ACIT Vs Rajah Muthiah (ITAT Chennai)
Name the Limb or Lose the Penalty: 270A Proceedings Fail-Misreporting Must Be Specific: Mechanical Penalty Struck Down
In ACIT Vs. Rajah Muthiah Chettiar Charitable & Educational Trust, ITA No.2081/Chny/2025 & CO No.72/Chny/2025, AY 2017-18, order dated 31.12.2025, Chennai ITAT dismissed Revenue’s appeal & upheld deletion of penalty u/s 270A. Assessee, a charitable trust registered u/s 12AA, had originally filed NIL return claiming exemption u/s 11, which was accepted in regular assessment u/s 143(3). Pursuant to search u/s 132 in Chettinad Group, proceedings were initiated u/s 153C & Assessee filed return admitting income of ₹2.72 crore, including unaccounted cash receipts reflected in seized loose sheets. Assessment u/s 153C was completed accepting returned income.
AO thereafter levied penalty of ₹1.89 crore @200% alleging under-reporting in consequence of misreporting u/s 270A(8) r.w.s. 270A(9). Tribunal noted that penalty notice u/s 274 r.w.s. 270A was vague, as AO failed to specify which of the six clauses (a) to (f) of section 270A(9) was attracted. Even in assessment order, satisfaction was recorded mechanically without pinpointing the exact limb of misreporting. Following earlier ITAT decisions including Prakashchand Jain v. DCIT (ITA 68/Chny/2024) & Kasat Prakash M (HUF) v. ITO (Pune ITAT), Tribunal held that non-specification of charge vitiates penalty proceedings. Deletion of penalty by CIT(A) was therefore confirmed & Revenue’s appeal dismissed; Cross Objection became infructuous.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
