The Mumbai Bench of Income Tax Appellant Tribunal (ITAT) has held that the penalty Under Section 270A of the Income Tax Act, 1962 is unsustainable without clear identification of ‘misreporting’.
The bench of Rahul Chaudhary (Judicial Member) and Omkareshwar Chidara (Accountant Member) has observed that the invocation of specific limb of Section 270A(9)(a) to 270A(9)(g) of the Act should either be apparent from the express provisions stated in the penalty order or should be unambiguously discernable from the reading of the penalty order as a whole; and in absence of the same penalty levied under Section 270A of the Income Tax Act cannot be sustained.
The bench stated that in case the Assessing Officer arrives at a conclusion that the under-reporting of income is in consequence of misreporting, Assessing Officer is required to exhibit that the aforesaid misreporting falls within the ambit of the cases of misreporting specified in Section 270A(9)(a) to 270A(9)(g) of the Act before the Assessing Officer can levy penalty at a higher rate of 200% of the amount of tax on under-reported income by invoking provisions of Section 270A(8) of the Income Tax Act.
The assessment for the Assessment Year 2019-2020 was framed on the appellant/Assessee, Hi-Tech Engineers a partnership firm, under Section 153A of the Act vide Assessment Order, dated 30/09/2021, whereby addition of INR.70,93,473 was made in the hands of the Assessee under Section 69C of the Income Tax Act holding that the aforesaid amount represented bogus purchases.
The Assessing Officer also initiated penalty proceedings under Section 270A of the Income Tax Act for misreporting of income.
The addition was challenged by the Assessee in appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority partly allowed the appeal preferred by the Assessee and restricted the addition on account of alleged bogus purchases to INR.1,99,328/- being 5% of the alleged bogus purchases of INR.39,86,587.
A show cause notice was issued to the Assessee in the penalty proceedings. The Assessing Officer concluded that the Assessee had under-reported income in consequence of misreporting income since the claim of expenditure was not substantiated by any evidence. Therefore, as per provision of Section 270A(9) of the Act, penalty equal to 200% of the amount of tax payable on misreported income as leviable on the Assessee.
Accordingly, the Assessing Officer levied a penalty of INR.1,39,306 on the Assessee vide Penalty Order passed under Section 270A of the Income Tax Act.
The assessee contended that the Assessee had furnished on relevant documents and details in relation to purchase. The Assessing Officer had failed to carry out any independent inquiry to show that the purchases were bogus and had merely related upon the report of the Investigation Wing. The additions were made on an estimated basis.
The assessee submitted that in the penalty notices, the Assessing Officer had specified whether penalty was leviable for under-reporting of income in terms of Section 270A(2)(a) to 270A(2)(g) of the Act or for misreporting of income in terms of Section 270A(9)(a) to Section 270A(9)(f) of the Act. In the Penalty Order, the Assessing Officer had also failed to specify the limb Section 270A(2)/(9) of the Act under which penalty was to be levied on the Assessee. It was contended that on account of penalty levied under Section 270A of the Act could not be sustained.
The tribunal held that the penalty order levying penalty under Section 270A of the Act cannot be sustained. Accordingly, the order passed by the CIT(A) is set aside and the penalty of INR.1,39,306 levied under Section 270A of the Income Tax Act is deleted.
Case Details
Case Title: Hi-Tech Engineers Versus ACIT
Case No.: ITA No.3165/MUM/2025
Date: 10.10.2025
Counsel For Appellant: Bhavik Chheda
Counsel For Respondent: Ritesh Misra
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