Section 270A Penalty Deleted for Failure to Specify Under-Reporting or Misreporting: ITAT Ranchi

Central Coalfields Ltd. Vs ACIT/DCIT (ITAT Ranchi)

The Income Tax Appellate Tribunal (ITAT), Ranchi disposed of two appeals filed by the assessee for Assessment Years 2019-20 and 2020-21 and one appeal filed by the Revenue for Assessment Year 2018-19. The appeals arose from separate orders passed by the National Faceless Appeal Centre (NFAC)/CIT(A). ITA No. 370/Ran/2025 for Assessment Year 2020-21 was treated as the lead case.

The assessee, a Government of India undertaking and subsidiary of Coal India Limited engaged in coal mining, coal washing and sale of different grades of coal, had filed its return of income for Assessment Year 2020-21 declaring total income of ₹3,015,95,03,600. During scrutiny assessment under Section 143(3), the Assessing Officer made additions and disallowances aggregating ₹170,26,20,100 under the heads of repair expenses, CMPDIL charges, environmental and tree plantation expenses, siding maintenance charges, miscellaneous expenses and stripping activity adjustment. Penalty proceedings under Section 270A read with Section 274 were initiated on account of alleged under-reporting of income in consequence of misreporting of income.

The assessee challenged the additions before the CIT(A), who partly allowed the appeal and sustained the remaining additions. Thereafter, the Assessing Officer issued a show cause notice proposing penalty under Section 270A in respect of the additions confirmed by the CIT(A). The assessee requested that the penalty proceedings be kept in abeyance until disposal of its appeal before the ITAT against the quantum additions. The Assessing Officer rejected the request, observing that the Income Tax Act contained no provision preventing imposition of penalty merely because an appeal against the quantum additions was pending. The Assessing Officer subsequently imposed a penalty of ₹58,07,20,000 under Section 270A for under-reporting of income by not offering it for taxation and consequently misreporting income.

The CIT(A) dismissed the assessee’s appeal against the penalty, holding that the Assessing Officer had discussed each addition in detail and that the assessee had failed to furnish any explanation to establish that penalty was not leviable.

Before the Tribunal, the assessee raised a legal issue that the assessment order passed under Sections 143(3) read with 144B did not record any satisfaction as to whether penalty was initiated for under-reporting or misreporting of income. It was contended that the Assessing Officer had failed to specify which of the statutory limbs under Section 270A had allegedly been violated, rendering the penalty void. The assessee also submitted that refusal to keep the penalty proceedings in abeyance deprived it of an opportunity of hearing and that imposition of penalty at 200% on alleged under-reporting in consequence of misreporting was illegal and arbitrary. In support of its submissions, the assessee relied upon decisions of the Delhi High Court and the Mumbai and Pune Benches of the Tribunal holding that failure to specify the relevant limb under Section 270A invalidated the penalty proceedings.

The Revenue supported the orders of the lower authorities and contended that the penalty under Section 270A had been correctly imposed.

After considering the rival submissions and the judicial precedents relied upon by the assessee, the Tribunal observed that the cited decisions had consistently held that where the specific limb under Section 270A was not specified, the penalties were liable to be deleted. Respectfully following those decisions, the Tribunal held that the present case was not a fit case for sustaining penalty under Section 270A in the absence of a specific finding as to whether the penalty had been imposed for under-reporting or misreporting of income. Accordingly, the Tribunal deleted the penalty imposed under Section 270A read with Section 274 and allowed the assessee’s appeal for Assessment Year 2020-21.

With regard to the assessee’s appeal for Assessment Year 2019-20, the Tribunal noted that the grounds of appeal and facts were identical except for the variation in the amount of penalty. Applying the principle of consistency, the Tribunal held that its findings for Assessment Year 2020-21 would apply mutatis mutandis. The appeal of the assessee for Assessment Year 2019-20 was accordingly allowed.

In the Revenue’s appeal relating to Assessment Year 2018-19, the Tribunal noted that the CIT(A) had deleted the penalty after holding that the Assessing Officer had invoked both statutory limbs in a sweeping manner without specifying the exact charge, demonstrating non-application of mind and rendering the penalty unsustainable. Observing that the CIT(A) had followed various judicial precedents of the High Courts and Tribunals, the Tribunal found no infirmity in the order of the CIT(A) and upheld it. Consequently, the Revenue’s appeal was dismissed.

Accordingly, both appeals filed by the assessee were allowed and the appeal filed by the Revenue was dismissed.

Cases Discussed

1. Manish Manohar Asrani vs. ITO Tax Ward 1(1)(1)– [2025] 170 taxmann.com 792 (Mumbai – Trib.).

2. Sunil Chunilal Kumavat vs. Income-tax Officer– [2024] 165 taxmann.com 287 (Pune – Trib.).

3. Schneider Electric South East Asia (HQ) Ltd. vs. Assistant Commissioner of Income-tax– [2022] 145 taxmann.com 665 (Delhi).

4. Prem Brothers Infrastructure LLP vs. National Faceless Assessment Centre– [2022] 142 taxmann.com 38 (Delhi).

FULL TEXT OF THE ORDER OF ITAT RANCHI

1. ITA No. 370/Ran/2025 and ITA No. 383/Ran/2025 are the appeals filed by the assessee and ITA No. 387/Ran/2025 is the appeal filed by the revenue. The appeals are directed against the separate orders of the National Faceless Appeal Centre (NFAC) Delhi [in short, the ld. CIT(A)] dated, 22/08/2025, 25/08/2025 and 29/09/2025 for the Assessment Years (AY) 2018-19 to 2020 21 respectively. As a lead case, we take up ITA No. 370/Ran/2025 for the A.Y. 2020-21. In this appeal, the assessee has raised following grounds of appeal:

“1. For that the order passed by Ld. CIT(A), NFAC confirming the penalty of Rs. 40,58,53,594/- is unjustified, incorrect, illegal and uncalled for on facts and in law.

2. For that Ld. CIT(A) was not justified in not keeping the penalty appeal in abeyance since the additions on which penalty was imposed were disputed in appeal before ITAT, which was pending for hearing. Moreover, the penalty order passed by Ld. AO on 11.03.2025, after more than 11 months from the reply dated 22.05.2024 filed by the appellant, for keeping the penalty proceedings in abeyance. The action of passing the order by both the lower authorities, without giving any further opportunity of hearing is unjustified, arbitrary and is in violation of Principles of Natural Justice. As such the order passed may be quashed.

3. For that  CIT(A) was not justified in not appreciating that the appellant had pleaded that no specific limb out of the 7 limbs mentioned in sub-section (2) of section 270A was specified or 6 limbs mentioned in sub-section (9) of section 270A was specified. As such the penalty order is liable to be quashed since the penalty was initiated u/s 270A in the aforesaid assessment order u/s 143(3) r.w.s 1448 dated 29.09.2022, without recording any satisfaction during the course of assessment in respect of specific limb and sub-section under which penalties were initiated.

Further imposition of penalty at the rate of 200% on the allegation of under reporting in consequence of mis-reporting, only at the end of the impugned penalty order, without specifically pointing out what was misreported, is without any cogent basis.

As such the penalty imposed is void ab-initio, erroneous, arbitrary, and liable to be quashed.

4. For that penalty u/s 270A imposed on disallowance of Rs. 21,99,00,000/-under the Repair Expenses is unjustified because it was disallowed on the pretext of, for want of details. Full details of the same were duly filed during assessment proceedings, which it appears that lost the sight of the Ld. AO. The has been incurred through banking channel after due passing of the same by various authorities. The same always allowed in past and the expenses claimed during the year compared well with the past results, for which no adverse comment has been given.

There is no specific allegation of any under-reporting or Mis reporting of the same. As such the penalty imposed on Repair Expenses is unjustified, illegal and be deleted.

5. For that penalty u/s 270A imposed on disallowance of Rs. 36,08,20,000/-under the Stripping activity adjustment is unjustified, illegal and liable to be deleted on the alleged misreported income. No penalty could have been imposed only on the difference of opinion of the Ld. AO. The appellant has filed complete facts and details of the same and no discrepancy in the same was found. As such the allegation of under-reporting, only in the penalty order, without pointing out what was under-reported / mis-reported, is without any cogent basis and liable to be deleted.

Under the similar circumstances Ld. CIT(A), NFAC has deleted such addition of Rs.56,90,00,000/- in AY 2018-19 vide his order dated 19.02.2024 and has further deleted the addition of Rs. 69,52,00,000/- in AY 2019-20 vide his order dated 20.02.2024 and as still further deleted the addition of Rs. 73,17,00,000/- in AY 2021-22 vide his order dated 29.08.2025 and Rs. 145,16,20,000/- in AY 2022-23 vide his order dated 22.08.2025. As such even if it was confirmed by Ld. CIT(A) in the year under consideration, the same does not constitute under reporting/misreporting by the appellant.

As such the penalty imposed on Stripping activity adjustment is unjustified, illegal and be deleted.

6. For that Ld. AO was incorrect in charging tax on the alleged under-reported income of Rs. 58,07,20,000/- @ of 30 percent instead of @ 22% applicable upon the appellant for the year under consideration and accordingly calculating surcharge and HE Cess at the higher amount of tax.

As such Ld. AO be directed to revise the calculation at the rate of 22. percent on the alleged under reported income, if any.

7. For that appellant craves leave to add, amend or alter all or any ground(s) or adduce evidences, if any, before or at the time of hearing.”

The revenue, on the other hand, in its appeal, has raised following grounds of appeal:

“1. For that the learned CIT(A) erred in facts as well as in law by deleting the well-reasoned penalty order passed by the assessing officer based on thorough consideration of the materials on record in course of the penalty proceedings;

2. For that the learned CIT(A) failed to consider that in matters of penalty. substance of the matter is to be taken into consideration rather than the form of the notices/ orders, more so when the facts and circumstances of the matter make it writ large that the penalty has been imposed for underreporting or for misreporting;

3. For that the learned CIT(A) adopted a hyper technical approach in the matter by quashing the imposed penalty in the facts and circumstances of the instant case wherein the assessing officer while computing the penalty has imposed a penalty of 50% was imposed by the assessing officer of the tax due as duly noted in paragraph-4 of the penalty order which makes it abundantly clear that penalty was for underreporting of income;

4. For that the learned CIT(A) erred in facts as well as in law in holding that the penalty order has been passed by the assessing officer without recording of satisfaction of exact limb under which penalty is levied in disregard to the fact that the records of the penalty proceedings if considered as a whole make it writ large that penalty was imposed for underreporting of income;

5. For that the other and further grounds shall be urged at the time of hearing of this appeal.”

 2. Facts of the case in brief are that the assessee company is an undertaking of Government of India and is a subsidiary of M/s Coal India Limited. It is engaged in coal mining, coal washing and sale of different grades of coal. The original return of income was e-filed by the assessee company declaring total income of ₹3015,95,03,600/- for the A.Y. 2020-21. The case of the assessee was selected for scrutiny under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) and following additions/disallowances were made under Section 143(3) of the Act.

Penalty proceedings under Section 270A of the Act was also initiated by the Assessing Officer on account of under-reporting of income in consequence of misreporting of income under Section 274 read with Section 270A of the Act.

3. When the assessee challenged the additions made by the Assessing Officer before the ld. CIT(A),the ld. CIT(A) vide order No. ITBA/NFAC/S/250/2023- 24/1060242869(1) dated 30/01/2024, partly allowed the appeal of the assessee and sustained rest of the additions.

4. Consequent upon the disposal of the appeal by the ld. CIT(A), the Assessing Officer issued a show cause notice to the assessee as to why the penalty under Section 270A of the Act for under-reporting of income should not be imposed in respect of the addition/disallowance confirmed by the ld. CIT(A). In response to the said show cause notice, the assessee-company, instead of filing any explanation, requested the Assessing Officer to keep the penalty proceedings in abeyance on the ground that the assessee-company has filed appeal before the Hon’ble ITAT against the quantum additions sustained by the ld. CIT(A). The Assessing Officer rejected the request of the assessee on the ground that there is no provision in the Income Tax Act which prevented the Assessing Officer from imposing penalty under Section 270A of the Act even if the assessee is in  The Assessing Officer, thereafter, imposed a penalty of ₹ 58,07,20,000/- under Section 270A of the Act for under-reporting the particulars of income by not offering it for the purpose of taxation and consequently it has misreported his income.

5. Aggrieved by the penalty order passed by the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who vide the impugned order, dismissed the appeal of the assessee on the ground that the Assessing Officer has discussed in detail each of the additions and the Assessing Officer, therefore, was right in imposing the penalty under Section 270A of the Act as the assessee-company failed to provide any explanation before the ld. CIT(A) to substantiate its claim that penalty was not imposable in this case.

6. Aggrieved by the order of  CIT(A), the present appeal has been filed by the assessee before this Tribunal.

7. During the appellate proceedings before us, the appellant raised a legal issue that in the assessment order made under Section 143(3) read with section 144B of the Act dated 29/09/2022, the Assessing Officer did not record any satisfaction as to whether the penalty was imposed for under-reporting of the income or misreporting of income. Since the Assessing Officer failed to specify as to which specific limb, out of the seven limbs mentioned in Section 270A of the Act, has been contravened the imposition of penalty is void ab

8. Secondly, when the request of the appellant to keep the penalty proceedings in abeyance till the disposal of the appeal before the ITAT was not acceded to the appellant was denied the opportunity of being heard, the penalty imposed under Section 270A @ 200% on alleged under-reporting in consequence of misreporting is an illegal and arbitrary act. In support of its contention, the assessee-company has placed reliance on the following decisions/case laws:

> Prem Brothers Infrastructure LLP vs. National Faceless Assessment Centre [2022] 142 taxmann.com 38 (Delhi)[31-05-2022-Copy attached at Page- 07-09

Para 8. 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 penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

> Schneider Electric South East Asia (HQ)  Ltd. vs. Asst. Commissioner of Income-tax [2022] 145 taxmann.com 665 (Delhi) [28-03-2022]-Copy attached at Page-10-12.

Para 6. Having perused the impugned order dated 09th 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 – “underreporting” or “misreporting” of income, under which the penalty proceedings had been initiated.

Para 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.

> Manish Manohar as Asrani vs. INT Tax Ward 1(1)(1) [2025] 170 taxmann.com 792 (Mumbai – Trib.) [15-10-2024]-Copy attached at Page – 13 -19

Where in penalty notice issued under section 274 read with section 270A, Assessing Officer had failed to specify any particular limb or sub-clause of section 270A and only mentioned under reporting of income and thereafter, penalty had been levied ultimately for both under reporting and misreporting of income for which show-cause notice was never issued to assessee, penalty was to be deleted.

> Sunil Chunilal Kumavat vs. Income-tax Officer [2024] 165 taxmann.com 287 (Pune-Trib.)[22-03-2024]-Copy attached at Page-20-22.

Section 270A of the Income-tax Act, 1961 Penalty For under-reporting and misreporting of income Assessment years 2017-18 and 2018-19 Lower authorities levied 200% penalties upon assessee for assessment years 2017-18 and 2018-19 due to bogus claims for deductions under section 80C – Whether although lower authorities had levied 200% penalty(ies) in assessee’s case going by sec.270A(8) on one hand; whereas they nowhere specified corresponding limb(s) of “under-reporting of income in consequence of any mis-reporting” thereof; as prescribed sub-sec.(9) containing

(a) to (f) clauses, impugned penalties for assessment years 2017-2018 and 2018-2019 deserved to be deleted – Held, yes [Para 4]

As such, relying upon the above facts and case laws citied, we state that the penalty proceedings initiated in case of the assessee was ab-initio void and the penalty imposed thereby is fit to be deleted.”

9. On the other hand, the ld. CIT-DR justified the actions of the lower authorities on the ground that the penalty under Section 270A of the Act was rightly imposed.

10. We have considered the rival submissions and also considered the case laws relied by the appellant. It is found that in all the cases as cited by the appellant, it has been held by the Hon’ble Delhi High Court and by the Mumbai Tribunal and Pune Tribunal that if specific limb as provided under Section 270A of the Act has not been specified, the penalties imposed deserve to be deleted. In view of the above decisions and respectfully following the same, we are of the considered opinion that this is not a fit case where penalty under Section 270A of the Act can be confirmed in absence of specific finding as to whether the penalty was imposed for under reporting or misreporting of income. Accordingly, the penalty imposed under Section 270A read with section 274 is deleted.

11. In the result, this appeal of the assessee is

12. Similarly in ITA No.383/Ran/2025 for the A.Y. 2019-20, we find that in this appeal, the assessee has raised similar grounds of appeal except variation of amount of penalty imposed by the Assessing Officer. We also find that the facts of the case and the grounds of appeal as raised by the assessee in this appeal are similar to the facts and grounds of appeal as raised in ITA No. 370/Ran/2025 for the A.Y. 2020-21, where we have allowed the appeal of the assessee by deleting the penalty imposed by the Assessing Officer. Therefore, keeping in view the principle of consistency on similar set of facts, our finding in ITA No. 370/Ran/2025 for the A.Y. 2020-21 shall apply mutatis mutandis in this appeal also. In the result, this appeal of the assessee is allowed.

13. Now we take up revenue’s appeal in ITA  387/Ran/2025 for the A.Y. 2018-19. In this appeal, the ld. CIT(A) allowed the appeal of the assessee by holding that the Assessing Officer has invoked both the limbs in a sweeping manner without specifying the exact charges. This amounts to non-application of mind and renders the penalty order unsustainable in law. Since the ld. CIT(A) allowed the appeal of the assessee by dismissing the penalty imposed by the Assessing Officer by following the various judicial precedents of the various High Courts and the Tribunals, we find no infirmity in the order of the ld. CIT(A) and accordingly, the same is upheld.

14. In the result, both the appeals of the assessee are allowed and the appeal of the revenue stands dismissed.

Order pronounced in open court on 11/06/2026.