Myunghwa Automotive India Private Limited Vs ITO (ITAT Chennai)
Penalty u/s 270A for PF/ESI disallowance deleted – Mere disallowance ≠ misreporting; Checkmate ruling not basis for penalty – ITAT Chennai
In Myunghwa Automotive India Pvt. Ltd. vs ITO (A.Y. 2017-18), penalty of ₹5.28 lakh u/s 270A was levied at 200% alleging “misreporting of income” due to disallowance of delayed employees’ PF/ESI contributions u/s 36(1)(va). The CIT(A) upheld the penalty relying on the Supreme Court ruling in Checkmate Services.
The ITAT held that penalty for misreporting u/s 270A(9) can be levied only when specific conditions such as suppression of facts, false entries, or failure to record income exist. The list of misreporting conditions reproduced on page 5 shows that mere disallowance of a claim disclosed in the return does not fall within these clauses. Since the assessee had fully disclosed the PF/ESI claim and no specific clause of section 270A(9) was invoked by the AO, penalty was unsustainable.
The Tribunal further observed that at the time of filing the return, the legal position on PF/ESI allowability was debatable and subsequent Supreme Court decision could not automatically trigger penalty. Accordingly, the penalty u/s 270A was deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal is filed by the assessee against the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”) dated 18.07.2025, dismissing the appeal filed by the assessee against the penalty order dated 12.11.2021 passed u/s.270A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2017-18.
