Penalty U/s 270A Quashed – Failure to Specify ‘Misreporting Limb’ in Notice Held Fatal

Mehul Ratilal Shah Vs DCIT (ITAT Bangalore)

The Bangalore ITAT in the case of Mehul Ratilal Shah dealt with levy of penalty u/s 270A (₹32.24 lakh) arising from additional income offered during assessment based on Form 64C (AIF income reconciliation).

Although the assessee had:

• Voluntarily revised computation during scrutiny,
• Paid taxes on additional income,
  the AO treated the case as “misreporting of income” and levied 200% penalty.

The Tribunal, however, did not go into merits and instead focused on a fundamental legal defect:

• The show cause notice and assessment order did not specify the exact limb of “misreporting” under section 270A(9),
• The specific charge (i.e., misrepresentation/suppression) was mentioned only in the penalty order,
• Thus, the assessee was never made aware of the precise allegation during proceedings.

Relying on Delhi High Court rulings (GE Capital, Schneider Electric) and consistent tribunal precedents, the ITAT held that:

• Failure to specify the exact limb of section 270A(9) vitiates penalty proceedings,
• Assessee must be clearly informed of the precise charge to defend itself.

The Revenue’s reliance on contrary rulings was distinguished, especially since jurisdictional principles require clear notice of charge.

Accordingly, the ITAT deleted the entire penalty, holding it to be invalid in law.

The appeal was allowed in favour of the assessee.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal is filed by the assessee/appellant for the assessment year 2022-23 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 12.08.2025 wherein the appeal filed by the assessee against the penalty order passed by the Assessment Unit of the Income Tax Department dated 23.9.2024 levying penalty of Rs.32,24,478 was dismissed.