a) to (g) of section 270A(9) of the Act were invoked by the AO to hold that the assessee has under reported the income, therefore, he requested for the deletion of the penalty so levied.
On the other hand, Ld. Sr. DR submits that the assessee has admitted the disallowance only after making necessary verification by the AO. This clearly shows that assessee has under reported its income as a consequence of misrepresentation or suppression of facts, therefore, provisions of section 270A(9)(a) of the Act were rightly invoked by the AO, he thus requested for the confirmation of the penalty so levied by the AO.
We have heard both the parties and perused the materials available on record. From the perusal of the show cause notice issued for initiation of the 3 IT No.43/DDN/2025 M/s Himalayan Vacations Pvt. Ltd. vs. ACIT penalty, it is seen that the AO has not specified in the show cause notice that under which sub-clause of sub-section 9 of section 270A he initiated the penalty proceedings. The said notice is reproduced as under: Notice for penalty under section 274 read with section 270A of Income-tax Act, 1961. Ms./Mr./M/s., Whereas in the course of proceedings before me for the Assessment Year 2018-19, it appears to me that you have under-reported income which is in consequence of misreporting thereof.
You are required to show cause why an order imposing penalty u/s 270A of Income-tax Act, 1961 should not be passed.
You are required to submit your reply online electronically in e-Proceeding facility through your account in e-filing website (www.incometaxindiaefiling.gov.in) by the midnight (23.59 hours) of 26/02/2021.
In case reply is not submitted, the order shall be passed without the benefit of your explanation. Additional/Joint/Deputy/Assistant Commissioner of Income Tax Income-tax Officer, National e-Assessment Centre, Delhi.
From the perusal of the above show cause notice and further from the perusal of assessment order, it is seen that AO has not specified under which clause (a) to (g) of sub section (9) of section 270A, the AO had initiated penalty proceedings. The Hon’ble Jurisdictional High Court in the case of Schneider Electric South Asia (HQ) PTE Ltd. vs. ACIT reported in [2022(3) TMI 1295 (Delhi) held that, there is not even a whisper as to which limb of Section 270 of the Act is attracted and how the ingredient of sub-section (9) of section 270A is satisfied. In absence of such particulars, the mere reference to the word “misreporting” by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrarily. The relevant portion of the judgments is as under:-
4 IT No.43/DDN/2025 M/s Himalayan Vacations Pvt. Ltd. vs. ACIT "7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act it attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.
This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting.
This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation.
Consequently, the impugned order dated 09th March, 2022 passed by Respondent No.1 under Section 270AA (4) of the Act is set aside and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner.
With the aforesaid directions, the present writ petition along with pending applications stand disposed of."
The Co-ordinate Bench of the Tribunal in the case of DD Target PMT Pvt. Ltd. vs. DCIT in to 2776 /Del/2023 vide order dated 17.01.2025 has followed the aforesaid judgement of hon’ble Delhi high court and deleted the penalty levied u/s 270A of the Act.
As the facts of the instant case are identical to the facts of the aforesaid cases of Schneider Electric South Asia (HQ) PTE Ltd. (supra) where the Hon’ble Jurisdictional High Court has held that not specifying as to which limb of Section 270A of the Act it attracted and how the ingredient of sub-section (9) of Section 270A is satisfied, penalty levied u/s 270A is bad in law and is liable to be quashed. Thus, by respectfully following the said judgement of hon’ble Delhi high court and also the judgement of Co-ordinate Bench of Delhi Tribunal in case of DD Target PMT Pvt. Ltd. (supra), we hold that in the present case also, AO has failed to specify the limb of section 270A(9) under which, he initiated the penalty proceedings, therefore, consequent levy of penalty u/s 5 IT No.43/DDN/2025 M/s Himalayan Vacations Pvt. Ltd. vs. ACIT 270A is bad in law and is hereby deleted. Accordingly, all the grounds of appeal taken by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 26.09.2025.