Case Law Details
Divya Burman Vs Assessment Unit (ITAT Delhi)
Penalty under section 270A is unsustainable if the Assessing Officer fails to specify the exact statutory clause of section 270A(2) invoked for under-reporting or misreporting of income, either in the penalty notice or in the penalty order.
Summary: The ITAT Delhi in Divya Burman Vs Assessment Unit held that penalty proceedings under Section 270A of the Income Tax Act are invalid if the Assessing Officer fails to specify the exact statutory clause of Section 270A(2) invoked for under-reporting or misreporting of income. The assessee had disclosed long-term capital gains on sale of jewellery, which were recomputed during scrutiny, resulting in an addition partly sustained by the first appellate authority. Subsequently, the Assessing Officer imposed penalty at 200% of tax under Section 270A without identifying the precise clause applicable to the alleged default either in the show-cause notice or in the penalty order. The Tribunal observed that Section 270A creates distinct categories of default and a valid assumption of jurisdiction requires clear specification of the relevant statutory limb. Relying on judicial precedents including Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT, the Tribunal held that such non-specification was a jurisdictional defect rendering the entire penalty proceeding unsustainable in law.
Issue: Whether penalty levied under section 270A is valid when neither the show-cause notice nor the penalty order specifies the precise limb or clause of section 270A(2) under which the alleged under-reporting of income falls.
Facts: The assessee disclosed long-term capital gains on sale of jewellery. During scrutiny, the Assessing Officer recomputed the capital gains, resulting in an addition that was partly sustained by the first appellate authority at ₹79,74,315. Thereafter, the Assessing Officer levied penalty under section 270A at 200 percent of tax on the alleged under-reported income. The assessee challenged the penalty on the ground that the Assessing Officer had not identified the specific clause of section 270A(2) or section 270A(9) applicable to the case.
Tribunal’s Findings: The Tribunal held that section 270A creates distinct categories of default, and a valid assumption of jurisdiction for penalty requires the Assessing Officer to clearly state the exact statutory clause under which penalty is proposed. Mere reference to “under-reporting” or levy of penalty at 200 percent without identifying the relevant clause is legally insufficient.
The Tribunal observed that neither the penalty notice nor the penalty order disclosed the specific clause of section 270A(2) applicable to the assessee’s case. This omission deprived the assessee of a meaningful opportunity to defend herself and rendered the entire penalty proceeding fundamentally defective.
Relying on the binding decision of the Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT, the Tribunal held that such non-specification is not a curable defect but goes to the root of jurisdiction. Similar support was drawn from Prem Brothers Infrastructure LLP v. NFAC and co-ordinate bench decisions including Ujala Credit Co-operative Society Ltd. v. NFAC and Karamvir Singh v. ITO.
Held: Since the Assessing Officer failed to specify the applicable clause of section 270A(2) in both the notice and the penalty order, the penalty proceedings were held to be invalid in law. The penalty levied under section 270A was quashed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above captioned appeal is preferred by the assessee against the order dated 30.10.2025, passed by CIT(A)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2017-18.
2. The assessees has raised following grounds of appeal:
“1. On the facts and circumstances of the case and in law, both the learned CIT(A)/ A.O has erred in levying penalty on matter of valuation versus indexation of cost of jewellery of Rs 0.797 crs.
2. On the facts and circumstances of the case and in law, both the learned CIT(A)/ A.O has erred in levy of penalty of Rs 0.797 crs u/s 270A without given any finding u/s 270(6) despites assessee objection of non-levy of penalty.
3. On the facts and circumstances of the case and in law, both the learned CIT(A)/ A.O has erred in enhancing u/s 270A(9) @ 200% without mentioning under which sub-clause of section 270A(9), there was misreporting.
4. The appellant craves leave to alter, amend or withdraw all or any of the grounds of appeal herein or add any further grounds as may be considered necessary and to submit such statements, documents and papers as may be considered necessary either before or during the hearing.”
3. Brief facts are that the assessee had filed her return for A.Y. 2017-18 on 30.07.2017 declaring income of Rs.4,53,27,960/-. The case was selected for scrutiny. Ld. AO noted that the assessee had declared long term capital gain (LTCG) of Rs.4,16,03,657/- on sale of jewellery. In order to examine the LTCG claim, AO called for details of purchases and sales alongwith supporting documentary evidences. After detailed examination, the LTCG was worked out at Rs.5,20,90,844/- resulting in addition of Rs.1,04,87,187/- in the assessment order u/s 143(3) dated 25.12.2019.
3.1 Aggrieved, the assessee preferred an appeal before the ld. CIT(A). After considering the submissions of the assessee, part relief was allowed by the ld. CIT(A) vide order dated 31.05.2023 resulting in reduction of the amount of addition form Rs.1,04,87,187/- to Rs.79,74,315/-. The assessee did not file appeal against the order of ld. CIT(A).
3.2 Thereafter the AO imposed penalty @200% on this amount u/s 270A for under reporting of income vide order dated 11.03.2025. Aggrieved, the assessee preferred appeal against the penalty order before ld. CIT(A) who dismissed the same vide order dated 31.10.2025. Further aggrieved, the assessee has filed appeal before the Tribunal.
4. Before us, ld. AR has submitted that the AO has not mentioned the specific clause of 270A invoked by him for levying the penalty in the notice as well as the penalty order. He further submitted that the issue is covered in favour of the assessee by the decision of the Hon’ble jurisdictional High Court in the case of Schneider Electric South East Asia (HQ) Pte Ltd. vs. ACIT(IT) (2022) 443 ITR 186 wherein it has been held that penalty proceedings initiated without specifying the limb of section 270A and the exact clause is arbitrary. Ld. AR has further placed reliance on the following decisions of the co-ordinate benches:
i. Karamvir Singh Vs. ITO in ITA No. 4673/Del/2024 (Del. Trib.)
ii. Joseph’s Educational Trust Vs. DCIT in ITA Nos. 3293 to 3297/Chny/2024
iii. Prem Brothers Infrastructure LLP [2022 (6) IMI 130 – Delhi High Court]
iv. Ujala Credit Cooperative Society Ltd. [2024 (6) TMI 600 – ITAT Delhi]
Ld. AR has pointed out from the copies placed before us that nowhere in the penalty notice/order, the AO has specified the exact clause of section 270A(2) regarding under-reporting of income which has been invoked in this case.
4.1 Ld. DR on the other hand has strongly relied on the orders of the lower authorities and pointed out that the assessee did not file appeal against the addition confirmed by ld. CIT(A) and therefore, it is clearly a case of under-reporting of income which has been accepted by the assessee and the penalty levied for the same deserves to be upheld.
5. We have heard the rival submissions and perused the material on record. Various judicial authorities on the issue of non-mentioning of specific clause of section 270A while levying penalty for under-reporting or mis-reporting have been perused. Respectfully following the decision of the Hon’ble jurisdictional High Court in the case of Schneider Electric South East Asia (supra) and of the co-ordinate benches, we hold that the notice and penalty order u/s 270A passed by the AO without specifying the clause of section 270A(2) applicable for under-reporting of income is bad in law and is, therefore, liable to be quashed.
In the result, appeal of the assessee allowed.
Order Pronounced in the Open Court on 15/05/2026.
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