"Mere Reference to Misreporting" Insufficient for Levy of Penalty: ITAT Quashes Rs. 1.22cr Penalty for Lack of Reasoning [Read Order]
The ITAT held that the order of the penalty passed under section 270A(9) was not sustainable, reversed the orders of the lower authorities, and directed the Assessing Officer to delete the penalty
![Mere Reference to Misreporting Insufficient for Levy of Penalty: ITAT Quashes Rs. 1.22cr Penalty for Lack of Reasoning [Read Order]](https://images.taxscan.in/h-upload/2026/05/08/2135951-mere-reference-to-misreportingjpg.webp "Mere Reference to Misreporting Insufficient for Levy of Penalty: ITAT Quashes Rs. 1.22cr Penalty for Lack of Reasoning [Read Order]")
The Income Tax Appellate Tribunal (ITAT), ‘A’ Bench, Bangalore, has allowed the appeal and set aside the penalty order levied under Section 270A of the Income Tax Act, 1961. The Tribunal held that the penalty of Rs. 1.22 Crore was unsustainable as the Assessing Officer failed to specify which specific clause of Section 270A(9) (misreporting of income) was attracted, rendering...
The Income Tax Appellate Tribunal (ITAT), ‘A’ Bench, Bangalore, has allowed the appeal and set aside the penalty order levied under Section 270A of the Income Tax Act, 1961. The Tribunal held that the penalty of Rs. 1.22 Crore was unsustainable as the Assessing Officer failed to specify which specific clause of Section 270A(9) (misreporting of income) was attracted, rendering the order manifestly arbitrary.
The Department alleged that the assessee,Indian Academy Education Trust had underreported income by claiming double deduction on depreciation and treating capital expenditure as application of income. The National Faceless Assessment Centre passed an order disallowing the depreciation claim and subsequently initiated penalty proceedings under Section 270A.
The Assessing Officer levied a penalty of Rs. 1,22,98,760/-, holding that the underreporting was a consequence of misreporting. The Commissioner of Income Tax (Appeals) confirmed this penalty, leading to the current appeal.
The Assessee, represented by B.S. Balachandran, Advocate, contended that the penalty was vitiated because neither the Assessment Order nor the penalty notice specified the nature of the misreporting or invoked any of the specific clauses under Section 270A(9). It was submitted that the Assessing Officer was duty-bound to inform the Assessee under which limb of the law the penalty was being imposed.
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The Coram of Prashant Maharishi (Vice-President) and Soundararajan K (Judicial Member) observed that when penalizing an assessee for misreporting, the Assessing Officer must clearly specify which of the six instances of misreporting under Section 270A(9) applies. The Bench noted that in the present case, there was "not a whisper" regarding which limb of the section was attracted.
The Tribunal observed:
“In the present case, neither the notice nor the Assessment Order speaks about the limb out of 6 limbs of misreporting of income as per section 270A(9) of the Act... Where there is not a whisper of which limb of section 270A of the Act is attracted... in absence of such mere reference to the word misreporting by the Ld. Assessing Officer in the Assessment Order makes the order manifestly arbitrary.”
Relying on the decisions of the Delhi High Court in Schneider Electric South East Asia (HQ) Pte Ltd. and GE Capital US Holdings Inc., the Tribunal held that the failure to specify the ground of misreporting violates the principles of natural justice and renders the penalty order liable to be quashed.
The ITAT held that the order of the penalty passed under section 270A(9) was not sustainable, reversed the orders of the lower authorities, and directed the Assessing Officer to delete the penalty.
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