DEPUTY COMMISSIONER OF INCOME TAX, NASHIK vs. CHAKRAHAR CONTRACTORS AND ENGINEERS PRIVATE LIMITED, JALGAON

PER RAMA KANTA PANDA, V.P. :

The above two appeals filed by the Revenue are

directed against the common order dated 29.07.2024 of the

learned CIT(A), Pune-12, relating to assessment years 2020-

2021 & 2021-2022 respectively. Since identical grounds have

been raised by the Revenue in both these appeals, therefore,

these appeals were heard together and are being disposed of

by this common order.

2 ITA.Nos.1939 & 1940/PUN./2024

ITA.No.1939/PUN./2024 :

company engaged in the business of construction. It filed it’s

return of income on 13.02.2021 declaring total income of

Rs.23,83,97,010/-. The return was processed u/s.143(1)(a) on

21.06.2021 determining the total income of the assessee at

Rs.23,84,93,182/-. Subsequently, the case was selected for

complete scrutiny under CASS to examine the following

issues:

(i) Default in TDS

(ii) Default in TDS & Disallowance for such default

(iii) Refund claim

(iv) Unsecured loan

2.1. Accordingly, the Assessing Officer issued statutory

notices u/sec.143(2) and 142(1) of the I.T. Act, 1961, in

response to which, the Authorised Representative of the

Assessee appeared before the Assessing Officer from time to

time and filed the requisite details. The Assessing Officer

completed the assessment determining the total income of the

assessee at Rs.32,18,44,630/- by estimating the income from

contract work at 10% of the turnover as against 7.37%

declared by the assessee, which the assessee accepted and

paid the due taxes.

3 ITA.Nos.1939 & 1940/PUN./2024

2.2. Subsequently, the Assessing Officer initiated

penalty proceedings u/sec.270A of the Act. Before the

Assessing Officer assessee submitted that penalty u/sec.270A

is not levaible as the case of the assessee company is covered

by exclusion mentioned in sec.270A(6)(a) of the Act. It was

submitted that during the course of assessment proceedings,

statement of the Managing Director Shri Mahendra Murlidhar

Patil was recorded u/s.131 wherein he has explained that total

contract receipts for the impugned assessment year 2020-

2021 is around Rs.317 crores and contract receipts for the

year before i.e. assessment year 2019-2020 is around Rs.123

crores. Due to exponential increase of more than 250% in total

turnover of the company, the accounts department was

overloaded and due to this reason, there can be some

unintentional discrepancies in the books of accounts, for

which, the Managing Director of the company had offered to

estimate the profit @ 9% of the turnover. It was further

submitted that the assessee company has accepted the income

determined by the Assessing Officer and paid the due taxes.

Accordingly, it was requested to drop the penalty proceedings

initiated u/sec.270A of the Act.

2.3. However, the Assessing Officer was not satisfied

with the arguments advanced by the assessee. He noted that

assessee company has inflated the expenses as well as passed

false entry in books of account by debiting non-genuine sub-

4 ITA.Nos.1939 & 1940/PUN./2024

contract expenses to suppress the income. The Assessing

Officer referred to the provisions of section 270A(9) of the Act,

according to which, a person shall be considered to have mis-

reported his income, if there is suppression of facts as well as

false entry in books of account. He further referred to the

provisions of section 270A(3)(i)(a), according to which, the

amount of under-reported income shall be the difference

between the amount of income assessed and the amount of

income determined under clause (a) of sub-section (1) of

section 143. He accordingly held that assessee has under

reported his income in consequence of mis-reporting for the

amount of Rs.8,33,51,448/-. The Assessing Officer, therefore,

levied penalty of Rs.4,19,55,786/- being 200% of the amount

of tax payable on under-reported income in consequence of

mis-reporting thereof.

that penalty u/sec.270A is not leviable when the income of the

assessee is estimated. It was argued that the Assessing Officer

in the instant case has estimated the profit @ 10% of the

contract receipts as against 7.37% declared by the assessee.

Relying on various decisions, it was submitted that no penalty

is leviable when the income is estimated.

3.1. It was further argued by the assessee that the

Assessing Officer has levied the penalty without giving details

of exact clause of mis-reporting of income under which he

5 ITA.Nos.1939 & 1940/PUN./2024

wanted to charge the assessee company. Since the Assessing

Officer has failed to mention both in the assessment order as

well as in the notice issued u/sec.274 r.w.s.270A of the Act as

to under which limb/sub-clause of sec.270A(9) of the Act

penalty proceedings are initiated, penalty so levied is not in

accordance with law. The assessee also relied on various

decisions to the proposition that penalty is not leviable in

absence of non-communication of the exact limb from clause

(a) to (g) of sub-section (2) of section 270A or as to which of the

specific clause (a) to (f) of sub-section (9) of section 270A was

detriment before imposing the impugned penalty u/sec.270A

of the Act in the assessment order or in the notice u/sec.274

r.w.s.270A of the Act.

3.2. Based on the arguments advanced by the assessee,

the Ld. CIT(A) cancelled the penalty so levied by observing as

under :

“Finding :

5.2. I have considered the submission of the

appellant and the facts of the case. From the assessment

order, it is seen that the addition is made on account of

addition of Net Profit taken 10% of contract receipts of

Rs.8,33,51,448/- and penalty proceedings u/s 270A of

the Act were initiated for under reporting of income in

consequence of misreporting. The appellant has objected

6 ITA.Nos.1939 & 1940/PUN./2024

that there is not even a whisper both in the assessment

order as well as the penalty notice u/s.274 r.w.s. 270A

dated 30.09.2022 as to which limb of section 270A of the

Act is attracted. Since the Ld. AO had not specified u/s

274 r.w.s. 270A, whether penalty is proposed for any of

the conditions mentioned in section 270A(2)(a) to

270A(2)(g) by virtue of which the income of the appellant is

held as under- reported and in section 270A(9)(a) to

270A(9)(g) by virtue of which the income of the appellant is

held as mis-reported, the penalty levied is obliterated. The

appellant has also submitted that the foundation of

initiation of notice u/s.274 r.w.s. 270A not being as per

the provisions of the Act is invalid, illegal and without the

authority of the law and penalty order passed on the basis

of such illegal/invalid/ defective notice is bad in law and

void ab initio and also deserves to be quashed being

violative of fundamental legal proposition. Hence, the

penalty order under appeal may be annulled.

5.3. For better understanding the provisions of

Section 270A of the Act are reproduced hereunder :

Penalty for under reporting and misreporting of

income.

270A. (1) The Assessing Officer or the Commissioner

(Appeals) or the Principal Commissioner or

7 ITA.Nos.1939 & 1940/PUN./2024

Commissioner may, during the course of any

proceedings under this Act, direct that any person

who has under-reported his income shall be liable to

pay a penalty in addition to tax, if any, on the under-

reported income.

(2) A person shall be considered to have under-

reported his income, if –

(a) the income assessed is greater than the income

determined in the return processed under clause (a)

of sub-section (1) of section 143;

(b) the income assessed is greater than the maximum

amount not chargeable to tax, where no return of

income has been furnished;

(c) the income reassessed is greater than the income

assessed or reassessed immediately before such

reassessment;

(d) the amount of deemed total income assessed or

reassessed as per the provisions of section 115JB or

section 115JC, as the case may be, is greater than

the deemed total income determined in the return

processed under clause (a) of sub-section (1) of

section 143;

8 ITA.Nos.1939 & 1940/PUN./2024

(e) the amount of deemed total income assessed as

per the provisions of section 115JB or section 115JC

is greater than the maximum amount not chargeable

to tax, where no return of income has been filed;

(f) the amount of deemed total income reassessed as

per the provisions of section 115JB or section 115JC,

as the case may be, is greater than the deemed total

Income assessed or reassessed Immediately before

such reassessment;

(g) the Income assessed or reassessed has the effect

of reducing the loss or converting such loss into

income.

(3) The amount of under-reported income shall be.-

(i) in a case where income has been assessed for the

first time, -

(a) if return has been furnished, the difference

between the amount of income assessed and

the amount of income determined under clause

(a) of sub-section (1) of section 143;

(b) in a case where no return has been

furnished,-

(A) the amount of income assessed, in the case

of a company, firm or local authority; and

9 ITA.Nos.1939 & 1940/PUN./2024

(B) the difference between the amount of income

assessed and the maximum amount not

chargeable to tax, in a case not covered in item

(A);

(ii) in any other case, the difference between the

amount of income reassessed or recomputed and the

amount of income assessed, reassessed or

recomputed in a preceding order:

Provided that where under-reported income arises out of

determination of deemed total income in accordance with

the provisions of section 115JB or section 115JC, the

amount of total under-reported income shall be determined

in accordance with the following formula-

(A - B) + (C - D)

where,

A = the total income assessed as per the provisions

other than the provisions contained in section 115JB

or section 115JC (herein called general provisions);

B = the total income that would have been

chargeable had the total income assessed as per the

general provisions been reduced by the amount of

under-reported Income;

10 ITA.Nos.1939 & 1940/PUN./2024

C = the total income assessed as per the provisions

contained in section 115JB or section 115JC;

D = the total income that would have been

chargeable had the total income assessed as per the

provisions contained in section 115JB or section

115JC been reduced by the amount of under-

reported income:

Provided further that where the amount of under-reported

income on any issue is considered both under the

provisions contained in section 115JB or section 115JC

and under general provisions, such amount shall not be

reduced from total income assessed while determining the

amount under item D.

Explanation. For the purposes of this section,-

(a) "preceding order" means an order immediately

preceding the order during the course of which the

penalty under sub-section (1) has been initiated;

(b) in a case where an assessment or reassessment

has the effect of reducing the loss declared in the

return or converting that loss into income, the amount

of under-reported income shall be the difference

between the loss claimed and the income or loss, as

the case may be assessed or reassessed.

11 ITA.Nos.1939 & 1940/PUN./2024

(4) Subject to the provisions of sub-section (6), where the

source of any receipt. deposit or investment in any

assessment year is claimed to be an amount added to

income or deducted while computing loss, as the case may

be, in the assessment of such person in any year prior to

the assessment year in which such receipt, deposit or

investment appears (hereinafter referred to as "preceding

year") and no penalty was levied for such preceding year,

then, the under-reported income shall include such amount

as is sufficient to cover such receipt, deposit or investment.

(5) The amount referred to in sub-section (4) shall be

deemed to be amount of income under-reported for the

preceding year in the following order-

(a) the preceding year immediately before the year in

which the receipt, deposit or investment appears,

being the first preceding year, and

(b) where the amount added or deducted in the first

preceding year is not sufficient to cover the receipt,

deposit or investment, the year immediately

preceding the first preceding year and so on.

(6) The under-reported income, for the purposes of this

section, shall not include the following, namely:-

(a) the amount of income in respect of which the

assessee offers an explanation and the Assessing

12 ITA.Nos.1939 & 1940/PUN./2024

Officer or the Commissioner (Appeals) or the

Commissioner or the Principal Commissioner, as the

case may be, is satisfied that the explanation is bona

fide and the assessee has disclosed all the material

facts to substantiate the explanation offered;

(b) the amount of under-reported income determined

on the basis of an estimate, if the accounts are

correct and complete to the satisfaction of the

Assessing Officer or the Commissioner (Appeals) or

the Commissioner or the Principal Commissioner, as

the case may be, but the method employed is such

that the income cannot properly be deduced

therefrom:

(c) the amount of under-reported income determined

on the basis of an estimate, if the assessee has, on

his own, estimated a lower amount of addition or

disallowance on the same issue, has included such

amount in the computation of his income and has

disclosed all the facts material to the addition or

disallowance;

(d) the amount of under-reported income represented

by any addition made in conformity with the arm's

length price determined by the Transfer Pricing

Officer, where the assessee had maintained

13 ITA.Nos.1939 & 1940/PUN./2024

information and documents as prescribed under

section 92D, declared the international transaction

under Chapter X, and, disclosed all the material facts

relating to the transaction; and

(e) the amount of undisclosed income referred to in

section 271AAB.

(7) The penalty referred to in sub-section (1) shall

be a sum equal to fifty per cent of the amount of tax

payable on under-reported income.

(8) Notwithstanding anything contained in sub-

section (6) or sub-section (7), where under-reported income

is in consequence of any misreporting thereof by any

person, the penalty referred to in sub-section (1) shall be

equal to two hundred per cent of the amount of tax

payable on under-reported income.

(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;

14 ITA.Nos.1939 & 1940/PUN./2024

(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.

(10) The tax payable in respect of the under-reported

income shall be –

(a) where no return of income has been furnished

and the income has been assessed for the first time,

the amount of tax calculated on the under-reported

income as increased by the maximum amount not

chargeable to tax as if it were the total income;

(b) where the total income determined under clause

(a) of sub-section (1) of section 143 or assessed,

reassessed or recomputed in a preceding order is a

loss, the amount of tax calculated on the under-

reported income as if it were the total income;

(c) in any other case determined in accordance

with the formula-

(X-Y)

where,

15 ITA.Nos.1939 & 1940/PUN./2024

X = the amount of tax calculated on the under-

reported income as increased by the total income

determined under clause (a) of sub-section (1) of

section 143 or total income assessed, reassessed or

recomputed in a preceding order as if it were the total

income; and

Y = the amount of tax calculated on the total income

determined under clause (a) of sub-section (1) of

section 143 or total income assessed, reassessed or

recomputed in a preceding order.

(11) No addition or disallowance of an amount shall

form the basis for imposition of penalty, if such addition or

disallowance has formed the basis of Imposition of penalty

in the case of the person for the same or any other

assessment year.

(12) The penalty referred to in sub-section (1) shall

be imposed, by an order in writing, by the Assessing

Officer, the Commissioner (Appeals), the Commissioner or

the Principal Commissioner, as the case may be."

In this connection, the appellant submitted that

the Ld. AO has not specified any limb out of the 7 limbs,

that are listed in Section 270A(9) in his notice u/s 274

r.w.s. 270A dated 30.09.2022. Hence, the penalty order is

bad in law.

16 ITA.Nos.1939 & 1940/PUN./2024

5.4. In this regard, the appellant has relied upon

the Hon'ble jurisdictional ITAT, Pune in the case of Kishor

Digambar Patil vs. ITO vide ITA No. 54 & 55/PUN/2023.

In this order, the Hon'ble ITAT has relied upon the

following decisions, wherein it is held that "without

specifying the limb within which the penalty is imposed is

unsustainable".

(i) Hon'ble Supreme Court in the case of Dilip N

Shroff vs JCIT reported in 291 ITR 519 (SC) (ii) Hon’ble Supreme Court in the case of Ashok Pal

vs CIT reported in 292 ITR 11 (SC) (iii) Hon’ble Bombay High Court in the case of CIT

vs. Samson Pericherry. (iv) Hon’ble Bombay High Court in the case of PCIT

Vs Goa Dorado. (v) Hon’ble Bombay High Court in the case of PCIT

Vs New Era Sova Mine. (vi) Prem Brothers Infrastructure LLP V/s. NFAC

reported in (2023) 334 CTR (Del) 363, Para

No.7. In this case Hon. Delhi High Court held

that penalty notice issued u/s.274 r.w.s. 270A

does not mention which limb of section 270A of

the Act is attracted, hence penalty order is

quashed.

17 ITA.Nos.1939 & 1940/PUN./2024

(vii) Alrameez Construction (P) Ltd. Vis. CIT (NFAC),

Delhi reported in (2023) 152 taxman.com 382

(Mumbal Tribunal). In this case Hon. Mumbai

ITAT held that if the penalty notice does not

mention which limb of section 270A is attracted

and how ingredients of section 270A is

satisfied, mere reference to the word "under

reporting" or "misreporting" in the assessment

order or penalty notice for imposing penalty u/s

270A is manifestly arbitrary and deserves to be

quashed.

5.5. Having gone through the relevant material on

record and the decisions of above judicial authorities relied

upon by the appellant, I am of the view that the above

stated judicial precedents regarding the "limb theory"

would squarely apply even in case of failure of the

Assessing Officer to quote any of the seven sub-limbs as

well prescribed in Section 270A(9) (a) to (g) of the Act

introduced by the legislature in order "to rationalize and

bring objectivity, certainty and clarity in the penalty

provisions". And that his noncompliance to this clinching

effect would not only defeat the legislative mandate but

also it renders the amending provisions an otiose. I

accordingly hold in these peculiar facts and circumstances

that the impugned penalty notice issued by the Ld. AO

18 ITA.Nos.1939 & 1940/PUN./2024

deserves to be quashed as not sustainable in the eye of

law. In view of the above, penalty levied u/s 270A of the

Act is bad in law. Hence, the AO is directed to delete the

impugned penalty. The additional ground raised by the

appellant is, therefore, allowed.

5.6. As the ground No.4 of appeal has been

allowed, therefore, the grounds no.1 to 3 of the appeal

become academic in nature and do not require separate

adjudication.”

3.3. Since the Ld. CIT(A) has cancelled the penalty on

account of non-specification of limb within which the penalty

is imposed as unsustainable, he did not adjudicate the ground

challenging the validity of the penalty when such income is

estimated.

Revenue is in appeal by raising the following grounds :

law the Ld. CIT (A) has erred by deleting penalty levied

u/s.270A of the Act of Rs.4,19,55,786/- for mis- reporting

income.

law, the Ld.CIT(A) has erred by not appreciating the fact

that the assessee company has inflated the expenses as

19 ITA.Nos.1939 & 1940/PUN./2024

well as made false entry in books of account by debiting

inflated/non-genuine expenses.

law, the Ld.CIT(A) has erred by incorrectly relying on the

decisions mentioned in the order of Ld.CIT(A) which did

not lay down the ratio that specific limb of section 270A

must be mentioned for a valid order u/s 270A.

law, the Ld.CIT(A) has erred in holding that the notice

u/s.270A r.w.s.274 was invalid as it did not mention the

specific clause of Section 270A whereas there is no such

requirement mandated by law. 5. The appellant craves leave to add, alter, modify, delete

and amend any of the grounds, as per the circumstances

of the case.”

Ld. CIT(A) in deleting the penalty. He submitted that when the

assessee company has inflated the expenses as well as made

false entries in it’s books of account by debiting inflated/non-

genuine expenses, the assessee falls under the purview of

provisions of sec.270A(3) as well as 270A(9) of the Act. Since

there was mis-reporting of income as well as under-reporting

of income, the Assessing Officer was fully justified in levying

the impugned penalty u/sec.270A of the Act. The Ld. CIT(A)

without considering and appreciating the facts properly, has

20 ITA.Nos.1939 & 1940/PUN./2024

deleted the penalty which is not in accordance with law. He

accordingly submitted that the order of the Ld. CIT(A) be

reversed and that of the Assessing Officer be restored.

heavily relied on the order of the Ld. CIT(A). He submitted that

the assessee in the instant case has declared a profit rate of

7.37% on the contract receipts. The Assessing Officer rejecting

the various explanations given by the assessee, resorted to the

provisions of sec.145(3) and estimated the income @ 10%, on

which, the assessee paid the taxes. He submitted that neither

in the assessment order nor in the notice issued u/sec.274,

the Assessing Officer has mentioned the exact limb of

sec.270A(9) under which penalty was imposed and, therefore,

the penalty proceedings so initiated by the Assessing Officer

are not in accordance with law. For the above proposition, the

Learned Counsel for the Assessee relied upon the following

decisions :

03.07.2024.

No.559/PUNE/2024] dated 05.07.2024.

02.02.2024.

21.10.2024.

21 ITA.Nos.1939 & 1940/PUN./2024

dated 19.06.2024. 6. Ritu Multitrade Services Pvt. Ltd. v. ITO [(2024) 164

taxmann.com 121 (Mum)]. 7. Lyka Labs Ltd.v. DCIT [(2024) 38 NYPTTJ 706 (Mum)]. 8. Smita Ashok Thakur v. DCIT [ITA No. 4386/Mum/2023]

dated 07.10.2024. 9. G.R. Infraprojects Ltd. v. ACIT [(2024) 336 CTR 249 (Raj

H.C.)]. 10. Schneider Electric South East Asia (HQ) PTE Ltd. v. ACIT

[(2022) 443 ITR 186 (Del) (HC)]. 11. Kishor D. Patil v. ITO [ITA Nos.54 & 55/PUNE/2023]

dated 30.03.2023. 12. PCIT v. Jehangir H. C. Jehangir [(2023) 155

taxmann.com 209 (Bom HC)]. 13. Mohd. Farhan A. Shaikh v. DCIT [434 ITR 1 (Bom)(HC)].

6.1. He submitted that although the assessee has raised

a ground before the Ld. CIT(A) that when profit is estimated,

penalty cannot be levied u/sec.270A(9) of the Act, however,

the Ld. CIT(A) did not adjudicate the same since he has

already deleted the penalty for non-specification of the limb.

Referring to the decision of Hon’ble Bombay High Court in the

case of B.R. Bamasi vs. CIT reported in 83 ITR 223 (Bom.)

(HC), he submitted that the Hon’ble High Court in the said

decision has held that assessee is empowered to defend the

22 ITA.Nos.1939 & 1940/PUN./2024

order of the Ld. CIT(A) by raising an additional legal ground

before the Tribunal even when the assessee has not filed

cross-objection or cross-appeal against the order of the Ld.

CIT(A). He accordingly submitted that the grounds raised by

the Revenue be dismissed.

sides and perused the material available on record. We have

also considered the various decisions cited before us by both

the sides. We find the Assessing Officer in the instant case

completed the assessment u/sec.143(3) determining the total

income of the assessee at Rs.32,18,44,630/- as against the

returned income of Rs.23,83,97,010/-, wherein he made an

addition of Rs.8,33,51,448/- to the income determined

u/sec.143(1)(a) by making addition of the difference between

the profit estimated @ 10% and the profit declared by the

assessee @ 7.37% of the total turnover. Since the Assessing

Officer, neither in the assessment order nor in the penalty

notice, has specified as to whether penalty is proposed for any

of the conditions mentioned in sec.270A(2)(a) to 270A(2)(g) by

virtue of which the income of assessee is held as under-

reported or in sec.270A(9)(a) to sec.270A(9)(f) by virtue of

which the assessee has mis-reported it’s income, the Ld.

CIT(A) deleted the penalty. The detailed reasoning given by him

has already been reproduced in the preceding paragraphs.

23 ITA.Nos.1939 & 1940/PUN./2024

7.1. We do not find any infirmity in the order of the Ld.

CIT(A) in deleting the penalty so levied by the Assessing

Officer. It is an admitted fact that the Assessing Officer in the

assessment order has not specified as to under which limb of

provisions of sec.270A(2) or 270A(9), the assessee has mis-

reported or under-reported it’s income, we find the Assessing

Officer in the body of the assessment order has mentioned as

under after making the addition :

“In light of the above, the amount of Rs.8,33,51,480/-

is added to the total income of the assessee company for

A.Y. 2020-21. Penalty proceedings u/s 270A of the Income

Tax Act, 1961 is initiated separately for underreporting in

consequence of mis-reporting of income.”

7.1. Similarly, we find the notice issued u/sec.274

r.w.s.270A dated 30.09.20222, copy of which, is placed at

page-12 of the paper book, reads as under :

24 ITA.Nos.1939 & 1940/PUN./2024

7.2. Similarly, the second notice issued u/sec.270A

dated 05.01.2023 reads as under :

7.3. We find the Hon’ble Delhi High Court in the case of

Schneider Electric South East Asia (HQ) PTE Ltd. v. ACIT

reported in (2022) 443 ITR 186 (Del) has held that when there

is not even a whisper as to which limb of sec.270A is attracted

and how the ingredient of sub-sec.(9) of sec.270A is satisfied,

the action of the Assessing Officer is contrary to the legislative

25 ITA.Nos.1939 & 1940/PUN./2024

intent. The relevant observations of Hon’ble High Court reads

as under :

“6. Having perused the impugned order dt. 9th March,

2022, this Court is of the view that the respondents' action

of denying the benefit of immunity on the ground that the

penalty was initiated under s.270A of the Act for

misreporting of income is not only erroneous but also

arbitrary and bereft of any reason as in the penalty notice

the respondents have failed to specify the limb

"underreporting" or "misreporting" of income, under which

the penalty proceedings had been initiated.

as to which limb of s.270A of the Act is attracted and how

the ingredient of sub-s.(9) of s.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.”

7.4. We find the Coordinate Bench of the Tribunal in the

case of ACIT v. Kedari Redekar Shikshan Sanstha in ITA

No.559/PUNE/2024] vide order dated 05.07.2024 while

deciding an identical issue deleting the penalty levied

u/sec.270A has observed as under :

26 ITA.Nos.1939 & 1940/PUN./2024

“9. We have carefully considered the rival submissions

and perused the records. The assessee is a charitable

trust registered u/s 12A of the Act and engaged in

educational activities whose income is exempt from tax. It

is manifest from para 4 of the assessment order that on

perusal of Schedule EC of the ITR, the Ld. AO noticed that

the assessee had claimed capital expenditure of

Rs.2,40,02,040/-. Vide notice u/s 142(1) of the Act he

required the assessee to furnish headwise and naturewise

bifurcation of said capital expenditure. It was in reply

thereof that the assessee submitted revised computation

showing capital expenditure of Rs.97,47,772/- for which

explanation was submitted. On consideration of such

explanation, the Ld. AO observed in para 4.5 of the

assessment order that the assessee has obtained fresh

loans of Rs.1,42,54,268/- from bank during AY 2018-19.

Accordingly, since the assessee has pleaded that

fresh loan has been obtained for capital expenditure on

assets which has been claimed as capital expenditure in

the ITR and now assessee submits request to reduce its

claim of capital expenditure for the assets on which loan

has been taken in next years. According to the Ld. AO, the

plea of the assessee is found acceptable. Not only this the

Ld. AO went on to observe further that in this way, the

assessee had saved itself from the double deduction on

27 ITA.Nos.1939 & 1940/PUN./2024

same capital assets on which loan is availed in coming

years whose repayment may have been claimed by the

assessee in subsequent AYs. It was in the above backdrop

of the factual matrix that the Ld. AO disallowed the excess

claim of capital expenditure of Rs.1,42,54,268/-. In our

considered view there is no intentional misrepresentation

of expenditure as alleged. By no stretch of imagination it

can be said to be a case of attempted tax evasion as even

after revision of computation, the taxable income remained

Nil which is same as returned income of the assessee. In

the assessment order there is no whisper that there is

under- reporting on total income as a consequence to

misreporting as envisaged u/s 270A(8) and (9) of the Act.

274 r.w.s. 270A of the Act states : "it appears to me

under-reporting/misreporting of income". Obviously, the

initiation of penalty itself is based on suspicion and

surmise. Nowhere it has been pinpointed - either in the

penalty notice or in the impugned order of penalty as to

under which stipulated specific clauses (a) to (f) to sub-

section (9) r.w. sub-section (8) of section 270A of the Act,

the assessee has committed default attracting "under-

reporting" as a consequence of "mis-reporting". In such a

scenario the Co-ordinate Bench of the Tribunal in the case

of Mahavir Realties (supra) held that not only Hon'ble

28 ITA.Nos.1939 & 1940/PUN./2024

Bombay High Court's Full Bench landmark decision

in Mohd. Farhan A. Shaikh Vs. ACIT (2021) 434 ITR 1

(Bom.) applies wherein it is held that such a failure on the

Assessing Officer's part indeed vitiates the entire penal

proceedings (in old scheme), but also the very principle

applies qua this new scheme of section 270A applicable

w.e.f. 01.04.2017 for AY 2017-18 onwards as

per Schneider Electric South East Asia (HQ) Ltd. Vs.

ACIT (2022) 443 ITR 186 (Delhi).

of the Ld. AR that a revision in computation of income was

made with a view to correct bonafide mistake which did

not have any tax implication so as to

cause misrepresentation resulting in misreporting.

Misrepresentation is often willful or intentional done with

the intention of gaining wrongfully. Nothing of the sort has

been done by the assessee. It only corrected an

inadvertent mistake.

of Ld. CIT(A) that on the facts and in the circumstances of

the case of the assessee, the impugned penalty is not

exigible. Consequently, we reject the appeal of the

Revenue being devoid of any merit and substance.

dismissed.”

29 ITA.Nos.1939 & 1940/PUN./2024

7.5. We find the Pune Bench of the Tribunal in the case

of Kasat Prakash M. HUF vs. ITO in ITA No.1328/PUNE/2023

vide order dated 19.06.2024 while deciding an identical issue

deleting penalty levied u/sec.270A has observed as under :

“4. We have given our thoughtful consideration to the

assessee's forgoing legal issue raised in the instant appeal

that the impugned penalty proceedings stand vitiated on

account of the Assessing Officer's failure to pinpoint the

relevant clauses (a) to (f) to sub-section (9); while initiating

the proceedings herein u/s.270A(8) of the Act, thereby

alleging under reporting of income as a sequence of

misreporting. Faced with this situation, we find no merit in

Revenue's arguments placing reliance on M/s. Veena

Estate Pvt. Ltd. (supra) once the issue before their

lordships was that of the concerned appellant seeking to

frame an additional substantial question of law in section

260A proceedings whereas the law regarding the

tribunal's jurisdiction to entertain such a pure question of

law, not requiring any further detailed investigation on

facts, is already settled in NTPC Ltd. Vs. CIT (1998) 229

ITR 383 (SC). That being the case, we are of the

considered view that going by the foregoing judicial

precedent, this tribunal is very much entitled to entertain

and decide such a pure legal plea for the first time in

section 254(1) proceedings. We accordingly reject the

30 ITA.Nos.1939 & 1940/PUN./2024

Revenue's instant technical arguments to conclude in light

of section 270A (8) & (9) r.w. clauses (a to f) that the

learned Assessing Officer's failure to pinpoint the

corresponding default of assessee's part indeed vitiates

the entire proceedings as per (2022) 443 ITR 186 (Del)

Schneider Electric South Asia Ltd. Vs. ACIT (in the new

scheme) and Md. Farhan S.A. Vs. ACIT (2021) 434 ITR 1

(Bom.) in section 271(1)(c) old penal provision. We order

accordingly. The impugned penalty of Rs. 15,54,736/-

stands deleted in very terms.

7.6. The various other decisions relied on by the Learned

Counsel for the Assessee also supports his case to the

proposition that where neither in the assessment order nor in

the notice issued u/sec.274 r.w.s.270A the Assessing Officer

has specified as to under which limb of provisions of

sec.270A(2) or 270A(9) the case of the assessee falls, then in

that case, no penalty u/sec.270A is leviable. We, therefore,

uphold the order of the Ld. CIT(A) and the grounds raised by

the Revenue are dismissed.

7.7. Even otherwise also, it is an admitted fact that

profit of the assessee has been estimated by resorting to the

provisions of sec.145(3). It has been held in various decisions

that penalty u/sec.271(1)(c) of the Act is not leviable when the

31 ITA.Nos.1939 & 1940/PUN./2024

profit is estimated. The same corollary in our opinion is also

applicable to the provisions of sec.270A of the Act. We,

therefore, do not find any infirmity in the order of the Ld.

CIT(A) cancelling the penalty levied by the Assessing Officer

u/sec.270A(9) of the Act. The grounds raised by the Revenue

are accordingly dismissed.

ITA.No.1940/PUN./2024 :

instant appeal :

law the Ld. CIT (A) has erred by deleting penalty levied

u/s.270A of the Act of Rs.2,22,45,572/- for mis- reporting

income.

law, the Ld.CIT(A) has erred by not appreciating the fact

that the assessee company has inflated the expenses as

well as made false entry in books of account by debiting

inflated/non-genuine expenses.

law, the Ld.CIT(A) has erred by incorrectly relying on the

decisions mentioned in the order of Ld.CIT(A) which did

32 ITA.Nos.1939 & 1940/PUN./2024

not lay down the ratio that specific limb of section 270A

must be mentioned for a valid order u/s 270A.

law, the Ld.CIT(A) has erred in holding that the notice

u/s.270A r.w.s. 274 was invalid as it did not mention the

specific clause of Section 270A whereas there is no such

requirement mandated by law.

and amend any of the grounds, as per the circumstances

of the case.”

raised in the instant appeal are identical to grounds raised in

ITA.No.1939/PUN./2024. We have already decided the issue

and the grounds raised by the Revenue have been dismissed.

Following similar reasoning, the grounds raised by the

Revenue in the instant appeal are dismissed.

dismissed. A copy of this common order be placed in the

respective case files.

Order pronounced in the open Court on 26.12.2024.

Sd/- Sd/- [VINAY BHAMORE] [RAMA KANTA PANDA] JUDICIAL MEMBER VICE PRESIDENT Pune, Dated 26th December, 2024 VBP/-

33 ITA.Nos.1939 & 1940/PUN./2024

Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune-12, Pune. 4. The Pr. CIT, Pune concerned 5. D.R. ITAT, “A” Bench, Pune. 6. Guard File.

//By Order//

//True Copy //

Sr. Private Secretary, ITAT, Pune Benches, Pune.