Jai Shankar Krishnan Vs DCIT (ITAT Mumbai)
Mumbai ITAT Deletes Section 270A Penalty for Bona Fide Wrong Head of Income on ESOP Sale
The Mumbai ITAT deleted the penalty levied under Section 270A for alleged misreporting of income, holding that the assessee had made a bona fide mistake in offering ESOP-related income under the wrong head of income. The assessee, a salaried employee, had exercised ESOPs and sold the shares within three days, treating the entire sale proceeds as short-term capital gains and paying tax accordingly. Upon receipt of a notice under Section 148, the assessee accepted the mistake, filed a revised return, offered the ESOP value as salary (perquisite) and the difference between the sale price and acquisition cost as capital gains, and paid the entire differential tax.
The Tribunal observed that, given the very short holding period, the assessee could reasonably believe that the entire gain was taxable as capital gains. It further held that the returned income, as revised, had been accepted by the Assessing Officer and that the case involved only an incorrect classification of income, not concealment or misreporting. Since the assessee had voluntarily corrected the error and discharged the entire tax liability, the Tribunal held that it was not a fit case for levy of penalty under Section 270A and accordingly deleted the penalty in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. Aforesaid appeal by assessee for Assessment Year (AY) 2020-21 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 12.01.2026 partially confirming penalty u/s 270A as levied by Ld. AO vide order dated 30.07.2025.
