Case Law Details
Jyotsna Ranchhodbhai Patel Vs DCIT (ITAT Ahmedabad)
The appeal before the ITAT Ahmedabad arose from an order of the National Faceless Appeal Centre (NFAC) dated 2 May 2025 for Assessment Year (AY) 2017-18, confirming a penalty imposed under Section 270A of the Income Tax Act for alleged misreporting of income.
The appeal was filed with a delay of 209 days. The assessee, a 74-year-old senior citizen living with her 80-year-old husband, explained that both were unfamiliar with the Income Tax Department’s online portal and had no family members in India to assist them, as their children were settled abroad. The appellate order received through email was inadvertently overlooked due to old age, and the appeal was filed only after the Department pursued the demand. Considering these circumstances, the Tribunal condoned the delay.
The assessee had filed her return of income for AY 2017-18 on 28 October 2017 declaring a total income of ₹1,81,60,310. During scrutiny assessment under CASS, the Assessing Officer noticed that a short-term capital loss of ₹9,05,105 had been debited to the profit and loss account. The same amount had also been reduced from the “Net Profit Before Tax” in Schedule BP of the return to consider it under another head of income, but it was ultimately not reflected under any other head. When this discrepancy was pointed out, the assessee admitted that it was a bona fide mistake and agreed to the addition of ₹18,10,210 to her business income. The Assessing Officer accordingly made the addition and initiated penalty proceedings under Section 270A for misreporting of income. A separate penalty order dated 30 March 2022 imposed a penalty of ₹12,52,952, being 200% of the tax sought to be evaded. The first appellate authority dismissed the assessee’s appeal, leading to the present appeal before the Tribunal.
Before the Tribunal, the assessee contended that the error had occurred due to a bona fide mistake by her tax consultant while preparing the return. It was argued that, immediately after the mistake was pointed out during assessment, the assessee accepted the error, agreed to the addition, and did not challenge the assessment order. Therefore, the penalty for misreporting of income under Section 270A was not justified. The Revenue supported the orders of the lower authorities.
After considering the submissions, the Tribunal observed that there was no dispute that the error was a bona fide mistake arising from the failure to correctly adjust the short-term capital loss while filing the return. The Tribunal noted that the mistake was evident from the income tax return itself and did not involve any misrepresentation or suppression of facts. It held that the error was merely an omission in making an arithmetical adjustment by the assessee’s consultant.
The Tribunal referred to Section 270A(9), which specifies the situations constituting misreporting of income, including misrepresentation or suppression of facts, failure to record investments, unsupported expenditure claims, false entries in books of account, failure to record receipts, and failure to report specified international or domestic transactions. It observed that the Assessing Officer was required to specify which clause of Section 270A(9) was applicable while imposing the penalty. However, neither the assessment order nor the penalty order identified any specific clause attracted in the present case.
The Tribunal found that the assessee had neither misrepresented nor suppressed any facts, had not claimed unsupported expenditure, had made no false entries in the books of account, and had not attempted to conceal the mistake. Since the error was apparent from the return itself and was accepted during assessment without dispute, none of the clauses of Section 270A(9) were applicable.
Accordingly, the Tribunal held that the case did not involve misreporting of income and cancelled the penalty imposed under Section 270A. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 02.05.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 270A of the Income Tax Act.
2. There was delay of 209 days in filing of this appeal. The assessee has filed a condonation application along with an affidavit. It has been explained that the assessee is a senior citizen 74 years of age living with her husband aged about 80 years. Their children are settled out of India and there is nobody in the family to help them in the technical matters pertaining to Income-tax proceedings. The assessee is not used to online portal of the department and the order of the CIT(A) received on the email was overlooked by the assessee due to her old-age. Subsequently, when the demand matter was pursued by the Department, the assessee has filed the present appeal and in the process there was delay of 209 days. Considering the explanation of the assessee, the delay in filing of the appeal is condoned.
3. The brief facts of the case are that the assessee had filed her return of income in A.Y. 2017-18 on 28.10.2017, declaring total income of Rs.1,81,60,310/-. The case was selected for complete scrutiny under CASS. The assessee derived income from business, interest income and capital gains. In the course of assessment, the AO had noticed that an amount of Rs.9,05,105/- being short-term loss was debited to P&L account. Further in Schedule-BP of ITR, the assessee had reduced this amount of Rs. 9,05,105/- from “Net profit before tax” to consider the same under other heads of income. However, this amount was not found considered in any other head income by the assesse. When this fact was brought to the knowledge of the assessee, she admitted that this as a bona fide mistake and had agreed to the addition of Rs. 18,10,210/- to her business income. Accordingly, the AO had made the addition and also initiated penalty proceeding u/s. 270A of the Act for misreporting the income. Subsequently, a separate order u/s. 270A of the Act was passed on 30.03.2022 imposing penalty of Rs.12,52,952/- on the assessee at the rate of 200% of the tax sought to be evaded.
4. Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
5. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
On the facts and circumstances of the case and in law –
1. The Ld. NFAC/CIT(A) has erred upholding penalty u/s 270A.
2. The Ld. NFAC/CIT(A) has erred not appreciating the facts that appellant consultant has made bona fide mistake by not reducing the capital loss amount from Business income as it included in Profit and loss account.
3. The ld. NFAC/CIT(A) has erred in holding it as under reported income resultant to misreporting and charged 200% penalty. Without prejudice it should be held as under reported income and charged 50% penalty.
The appellant craves leave to add to, alter amend, very, modify or delete any of the grounds taken above.
6. Shri Dipen Shukhadia, the Ld. AR of the assessee submitted that the assessee’s consultant had made the bona fide mistake while filing her return, in making adjustment for short term capital loss of Rs.9,05,105/-. When the mistake was brought to the knowledge of the assessee in the course of assessment proceeding, she had accepted the mistake and agreed to the proposed addition and no appeal was filed against the assessment order. The Ld. AR submitted that the AO was not correct in imposing penalty u/s. 270A of the Act for misreporting of income as this was only a bona fide mistake made by the consultant of the assessee while filing the return.
7. Per Contra Shri Abhijit, the Ld. SR-DR, supported the order of the lower authorities.
8. We have carefully considered the rival submissions. There is no dispute to the fact that a bona fide mistake was committed by not reducing the short term capital loss amount from the business income. This mistake was evident from the Income-tax return filed by the assessee itself. Thus, there was no misrepresentation or suppression of any fact. Rather, it was a case mistake in arithmetical adjustment, which had occurred due to omission on the part the of the consultant while filing the return. Under the circumstance, the AO was not correct in imposing penalty on the assessee for misreporting of income. The provision of section 270A(9) stipulates misreporting of income in the following cases:
(9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:—
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account;
(c) claim of expenditure not substantiated by any evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing on total income; and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.
9. In view of the above specific provision, the Assessing Officer, while imposing the penalty under Section 270A of the Act for misreporting of income, was duty bound to specify as to which specific clause of Section 270A(9) of the Act was attracted in the present case. The Assessing Officer had not given any finding in this regard either in the assessment order or in the penalty order. From the facts of the case as already discussed earlier, we do not find that any of the above clauses were attracted in the present case. The assessee had neither misrepresented or suppressed any fact nor claimed any expenditure which was not supported by any evidence. There was no record of any false entry in the books of account. The mistake made by the assessee was evident from the ITR itself and the assessee had never tried to misrepresent her case. Rather bona fide mistake committed by the consultant was duly accepted and no appeal was filed against the assessment order. Considering the specific facts of the case as already discussed earlier, none of the clauses of Section 270A(9) of the Act are found attracted in the present case and we do not find it to be a case of misreporting of income. Therefore, the penalty imposed by the Assessing Officer under Section 270A of the Act for misreporting of income, is cancelled.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 12/05/2026 at Ahmedabad.
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