Penalty u/s 270A Unsustainable Without Specifying Charge of Misreporting of Income: ITAT Deletes ₹32.24 Lakh Penalty [Read Order]

The assessee a person has made a return of income of ₹33.53 lakh for the assessment year 2022–23. On scrutiny, it has been found that the assessee has wrongly made certain exemptions to the income from Alternate Investment Funds (AIFs).After being shown the income as per the Form 64C issued by the AIFs the assessee has corrected the calculations and increased the income by additional amount.

Finally, the income was arrived at as ₹1.78 crore as per the new calculation made by the assessee during assessment proceedings.After that, penalty proceedings under section 270A of the Income Tax Act 1961 have been initiated on the grounds of under reporting of income due to misreporting.

As a result the penalty was imposed on the assessee at the rate of 200% of tax on the alleged misreported income in the sum of ₹32.24 lakh by the AO.The assessee contended that there was no deliberate misreporting as the revised computation was voluntarily furnished based on Form 64C and taxes were duly paid.

Moreover, it was submitted that the notice issued to the assessee under Section 274 along with Section 270A, did not make out any specific charge or Clause under Section 270A(9) regarding misreporting.

The Revenue, on the other hand, supported the orders of the lower authorities, contending that the assessee had misreported income and that the penalty was rightly levied.

The Tribunal comprising Prashant Maharishi [Vice President] and Soundararajan K.[Judicial Member] observed that the show cause notice as well as the assessment order merely alleged under-reporting of income in consequence of misreporting without identifying the specific statutory basis under Section 270A(9).

The Bench noted that the precise charge of misrepresentation or suppression of facts was introduced only at the stage of the penalty order thereby depriving the assessee of a fair opportunity to respond.

The Tribunal held that failure to specify the exact charge renders the penalty proceedings invalid. It distinguished the Revenue’s reliance on contrary precedents and emphasized that the assessee must be clearly informed of the allegations.

Accordingly, the Tribunal held that the penalty proceedings were vitiated due to non specification of the charge and directed deletion of the entire penalty.

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