No Specific Charge = No Penalty – ITAT Deletes 270A Penalty for Vague Notice Bonafide Claim

Mustafa Alihusain Sunelwala Vs ITO (ITAT Pune)

No Specific Charge = No Penalty – ITAT Deletes 270A Penalty for Vague Notice Bonafide Claim

In Mustafa Alihusain Sunelwala vs ITO, the Pune ITAT deleted penalty u/s 270A, holding that absence of a clear charge and existence of a bona fide claim defeats penalty for “misreporting”.

The assessee’s return was subjected to scrutiny where deductions for cost of improvement and exemption u/s 54F were disallowed due to lack of evidence and ineligibility. The AO completed assessment ex-parte and levied penalty of ₹15.48 lakh u/s 270A, treating the case as “underreporting due to misreporting”.

The Tribunal noted a fundamental defect: the penalty notice u/s 274 failed to specify which limb of section 270A(9) (misreporting) was invoked. Relying on Delhi High Court rulings and Pune Tribunal precedent, it held that such vague notices render the penalty unsustainable.

On merits also, the ITAT found that the assessee had made claims under a bona fide belief, disclosed all facts, partly complied during assessment, and later paid the entire tax demand including excess refund. There was no material indicating falsity or malafide intent, and mere disallowance of claim cannot automatically lead to penalty for misreporting.

Accordingly, the Tribunal held that the case did not fall under either underreporting or misreporting, and deleted the penalty in full.

Bottom line:

No specific limb in notice = penalty collapses.

Wrong claim ≠ misreporting, if backed by bona fide belief and full disclosure.

FULL TEXT OF THE ORDER OF ITAT PUNE