ITAT Quashes Section 270A Penalty for Failure to Specify Misreporting Clause

Chiguruvada Dileep Kumar Vs DCIT (ITAT Bangalore)

The Income Tax Appellate Tribunal (ITAT), Bangalore, partly allowed the assessee’s appeal for Assessment Year 2020-21 by quashing the penalty order passed under Section 270A of the Income Tax Act, 1961 and directing the Assessing Officer to consider the assessee’s application seeking immunity under Section 270AA in accordance with law. The Tribunal also dismissed as infructuous a second appeal filed belatedly against the same appellate order, holding that two appeals could not lie against the same impugned order.

The assessee, an individual, filed the original return of income declaring total income of ₹37,34,200 and claimed exemption under Section 10(13A) along with deductions under Chapter VI-A. The return was processed and a refund was issued. Subsequently, the assessee filed a revised return declaring total income of ₹34,34,200 with a reduced claim under Section 10(13A) and a loss under the head “Income from House Property.” The case was selected for complete scrutiny to verify the refund, differences with Form 26AS, and deductions claimed under Chapter VI-A.

During assessment proceedings, the Assessing Officer examined the claims under Sections 80C, 80E and 10(13A). The deductions under Section 80E and exemption under Section 10(13A) were disallowed due to lack of supporting evidence, resulting in additions of ₹29,53,200 and ₹2,28,166 respectively, aggregating to ₹31,81,366. The assessee accepted the additions and paid the tax demand raised under Section 156.

The Assessing Officer initiated penalty proceedings under Section 270A for “underreporting of income in consequence of misreporting” and subsequently levied penalty of ₹15,95,172, being 200% of the tax payable on the underreported income. The assessee had filed replies explaining that the incorrect claim under Section 80E resulted from a mistake committed by the tax consultant. According to the assessee, the consultant wrongly claimed deduction under Section 80E instead of advising on tax treatment of losses arising from stock options. The assessee submitted that there was no intention to claim an incorrect refund, that tax had already been deducted from salary income, and that efforts were made to revise the return and pay the correct tax after discovering the mistake. The assessee also stated that the revised return still contained errors and was therefore not e-verified.

Regarding the exemption claimed under Section 10(13A), the assessee submitted that rent had actually been paid and that supporting bank statements and rental agreement had been produced, although the claim was ultimately disallowed. The assessee also filed Form 68 manually and through email seeking immunity under Section 270AA after paying the tax demand and not challenging the assessment order. The Assessing Officer rejected the immunity request, stating that penalty had been initiated under Section 270A(9) and therefore immunity under Section 270AA(3) was unavailable. The Commissioner (Appeals) affirmed this view and upheld both the rejection of immunity and the penalty.

Before the Tribunal, the assessee argued that the wrong claim under Section 80E arose solely because of the tax consultant’s mistake and not because of any deliberate intention. It was further contended that the assessee had voluntarily accepted the additions, paid the tax demand, sought immunity under Section 270AA, and that the authorities failed to consider the application on its merits. The Revenue relied upon the orders of the lower authorities and also cited the decision of the Kerala High Court in IBS Software (P.) Ltd. vs. UOI.

The Tribunal examined Sections 270A and 270AA and observed that the assessment order merely referred to “underreporting of income in consequence of misreporting” without identifying which specific clause of Section 270A(9)(a) to (f) was attracted or how its ingredients were satisfied. It further noted that the assessee’s application seeking immunity had been rejected without considering the facts of the case, despite the assessee having accepted the additions and not filing any appeal against the quantum assessment.

The Tribunal observed that the assessee had consistently explained the circumstances leading to the incorrect claim under Section 80E, including the tax consultant’s error, the attempts to revise the return, and the immediate acceptance of the additions during assessment. It also noted that the assessee had furnished details regarding rent paid in support of the claim under Section 10(13A). According to the Tribunal, these facts should have been considered while deciding the application for immunity under Section 270AA.

Relying upon the Delhi High Court decision in Prem Brothers Infrastructure LLP vs. NFAC and Schneider Electric South East Asia (HQ) PTE Ltd. Vs. ACIT, the Tribunal held that there was no indication in the assessment order as to which limb of Section 270A(9) was applicable or how the statutory ingredients of misreporting were satisfied. It observed that a mere reference to the phrase “underreporting of income in consequence of misreporting” was insufficient to deny immunity or sustain penalty proceedings.

The Tribunal further observed that, while underreporting may in some cases result in misreporting, the facts of the present case did not establish such circumstances. It noted that the assessee had furnished details relating to rent payments under Section 10(13A), voluntarily accepted the disallowance under Section 80E, and had attempted to rectify the erroneous claim before assessment. Since these circumstances had not been considered by the lower authorities, the Tribunal quashed the penalty order dated 15.03.2023 and directed the Assessing Officer to consider the application seeking immunity under Section 270AA and pass an order in accordance with law. The appeal in ITA No. 832/Bang/2023 was partly allowed for statistical purposes, while the second appeal in ITA No. 143/Bang/2024 was dismissed as infructuous.

Cases Discussed

• IBS Software (P.) Ltd. vs. UOI (Kerala High Court), (2024) 158 taxmann.com 209
• Prem Brothers Infrastructure LLP vs. NFAC (Delhi High Court), (2022) 142 taxmann.com 38
• Schneider Electric South East Asia (HQ) PTE Ltd. Vs. ACIT, International Taxation Circle 3(1)(2), New Delhi and Ors. (Delhi High Court), W.P.(C) No. 5111/2022, judgment dated 28.03.2022

FULL TEXT OF THE ORDER OF ITAT BANGALORE

Present appeal arises out of order passed by NFAC dated 30.08.2023 for A.Y. 2020-21 on following grounds of appeal:

2. We note that assessee has efiled the present appeal being ITA No. 832/Bang/2023 which is within the period of limitation. Subsequently, assessee has manually filed the appeal against the same impugned order in ITA No. 143/Bang/2024 on 25.01.2024 which is a belated appeal. The appeal filed belatedly against the same impugned order deserves to be held as infructuous as two appeals cannot lie against the same impugned order. We therefore dismiss the subsequent appeal filed belatedly in ITA No. 143/Bang/2024.

Accordingly, the appeal filed by assessee in ITA No. 143/Bang/2024 is dismissed as infructuous.

3. Brief facts of the case are as under:

3.1 Assessee is an individual and filed return of income for A.Y. 2020-21 on 06.01.2021 declaring total income of Rs.37,34,200/-. The assessee in the original return claimed exemption u/s. 10(13A) under the head salary income and income from other sources. The return was processed on 18.03.2021 determining refund in the hands of the assessee, which was paid to the assessee. Later, on 20.03.2021, a revised return was filed declaring total income of Rs.34,34,200/- and the exemption claimed u/s. 10(13A) of the act got reduced. The assessee declared loss under the head income from house property. Subsequently, the case was selected for a complete scrutiny for verification of the refund that disclosure of substantially lower receipts in the return vis-à-vis 26AS. On deduction from total income under Chapter VIA, substantial difference in the total taxable income was also to be verified.

3.2 During the course of the assessment proceedings, various information were called for to examine the issues. The deduction claimed by assessee u/s. 80C, 80E and 10(13A) were examined in detail by the Ld.AO. The Ld.AO after verification, disallowed the claim of deduction u/s. 80E and 10(13A) as assessee did not give any supporting evidence.

3.3 The Ld.AO initiated the penalty proceedings for under reporting of income in consequence of misreporting u/s. 270A(9). The assessment order was passed on 17.09.2022 by making total additions in the hands of the assessee as under:

The assessee accepted the additions made and the payment was paid immediately.

3.4 Subsequently, a show cause notice u/s. 274 r.w.s. 270A dated 17.09.2022 was issued to levy penalty u/s. 270A of the act. In response, the assessee filed reply dated 11.10.2022 and 07.02.2023. The reply filed by the assessee was considered by the Ld.AO. The Ld.AO noted that assessee filed original return of income for AY under consideration claiming refund of Rs.11,19,880/-.

3.5 The refund of Rs.10,91,670/- was credited to the assessee and subsequently on the revised return filed by the assessee, a scrutiny notice u/s. 143(2) was issued on 29.06.2021. The assessee has completed during the assessment proceedings that the revised return was filed by mistake and the original return dated 06.01.2021 was treated to be a final. It is submitted that some other CA has filed the return with incorrect details and that invoking the provisions of section 270A of the act is bad in law.

3.6 The Ld.AO observed that addition was made in the assessment order by disallowing the deduction u/s. 80E and the claim u/s. 10(13A) of the act. The Ld.AR submitted that during the course of the assessment proceedings, assessee has admitted that no education loan was taken and therefore no deduction could have been claimed u/s. 80E of the act.

3.7 It was also submitted that against the HRA claimed, assessee had filed the rental agreement with nestaway and assessee had submitted the bank statements substantiating the debit of rent paid. The Ld.AO however passed the draft assessment order on 28.02.2022 proposing the disallowance of deduction u/s. 80E and disallowance of exemption claimed u/s. 10(13A) of the act totalling to Rs.69,15,566/-. Thereafter on 17.09.2022, the final assessment order was passed by making the said addition in the hands of the assessee. The Ld.AO had initiated penalty for under reporting of income in consequence of misreporting for the disallowance of deduction claimed u/s. 80E of the act as well as disallowance of exemption claimed u/s. 10(13A) of the act. It is submitted that the assessee immediately paid the demand as per notice u/s. 156 amounting to Rs.12,92,361/-. The outstanding demand was paid vide challans dated 28.09.2022 and 30.09.2022. Thereafter on 10.10.2022, assessee filed form 68 being an application u/s. 270AA(2) of the act seeking immunity against the penalty proceedings. The Ld.AO however still initiated the penalty proceedings on 17.09.2022. The penalty order was passed on 15.03.2023 wherein the Ld.AO rejected the immunity from penalty proceedings by observing as under:

“12. With regard to immunity from penalty proceedings u/s section 270AA, in page 6 of the assessment order u/s 143(3), in para 9.1 and 9.2 it has been clearly and specifically mentioned that penalty proceedings in the given case has been initiated under the circumstances referred to in subsection (9) of the Section 270A of the Income Tax Act, 1961. Therefore, as per the provisions of Section 270AA(3) of the income Tax Act, 1961, the assessee is also not eligible for immunity from imposing of penalty initiated u/s. 270A of the Income Tax Act, 1961 for underreporting of income which is in consequences of misreporting of income. For sake of clarity, the provisions of Section 270AA(3) of the Income Tax Act, 1961 is reproduced as under; “Section – 270AA(3) The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and after the expiry of the period filing the appeals as specified in clause (b) of sub­section (2) of section 249, grant immunity from imposition of penalty under section 270Aand initiation of proceedings under section 276C or section 276CC. where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A.”. Also as per CBDT Notification No 3/2022, dated 16.07.22, filing of Form 68 is mandatorily to be done electronically through e-filing portal. In the given case assessee has sent an email seeking immunity and no form 68 application was e-filed. Moreover as discussed in para above, as the provisions of immunity itself not applicable in the assessee’s case even if assessee were to have e-filed form68, the same would have been rejected as per provisions of section 270AA(3) of the Income Tax Act .

13. In view of the above, it is held that this is a fit case for levy of penalty u/s. 270A of the Income Tax Act, 1961 for underreporting of income, which is in consequences of misreporting of income. There is underreporting which is in consequences of misreporting of income of Rs 31,81,366/-. Hence, the assessee is liable to pay penalty of two hundred percent of the amount of tax payable on the underreported income, which is in consequence of misreporting of income. The income tax payable on underreported income works out to Rs 7,97,586/- and the two hundred percent penalty for the same works out to Rs. 15,95,172/-.

I hereby levy penalty of Rs. 15,95,172/- i.e. two hundred percent of the tax payable on the underreported of income in consequence of misreporting of income.

This penalty order has been passed with prior approval of the Addl. Commissioner of Income Tax, Range-3(3), Bengaluru received in order with DIN & Document No. ITBA/PNL/S/992/2022-23/1050563178(1)

Dated: 09/03/2023.

Demand notice is issued accordingly.”

3.8 Against this penalty order, the assessee preferred appeal before the Ld.CIT(A).

3.9 The Ld.CIT(A) was of the view that as the penalty proceedings were initiated u/s. 270(9) of the act for misreporting of income assessee could not seek immunity u/s. 270AA. He thus upheld the order of the Ld.AO by observing as under:

“5.3.4. With regard to immunity from penalty proceedings u/s section 270AA, in page 6 of the assessment order u/s 143(3), in para 9.1 and 9.2 it has been clearly and specifically mentioned that penalty proceedings in the given case has been initiated under the circumstances referred to in subsection (9) of the Section 270A of the Income Tax Act, 1961. Therefore, as per the provisions of Section 270AA(3) of the income Tax Act, 1961, the assessee is also not eligible for immunity from imposing of penalty initiated u/s. 270A of the Income Tax Act, 1961 for underreporting of income which is in consequences of misreporting of income. For sake of clarity, the provisions of Section 270AA(3) of the Income Tax Act, 1961 is reproduced as under; “Section – 270AA(3) The Assessing Officer shall, subject to fulfilment of the conditions specified in sub-section (1) and after the expiry of the period filing the appeals as specified in clause (b) of sub­section (2) of section 249, grant immunity from imposition of penalty under section 270Aand initiation of proceedings under section 276C or section 276CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A.” Also as per CBDT Notification No 3/2022, dated 16.07.22, filing of Form 68 is mandatorily to be done electronically through e-filing portal. In the given case assessee has sent an email seeking immunity and no form 68 application was efiled. Moreover as discussed in para above, as the provisions of immunity itself not applicable in the assessee’s case even if assessee were to have e-filed form68, the same would have been rejected as per provisions of section 270AA(3) of the Income Tax Act.

3.10 Aggrieved by the order of the Ld.CIT(A), assessee filed appeal before this Tribunal.

4. Before us, the Ld.AR submitted that the original return filed by the assessee on 06.01.2021 was processed on 18.03.2021 determining refund of Rs.10,91,670/- which was received by the assessee. He submitted that assessee was provided stock options by his employer every year. The stocks vest on a specific date and the employer deducts tax on the same. But FY 2019-20 was black-out period, wherein there was restriction imposed by the employer, internal employees can’t sell the shares and to wait for 3 months. By the time black-out period is over, stock valuer educes to a great extent by 30%, and employee’stend to loose amount. Taxes was deducted by employer on notional gains of stock options, whereas employee’s incur loss when the stock was sold. Hence, assessee approached a tax consultant and requested the to claim said losses. However, the tax consultant instead of providing the insight on provisions of claiming loss on stock options, misguided the appellant and claimed the deduction U/s 80E of the Income Tax Act,1961 and filed the return of income with a refund claim.

5. The Ld.AR submitted that the assessee had no intention to claim refunds nor any intention to default tax payments as the total taxes were duly deducted from salary income. However, due to lack of knowledge on the law and overlooking the income tax returns with wrong claim was filed. Subsequently, said returns were processed at CPC and refund was determined, the appellant came to know about the refund claim made by his tax consultant and hence requested to revise the returns and pay the applicable taxes. However, he revised the returns filed by the tax consultant was still resulting the refund which was not accepted by the assessee and didn’t e-verify the returns till date.

6. The Ld.AR submitted that the assessee also tried various options on his own, contacted helpline to get guidance on filing revised returns without wrong claim of deductions and pay the applicable taxes. However, the appellant did not succeed in his honest attempt in revising the returns. Subsequently, the case was selected for complete scrutiny to verify the return of income with the below queries:

• Total Taxable Income of an employee
• Reasons for Refund claim
• Deduction from Total Income under Chapter VI-A

7. The Ld.AR submitted that during the assessment proceedings, the appellant had duly accepted that there was an inadvertent error while filing returns of income for the said assessment year relating to section U/s 80E deduction.

8. Assessment proceedings was completed as under Faceless Assessment Scheme and the assessment u/s 143(3) was completed vide order dated 17.9.2022 with DIN ITBA/AST/S/143(3)/2022-23/1045579614(1).Details of the additions made to the retuned income are tabulated hereunder for your ready reference.

9. It is submitted that the Ld.AO completed the assessment with a demand of Rs. 12,92,361/- it is to make humble request before your good office your honor the appellant has accepted the additions and made the tax payments. Details of the tax paid are as under:

10. Subsequently show cause notice u/s. 274 r.w.s 270A dated 17t^h Sept. 2022 was issued to levy penalty u/s. 270A. The assessee submitted response against the penalty notice and filed Form 68 manually and through email to the learned jurisdictional authorities with a request to grant immunity from penalty proceedings which was denied.

11. Levy of Penalty:

11.1 The Ld.AR submitted that

i. The appellant accepted the additions made while passing the order

ii. Said taxes were duly remitted without making any dispute

iii. Made humble request before the learned assessing authorities as well as learned appellant authorities to grant immunity from leavy penalty

iv. It is submitted that, the said claim made inadvertently while filing return on income and there was no mensrea while making claim

11.2 The Ld.AR submitted that in the assessment order, penalty has been initiated for underreporting of income in consequence of misreporting, however the section mentioned there is section 270(9) instead of section 270(8). The Ld.AR submitted that u/s. 270AA, sub-clause (8) deals with a situation where there arises underreporting of income in consequence of misreporting. The Ld.AR also emphasised that wrong claim of section 80E was not at the behest of the assessee but a mistake that was committed by the tax professional who had filed returns of assessee. The Ld.AR submitted that assessee upon realising the wrong claim had surrendered the taxes with interest thereon, thus there cannot be any malafide attributable to the assessee.

11.3 The Ld.AR submitted that even form 68 was filed manually and also sent through email to the jurisdictional AO requesting to grant immunity from penalty proceedings after satisfying the relevant conditions. However, the authorities below rejected the submissions of the assessee by stating that assessee being an educated person is accepted to be vigilant. The Ld.AR thus prayed that the penalty may be deleted as the assessee did not have any intention to default the tax payment by making the wrong claim of deduction. It is submitted that the error committed by the tax consultant went unnoticed by the assessee. On the contrary, the Ld.DR relied on the orders passed by the authorities below. The Ld.DR vide written submissions submitted as under:

–

–

–

11.4 The Ld.DR in support also relied on the decision of Hon’ble Kerala High Court in case of IBS Software (P.) Ltd. vs. UOI reported in (2024) 158 taxmann.com 209.

We have perused the submissions advanced by both sides in the light of records placed before us.

12. Section 270A of the act, specifies penalty for underreporting and misreporting. Sub-section of section 270A of the act categorises the case of misreporting of income that reads as under:

“270A. Penalty for under reporting and misreporting of income.

(9) The cases of misreporting of income referred to in sub­section (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.”

12.1 It is further noted that, section 270AA deals with immunity from imposition of penalty etc. u/s. 270A, except for penalty initiated under sub-section 9 of section 270A. On perusal of the assessment orders, we note that the Ld.AO initiated penalty proceedings for, ‘underreporting of income in consequence of misreporting’ without specifying which limb of sub-section 9 stands satisfied in present facts of the case. It is noted that there is no whisper as to which limb of section 270A(9) is attracted, and how any of the particular ingredient under sub-section 9(a-f) is satisfied.

Further, it is noted that, the assessee filed application seeking immunity in Form 68 before the Ld.AO within the prescribed period manually, as well as electronically, which has not been considered. Even before the Ld.CIT(A), the application seeking immunity against penalty u/s. 270A was filed by the assessee, which has not been considered and rejected at the face of it. Admittedly, assessee has not filed any appeal against the quantum and has accepted the addition made by the Ld.AO.

12.2 We note that in the assessment order, the assessee submitted the bonafides of wrong claims that was made by the tax consultant, who filed assessee’s return for the year under consideration. The assessee categorically mentioned that, even in the return that was filed subsequently, the assessee denied to e-verify as there were errors that continued. The assessee also submitted that, he has been paying rent which can be established from the bank statements, and it was only in the absence of the documents in support that the deduction u/s. 10(13A) was disallowed. It is the submission of the assessee that, these being a debatable issues, penalty is not leviable.

12.2.1 Insofar as the wrong 80E claim is concerned, the assessee accepted the addition as it was due to shear negligence of the authorised representative who filed the return of income and that the assessee had no knowledge of the claim having made in the form of education loan.

12.3 Under such circumstances, the application for immunity against the provisions of section 270A should have been considered by the authorities below. The Ld.CIT(A) during the appellate proceedings has concurrent jurisdiction, as that of AO and should have used the discretionary power envisaged under the act, to accept the application and to consider the same in the light of the law.

12.4 The facts of the decision relied by the Ld.DR are distinguishable as in that case, the authorities below had accepted the application of immunity and has analysed the same in the light of evidences filed. Whereas in the present case, the application seeking immunity has been dismissed at the threshold without even considering the facts of the case and without even mentioning under which limb of sub-section (9) of section 270A as the penalty being initiated.

12.5 We refer to the decision of Hon’ble Delhi High Court in case of Prem Brothers Infrastructure LLP vs. NFAC reported in (2022) 142 taxmann.com 38, wherein the penalty was levied by the assessing authority similar as that of present assessee by alleging misreporting of income. It is also noted that in the present facts of the case, the assessee furnished all the details pertaining to the rent paid to the authorities below. In respect of the addition accepted by the assessee u/s. 80E, the Ld.CIT(A) has reproduced the submissions of the assessee that reads as under:

“5.3.1. The appellant was provided with stock options every year by his employer. The stocks vests on a specific date and the employer deducts tax on the said vesting. But the F.Y 2019-20 was black-out period, wherein there was a restriction imposed by the employer, stating that the internal employees can’t sell the shares for 3 months’ time. By the time the black-out period was over, stock value reduces to a great extent by 30%, and employees tend to loose the money. However, taxes were deducted by employer on notional gains of stock options, whereas employees has to incur losses when the stocks were actually sold. Hence, the appellant approached a tax consultant to seek guidance on the tax treatment on the said losses incurred during the year. However, the tax consultant, instead of providing the insight on provisions of claiming loss on stock options, misguided the appellant and claimed the deduction U/s. 80E and filed income tax returns with the above refund claim. This claim of refund was not brought to the knowledge of the appellant while filing the return of Income.

5.3.2 The appellant further submitted that, the appellant had no intention to claim refund nor any intention to default tax payments. But due to lack of knowledge about Income tax provisions/rules and overlooking and relying on the tax consultant the income tax return was filed with wrong claim. Later when the return of Income was processed and refund was determined, the appellant came to know about the claim made by tax consultant and hence requested to revise the returns and pay the applicable taxes on the wrong claim. However, the revised return filed by the tax consultant still has more flaws and tax consultant mentioned that he doesn’t have the knowledge on taxability of stock options. Hence, appellant didn’t e-verify or accept the revised returns filed for the said assessment year. Further, it is to bring to your kind notice that the appellant tried various options on his own, contacted helpline to file revised returns in order to remove wrong claim of deductions and pay the applicable taxes. However, the appellant did not hear from the helpline and left the same as it is. During the assessment proceedings appellant duly accepted that deduction U/s 80E was wrongly claimed by his tax consultant while filing of returns and also accepted to pay the tax demands that he is liable on the wrong claim made in ITR.”

From the above, the bonafide of the assessee is established and the Ld.CIT(A) should have considered the application seeking immunity.

12.6 Hon’ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. Vs. ACIT, International Taxation Circle 3(1)(2), New Delhi and Ors. W.P.(C) No. 5111/2022 vide judgment dated 28.03.2022 observed as under:-

“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 – “underreporting” 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 09^th 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.”

12.7 We are conscious of the fact that there can be cases where underreporting of income may result in misreporting of income. However, in facts of the present case, the underreporting has not been established in respect of deduction u/s. 10(13A), the assessee had furnished all the details in respect of rental paid. In respect of the wrong claim u/s. 80E, the assessee admitted the addition voluntarily which is evident from the submissions reproduced hereinabove in para 12.4. The assessee took necessary steps to correct the claim before the assessment which was unsuccessful. All these circumstances have not been considered by the Ld.CIT(A)/AO.

12.8 Based on the above discussions, we are of the opinion that there is no whisper as to which limb of section 270A of the act is directed and how any of the ingredients of sub-section (9) to section 270A stands satisfied in the present facts of the case. There is no basis to invoke sub-section (9) to section 270A and in the absence of any such particulars in the assessment order dated 17.09.2022, a mere reference of the phrase “underreporting of income in consequence of misreporting”, cannot be a reason to deny immunity from imposition of penalty and prosecution.

We therefore quash and set aside the penalty order dated  15.03.2023 and direct the Ld.AO to consider the application seeking immunity filed by the assessee u/s. 270AA of the act and to pass necessary orders in accordance with law.

Accordingly, the appeal filed by the assessee in ITA No. 832/Bang/2023 stands partly allowed for statistical purposes.

In the result, the appeal filed by assessee in ITA No. 832/Bang/2023 stands partly allowed for statistical purposes and appeal in ITA No. 143/Bang/2024 stands dismissed. Order pronounced in the open court on 27^th May, 2024.