Case Law Details
Hiro Mulchand Tanwani Vs ITO (ITAT Ahmedabad)
No 270A Penalty Merely Because Deduction Claim Failed: ITAT Deletes ‘Misreporting’ Penalty on 80GGC Donation
The Ahmedabad ITAT deleted penalty levied under Section 270A for alleged “misreporting of income” arising from disallowance of deduction claimed under Section 80GGC towards donation to a political party. The Tribunal held that mere disallowance of a deduction claim or non-filing of appeal against the quantum addition does not automatically establish concealment or misreporting.
The assessee had transparently disclosed the donation in the return of income and claimed deduction based on a bona fide belief regarding eligibility. The reassessment proceedings resulted in disallowance of the deduction, following which penalty was levied alleging misreporting. However, the Tribunal observed that Section 270A(9) specifically covers cases involving suppression of facts, false entries, fabricated evidence or deliberate misrepresentation. In the present case, there was no finding that the assessee had furnished false particulars or fabricated documents. The Tribunal emphasized that penalty proceedings are independent from assessment proceedings and that rejection of a claim does not by itself justify penalty for misreporting. Accordingly, the penalty was deleted in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi order dated 10.12.2025 relevant to Assessment Year 2019-20.
2. The assessee has raised the following grounds of appeal:
1. The learned CIT(A) has erred in confirming penalty of Rs.93,600/- under section 270A on the ground of mis-reporting of income (CIT(A) confirms the penalty on the ground of under reporting of income] in as much as mere acceptance of addition does not attract penalty and that on the facts of the case there was neither under-reporting nor mis-reporting of income.
3. The assessee challenged the levy of penalty under Section 270A of the Income-tax Act, 1961, contending that the Assessing Officer was not justified in treating the disallowance of deduction claimed under Section 80GGC as a case of “misreporting of income.” The facts reveal that the assessee had filed the return of income for Assessment Year 2019-20 declaring total income of Rs.13,25,710 after claiming deduction of Rs.1,50,000 under Section 80GGC in respect of donation made to a political party, namely Manvadhikar National Party. Subsequently, the assessment was reopened under Section 148 to verify the genuineness of the said donation. In the reassessment completed under Section 147 read with Section 144B, the Assessing Officer disallowed the deduction and assessed the total income at Rs.14,75,710, and thereafter levied penalty of Rs.93,600 under Section 270A on the ground that the assessee had under-reported income in consequence of misreporting.
4. The contention of the Assessing Officer that the assessee had accepted the addition by not filing an appeal against the disallowance cannot, by itself, be a valid basis for concluding that there was misreporting of income. The mere fact that the assessee chose not to challenge the quantum addition due to the relatively small amount involved and in order to avoid prolonged litigation does not amount to an admission of concealment or furnishing of false particulars. It is well settled that penalty proceedings are distinct and independent from assessment proceedings, and the findings in the assessment order are not conclusive for the purpose of levy of penalty. Section 270A draws a clear distinction between “under-reporting of income” and “misreporting of income.” Misreporting is attracted only in specific circumstances enumerated in sub-section (9), such as misrepresentation or suppression of facts, failure to record investments, claiming of expenditure not substantiated by evidence, recording false entries, or failure to report receipts. In the present case, the assessee had duly disclosed the donation in the return of income and claimed deduction under Section 80GGC based on the belief that the payment qualified for deduction. The disallowance arose because the Assessing Officer was not satisfied about the genuineness or eligibility of the donation. However, there is no material on record to establish that the assessee had furnished any false evidence, suppressed any facts, or made any deliberate misrepresentation. A claim of deduction made in the return, even if ultimately found to be inadmissible, does not automatically lead to the conclusion that the assessee has misreported income. Unless the Revenue demonstrates with cogent evidence that the claim was bogus and knowingly made on the basis of false particulars, penalty for misreporting cannot be sustained. At best, the case may fall within the ambit of under-reporting of income, but even that would require the Assessing Officer to establish that the conditions prescribed under Section 270A are satisfied. In the absence of any finding that the assessee deliberately furnished inaccurate particulars or fabricated documents, the higher penalty prescribed for misreporting is not legally tenable. Accordingly, considering that the deduction was claimed transparently in the return of income and that the disallowance was based solely on the Assessing Officer’s adverse view regarding its admissibility, the levy of penalty under Section 270A on misreporting of income is unsustainable in law. The penalty of Rs.93,600 is therefore directed to be deleted.
5. In the result, the appeal filed by the assessee is allowed.
The order is pronounced in the open Court on 15.05.2026.
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