Section 270A Penalty Deleted as AO Failed to Specify Under-Reporting or Misreporting Charge

ACIT Vs Nawazuddin Nawabuddin Siddiqui (ITAT Mumbai)

The Revenue appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which had deleted the penalty imposed under Section 270A of the Income-tax Act for the assessment year 2019-20. The Revenue contended that the assessee had failed to file a return of income under Section 139(1), filed the return only after issuance of a notice under Section 148, and was therefore liable for penalty on account of under-reporting of income under Section 270A.

The assessee had not filed a return of income for the relevant assessment year. Based on information available on the Insight Portal under the Risk Management Strategy for non-filers, the Assessing Officer (AO) reopened the assessment after noting that the assessee had purchased an immovable property valued at ₹11.50 crore and had undertaken large financial transactions amounting to ₹26.73 crore. Pursuant to a notice under Section 148, the assessee filed a return declaring total income of ₹12.91 crore. During the reassessment proceedings, the AO accepted the returned income in full without making any addition, disallowance or variation. Despite accepting the returned income, the AO initiated penalty proceedings under Section 270A for under-reporting in consequence of misreporting of income and ultimately levied a penalty of ₹9.22 crore, being 200% of the tax sought to be evaded.

The CIT(A) allowed the assessee’s appeal and deleted the penalty. The Revenue challenged this order before the Tribunal, arguing that the assessee had disclosed income only after issuance of the notice under Section 148 and that, without reopening, the income would have escaped assessment. According to the Revenue, the case squarely attracted Section 270A relating to under-reporting of income.

The assessee submitted that although the return had not been filed under Section 139(1), all relevant details and documentary evidence were furnished during the reassessment proceedings, including documents relating to donations, medical expenses, travelling, accommodation, vehicle expenses and other claims. These were examined and accepted by the AO, who completed the reassessment without making any addition. The assessee further argued that while penalty proceedings had been initiated for under-reporting, the penalty was ultimately imposed for misreporting without establishing the ingredients necessary to invoke that provision.

The Tribunal examined the provisions of Section 270A dealing with under-reporting and misreporting of income. It noted that the section specifies circumstances in which a person is considered to have under-reported income, including cases where no return is furnished or where the return is filed for the first time in response to a notice under Section 148. The Tribunal also referred to the provisions prescribing penalty for under-reporting and the enhanced penalty where under-reporting results from misreporting. It observed that Section 270A(9) specifically identifies the situations constituting misreporting, such as misrepresentation, suppression of facts, false entries and other specified defaults.

The Tribunal considered earlier decisions relied upon by the assessee, including decisions holding that merely filing a return for the first time in response to a notice under Section 148 does not automatically attract penalty under Section 270A unless there is a clear case of under-reporting. It also referred to decisions emphasising that the power to levy penalty under Section 270A is discretionary, having regard to the use of the word “may” in the provision. The Tribunal noted that the authorities must clearly specify the particular limb of Section 270A under which penalty is proposed, whether for under-reporting or misreporting, and identify the specific clause of Section 270A(9), where applicable.

The Tribunal also referred to judicial precedents holding that failure to specify the applicable limb in the assessment order and the show cause notice renders the penalty proceedings defective because the assessee is deprived of an effective opportunity to respond to the precise allegation. It observed that the show cause notice and assessment order in the present case referred to both under-reporting and misreporting without clearly identifying the exact charge or explaining how the conditions for misreporting under Section 270A(9) were satisfied.

Agreeing with the findings of the CIT(A), the Tribunal held that the AO had accepted the income declared by the assessee without making any addition or disallowance and had nevertheless imposed penalty for misreporting. It also accepted the legal objection that the notice initiating penalty proceedings failed to specify the precise charge under Section 270A. The Tribunal found no infirmity in the order deleting the penalty and accordingly dismissed the Revenue’s appeal.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal is filed by the Revenue challenging the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC” for short) [“Ld. CIT(A)” for short] u/s 250 of the Income Tax Act, 1961 (“the Act” for short) relevant to assessment year (“AY” for short) 2019-20.

2. The Revenue has raised the following grounds of appeal:

“1. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in allowing an appeal against penalty levied under section 270A for under-reporting of income as being without jurisdiction and not being on factual basis even when the assessee has not filed a return of income under section 139(1) and penalty is leviable as per Act in such instances?

2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is justified in allowing the appeal of the assessee holding that no penalty under section 270A is leviable when there is no addition on account of difference between the income assessed and income as per ROI, when such instances are deemed to be under­reporting and calculation of penalty for such under-reporting are clearly specified in the section 270A(2)(b) and Section 270A(3)(b) of the Act?”

3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee as the assessee has not filed his return of income under section 139(1) but in response to notice u/s.148 of the Act, ignoring the fact that the failure to file a return is under reporting under the provisions of section 270A(2) of the Act?

4. “Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the appeal of the assessee as the assessee has not filed his return of income under section 139(1) but in response to notice u/s. 148 of the Act, ignoring the fact that the assessee was covered by the provision of section 270A(2)(b) of the Act?

5. The Ld. CIT (A)’s order is contrary in law and on facts and deserves to be set aside.

6. The appellant prays that the order of Ld. CIT (A) on the above ground be set aside and that of the AO restored. The applicant craves leave to amend or alter any ground or add a new ground that may be necessary at the time of hearing.

The Appellate Order of NFAC, Delhi vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1081746293(1) dated 14.10.2025 in the case of Nawazuddin Nawabuddin Siddiqui [PAN: AVVPS3509GJ, A.Y.: 2019-20 has been received in the O/o. Pr. CIT-8, Mumbai through ITHA on 14.10.2025. The Last date for filing appeal is 31.12.2025. However, appeal should be filed immediately.”

3. Brief facts of the case are that the assessee is an individual and had not filed his return of income for the year under consideration. The assessee’s case was reopened based on the information on insight portal as Risk Management strategy formulated by CBDT as RMS-non filing of return-PAN cases, as the assessee had purchased an immovable property for a value of Rs.11,50,00,000/- during the year under consideration and large transactions of Rs.26,73,98,898/- were also found to have been done by the assessee. The Ld. Assessing Officer (“Ld. AO” for short) issued notice u/s 148 of the Act dated 30.03.2023 and in response to which the assessee filed his return of income declaring total income at Rs.12,91,82,920/- dated 09.11.2023. The Ld. AO passed the assessment order dated 05.03.2024 u/s 147 r.w.s 144B of the Act determining the total income at Rs.12,91,82,920/-after duly accepting the return of income filed by the assessee u/s 148 of the Act without any variation. The Ld. AO initiated penalty proceeding u/s 270A of the Act for under­reporting in consequence of misreporting of income. The Ld. AO issued notice u/s 274 r.w.s 270A of the Act dated 05.03.2024 for under-reporting income which is in consequence of misreporting thereof and subsequent show cause notice dated 28.05.2024 u/s 270A of the Act. The Ld. AO then passed the penalty order u/s 270A of the Act vide order dated 26.09.2024 imposing a penalty of Rs.9,22,53,160/- u/s 270A of the Act being 200% on the tax sought to be evaded on the ground that the assessee has under-reported his income in consequence of misreporting as per section 270A of the Act.

4. Aggrieved, the assessee was in appeal before the first appellate authority who vide order dated 14.10.2025 allowed the appeal filed by the assessee thereby deleting the impugned penalty levied by the Ld. AO.

5. Aggrieved, the Revenue is in appeal before us challenging the impugned order of the Ld. CIT(A).

6. The Ld. Departmental Representative (“Ld. DR” for short) for the Revenue contended that the assessee has failed to file his return of income for the year under consideration despite having huge income which is liable to be taxed in the hands of the assessee. The Ld. DR further stated that the assessee filed his return of income only in response to section 148 notice which revealed that the assessee has suppressed his income which would have escaped from being taxed, had the 148 notice not been issued. The Ld. DR further stated that this is a clear case of under-reporting of income inconsequence of misreporting where penalty has been levied u/s 270A of the Act. The Ld. DR further stated that the Ld. CIT(A) had erred in deleting the penalty stating that since the Ld. AO accepted the returned income filed by the assessee and no addition/allowance/variation were made, penalty was deleted as the same does not amount to under-reporting in consequence of misreporting of income. The Ld. DR relied on the penalty order of the Ld. AO.

7. The Ld. Authorised Representative (“Ld. AR” for short) for the assessee, on the other hand, controverted the said fact and stated that the assessee had genuine difficulty in filing his return of income u/s 139(1) of the Act and that during the reassessment proceeding the assessee had furnished all relevant details along with documentary evidences which were duly accepted by the Ld. AO. The Ld. AR further stated that the Ld. AO initiated penalty for under-reporting but levied for misreporting of income which is not the case, since the assessee has duly reported his income during the reassessment proceeding which implies that there was neither under-reporting of income nor misreporting of income in whatsoever manner may be. The Ld. AR relied on various decisions of the Tribunal as well as the order of Ld. CIT(A) and prayed that the Ld. CIT(A)’ s order be upheld.

8. We have heard the rival submissions and perused the materials available on record. The moot issue that requires adjudication is whether penalty can be levied u/s 270A of the Act where the assessee has filed his return of income for the first time only in response to section 148 notice and where there was no addition or variance made by the Ld. AO, who had accepted the income declared by the assessee in response to section 148 notice during the reassessment proceeding. It is undisputed fact that the assessee has failed to file his return of income u/s 139(1) of the Act neither had he failed belated returns u/s 139(4) of the Act. It was only pursuant to the notice u/s 148 of the Act that the assessee had filed his return of income during the reassessment proceeding declaring total income at Rs.12,91,82,920/-. It is further observed that the assessee though had initially not filed all the details and the documentary evidences called for by the Ld. AO, is said to have subsequently filed all the necessary documents such as the donation receipt, confirmation from donor, tax exemption certificate, ledger, bank statement pertaining to medical expenses, service tax, travelling and accommodation and vehicle expenses etc. and the Ld. AO found the same to be acceptable, thereby accepting the return of income filed by the assessee without any addition/disallowance/variation, during the reassessment proceeding. Subsequently, the Ld. AO initiated penalty proceeding u/s 270A of the Act for under­reporting in consequence of misreporting of the income and passed the penalty order u/s 270A of the Act levying penalty amounting to Rs.9,22,53,160/- as per the following computation.

9. From the above, it can be inferred that the Ld. AO has levied a penalty @ 200% on the tax sought to be evaded as being a fit case for under-reporting of income in consequence of misreporting of the income by the assessee which was also the reason specified in the show cause notice issued u/s 274 r.w.s 270A of the Act dated 05.03.2024. The Ld. CIT(A) deleted the said penalty on grounds, namely that the Ld. AO did not make any addition/disallowance/variation to the returned income filed by the assessee, thereby implying that it is not a case of misreporting of income as alleged by the Ld. AO. Further, the Ld. CIT(A) deleted the impugned penalty on the legal issue that there was no specific and definite charge in issuing the notice u/s 274 of the Act, which is said to have not specifically mentioned whether it was for under-reporting or misreporting, rather had mentioned both the limbs, that the same is for both under-reporting as well as misreporting, thereby holding that it is an omnibus show cause notice without non application of mind denying the assessee opportunity to raise his defence precisely. The Ld. CIT(A) also held that failure to mention specific limb would amount to a mechanical application of the provision and held that there is no concealment, inaccuracy or misrepresentation and hence the invocation of the penalty provision u/s 270A(1) of the Act which specifies the word “may” and not “shall” where the Ld. AO ought to have exercised the power to impose penalty judiciously and not arbitrarily. The Ld. CIT(A) had relied on a catena of decisions of the Tribunal and also the decision of the Hon’ble Rajasthan High Court in the case of Chambal Fertilizers Ltd. vs. PCIT (2024) 462 ITR 4 in support of the view taken by the Ld. CIT(A). Before we decide the issue, it is trite to reproduce the relevant provision herein under for ease of reference:

270A. (1) The Assessing Officer or m[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.

(2) A person shall be considered to have under-reported his income, if-

(a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143;

(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished l’Aor where return has been furnished for the first time under section 148];

(c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment;

(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143;

(e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where [no return of income has been furnished or where return has been furnished for the first time under section 148];

(f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment;

(g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.

(3) The amount of under-reported income shall be,-

(i) in a case where income has been assessed for the first time,-

(a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub­section (1) of section 143;

(b) in a case where A'[no return of income has been furnished or where return has been furnished for the first time under section 148],-

(A) the amount of income assessed, in the case of a company, firm or local authority; and

(B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A);

(ii) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order:

Provided that where under-reported income arises out of determination of deemed total income in accordance with the provisions of section 115JB or section 115JC, the amount of total under-reported income shall be determined in accordance with the following formula-

(A – B) + (C – D)

where,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-reported income;

C = the total income assessed as per the provisions contained
in section 115JB or section 115JC;

D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 115JC been reduced by the amount of under-reported income:

Provided further that where the amount of under-reported income on any issue is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

Explanation.-For the purposes of this section,-

(a) “preceding order” means an order immediately preceding the order during the course of which the penalty under sub-section (1) has been initiated;

(b) in a case where an assessment or reassessment has the effect of reducing the loss declared in the return or converting that loss into income, the amount of under­reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed.

(4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter referred to as “preceding year”) and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to cover such receipt, deposit or investment.

(5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported for the preceding year in the following order-

(a) the preceding year immediately before the year in which the receipt, deposit or investment appears, being the first preceding year; and

(b) where the amount added or deducted in the first preceding year is not sufficient to cover the receipt, deposit or investment, the year immediately preceding the first preceding year and so on.

(6) The under-reported income, for the purposes of this section, shall not include the following, namely:-

(a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or m[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered;

(b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or n[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;

(c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance;

(d) the amount of under-reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and

(e) the amount of undisclosed income referred to in section 271AAB.

(7) The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income.

(8) Notwithstanding anything contained in sub-section (6) or sub-section (7), where under­reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income.

m ²²(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.

(10) The tax payable in respect of the under-reported income shall be-

(a) where no return of income has been furnished m[or where return has been furnished for the first time under section 148] and the income has been assessed for the first time, the amount of tax calculated on the under-reported income as increased by the maximum amount not chargeable to tax as if it were the total income;

(b) where the total income determined under clause (a) of sub-section (1) of section 143 or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported income as if it were the total income;

(c) in any other case, determined in accordance with the formula-

(X-Y)

where,

X = the amount of tax calculated on the under-reported income as increased by the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order as if it were the total income; and

Y = the amount of tax calculated on the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order.

(11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the basis of imposition of penalty in the case of the person for the same or any other assessment year.

(12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the Assessing Officer, m[the Joint Commissioner (Appeals) or] the Commissioner (Appeals), the Commissioner or the Principal Commissioner, as the case may be.]”

10. Upon perusal of the provision, it can be inferred that the specified authorities “may” during such proceeding direct that any person who has under-reported his income “shall be” liable to pay penalty in addition to tax on any under-reported income. Further, sub section (2) provides what shall amount to under-reporting of income as per clauses (a) to (g) which categorically specifies that the income “assessed/reassessed” in all the said clauses and also sub-section 3(1)(b) deals with cases where no return has been furnished or where return has been furnished for the first time in response to section 148 of the Act notice, which is the case of the assessee, then the assessee would fall under sub-clause (B) where it says that the difference between the amount of income assessed and the maximum amount not chargeable to tax would be the amount that ought to be determined as under- reported income. Also sub-section (7) determines what amount shall be levied in case of under-reporting of income as penalty and sub section (8) is a non obstante clause where if the under-reported income is in consequence of any misreporting thereof then the penalty referred to in sub-section (1) shall be equal to 200% of the amount of tax payable on under­reported income, which in the present case has been applied by the Ld. AO. Sub-section (9) here classifies what would amount to misreporting of income and sub-section (10) also provides the mechanism for calculating the tax payable on under-reported income for the purpose of determining the penalty to be levied but categorically specifies that as per the assessed or reassessed income.

11. From the above, the moot issue that ought to be decided is whether penalty u/s 270A of the Act is leviable for the reason that the assessee has filed his return of income for the first time in response to notice u/s 148 of the Act and since the income assessed is greater than the maximum amount not chargeable to tax, even in case where the Ld. AO has made no disallowance or addition during the assessment proceeding. The Ld. AR had relied on the decision of the coordinate Bench in the case of Archana Achyut Sail vs. ITO (2025) 173 taxmann.com 52 which was also followed subsequently by the Tribunal in the case of Ishit Kamleshbhai Sheth vs. ITO in ITA No.753/Ahd/2025 wherein it was held that mere filing of return for the first time in response to section 148 of the Act does not ipso facto attract section 270A(2)(b) of the Act unless there is a clear case of under-reporting of income. Though the decision of the coordinate Bench in the case of Archana Achyut Sail (supra) has dealt with both the issues of penalty u/s 271(1)(c) and section 270A of the Act, the finding with regard to section 270A of the Act was that it is discretionary or directory for the Ld. AO to impose penalty and not arbitrary as held by the Hon’ble Jurisdictional High Court in the case of CIT vs. Dodsal Ltd. (2010) 2 taxmann.com 317 which had laid emphasis on the word “may” as per section 158BFA(2) of the Act which is similarly worded as section 270A(1) of the Act. Further, the coordinate Bench in Archana Achyut Sail (supra) also held that penalty u/s 270A of the Act is liable to be quashed where the Ld. AO has failed to specify as to under which limb of the provisions of section 270A(2) or 270A(9) of the Act penalty is leviable as to the facts of the case.

12. The next limb of argument was that even if under-reporting was arguendo assumed, for the same to be converted into misreporting u/s 270A(9) of the Act for levy of 200% penalty as per sub-section (8), the Ld. AO must specifically emphasise as to within which clauses (a) to (f) of section 270A(9) of the Act would the assessee’s case fall under, by recording a categorical satisfaction of misrepresentation, suppression, false entries etc. corroborating with the computation mechanism adopted by the assessee. Reliance is also placed on the decision of the Hon’ble Delhi High Court in the case of GE Capital US Holding INC (2024) 163 taxmann.com 146 (Delhi) wherein on the issue of claiming immunity u/s 270AA of the Act the Hon’ble Delhi High Court held that the assessment order as well as the show cause notice having failed to specify the specific limb would be liable to be quashed and the same is further supported by the decision of the Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte Ltd vs. Asst. CIT, W.P.(C) 5111 of 2022, dated 28.03.2022 (Delhi High Court) where it was reiterated that it is mandatory to specify which limb of u/s 270A of the Act is attracted and the Ld. AO should also satisfy how the ingredients of sub-section (9) of section 270A of the Act is attracted in the present case and in the absence of the same the impugned penalty order ought to be quashed. The relevant extract of the decision in the case of Schneider Electric South East Asia (HQ) Pte Ltd. (supra) is also cited herein under for ease of reference:

“6. Having perused the impugned order dated 9th March, 2022, this Court is of the view that the Respondents’ action of denying the benefit of immunity on the ground that the penalty was initiated under section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb – “under reporting” or “misreporting” of income, under which the penalty proceedings had been initiated.

7. This Court also finds that there is not even a whisper as to which limb of section 270A of the Act is attracted and how the ingredient of sub-section (9) of section 270A is satisfied. In the absence of such particulars, the mere reference to the word “misreporting” by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No. 1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting.

9. This Court is further of the view that the impugned action of Respondent No. 1 is contrary to the avowed Legislative intent of section 270AA of the Act to encourage/incentivize a taxpayer to (i) fast-track settlement of issue, (ii) recover tax demand; and (iii) reduce protracted litigation.

10. Consequently, the impugned order dated 9th March, 2022 passed by Respondent No. 1 under section 270AA(4) of the Act is set aside and Respondent No. 1 is directed to grant immunity under section 270AA of the Act to the Petitioner.

11. With the aforesaid directions, the present writ petition along with pending applications stand disposed of.”

13. Though the cases referred above pertained to the issue of immunity claimed u/s 270AA of the Act, the proposition laid down in all these decisions are clear that the Ld. AO will have to mandatorily specify in the assessment order as well as in the show cause notice as to which limb the assessee’s case would fall under which is nothing but for the assessee to facilitate for countering the allegation of the Ld. AO. On this ground the impugned penalty levied by the Ld. AO holds no merit and ought to be deleted.

14. On the above observation, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the penalty levied u/s 270A of the Act. We, therefore, deem it fit to dismiss the grounds of appeal raised by the Revenue.

15. In the result, the appeal filed by Revenue is hereby dismissed.

Order pronounced in the open court on 18.05.2026