Niket Maheshbhai Shah Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, allowed the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2019-20 confirming a penalty of Rs. 2,31,504 levied under Section 270A of the Income-tax Act, 1961.
The assessee had claimed a deduction of Rs. 3,71,000 under Section 80GGC in respect of a donation made through a recognised banking channel to a registered political party, Manav Adhikar National Party, supported by a certificate issued by the donee. The assessment was reopened under Section 147 following a search conducted on the donee and statements recorded from its officials. The Assessing Officer disallowed the deduction. The assessee accepted the disallowance and paid the resultant tax demand to avoid prolonged litigation and also filed an application seeking immunity under Section 270AA, which was rejected on the ground that the income was misreported. Thereafter, the Assessing Officer levied a penalty of Rs. 2,31,504 under Section 270A at 200% of the assessed tax, treating the case as one of under-reporting in consequence of misreporting of income. The CIT(A) upheld the penalty.
Before the Tribunal, the assessee submitted that the deduction under Section 80GGC had been claimed bona fide on the basis of a donation made through banking channels and that the claim could not be regarded as under-reporting or misreporting of income. Reliance was placed on G R Infraprojects Ltd. vs. ACIT, Prem Brothers Infrastructure LLP vs. NFAC, and Abhishek Jayketu Joshi vs. AC Cir 42(2)(1).
The Tribunal observed that the Assessing Officer had examined the deduction claimed under Section 80GGC and that the claim could not be characterised as misreporting or under-reporting since the assessee considered the donation to be eligible under the provision. It further noted that the Assessing Officer had not specified the applicable limb of Section 270A or explained how the ingredients of Section 270A(9) were satisfied while imposing the penalty. Referring to the decision in Prem Brothers Infrastructure LLP, the Tribunal held that, in the absence of such particulars, the penalty could not be sustained. Accordingly, the Tribunal deleted the penalty under Section 270A and allowed the assessee’s appeal.
Cases Discussed
- Abhishek Jayketu Joshi vs. AC Cir 42(2)(1), order dated 13-01-2026
- G R Infraprojects Ltd. vs. ACIT, (2024) 158 taxmann.com 80 (Rajasthan)
- Prem Brothers Infrastructure LLP vs. NFAC, (2022) 142 taxmann.com 38 (Delhi)
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 14-10-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2019-20.
2. The grounds of appeal are as under:-
“1. The Commissioner of Income Tax (Appeals) has erred in law and facts by confirming a penalty of – 2,31,504 under Section 270A of the Income Tax Act, alleging under-reporting in consequential of misreporting of income at the rate of 200% of the assessed tax.
The appellant had claimed deduction U/s 80GGC for a donation of Rs. 3,71,000 to a political party namely Manav Adhikar National Party through a recognized banking channel and necessary certificate was issued by the donee.
The assessment was reopened on the basis of search carried on donee and statement given by the officials, but neither opportunity of cross examination of donee nor provided any documentary evidence on which the AO has relied upon. Further, if assessment must have completed of the donee and additions would have been made u/s 68 in the hands of donee, then addition in the hands of appellant would lead to double taxation.
The Appellant has accepted the disallowance and paid the resultant tax demand to avoid prolonged litigation and maintain peace of mind.
The said addition was deleted in the similar case by Ahmedabad Tribunal, hence the allowability of donation to a political party is itself a debatable issue.
Hence, considering the facts of the case, the appellant has not underreported any income in consequence to misreporting of any income, penalty levied U/s 270A is bad in law and the same should be deleted.
2. The Appellant craves leave to add, alter, amend, delete, rescind, or withdraw any of the grounds of appeal mentioned hereinabove.”
3. The assessee is an individual, residing at A-301 Vardhaman Complex, Nr. High Tension Road Subhanpura Vadodara 390007, Gujarat, India. The assessee has filed his return of income for the relevant assessment year claiming a deduction of 3,71,000 under section 80GGC of the Income Tax Act. The deduction was for a donation made via a recognized banking channel to a registered political party, namely Manav Adhikar National Party, and supported by a valid certificate issued by the donee. The assessment was reopened under section 147 following a search action conducted on the donee, and consequent statements provided by their officials. The Assessing Officer disallowed the donation claimed under section 80GGC. The assessee has accepted the disallowance and paid the resultant tax demand to avoid prolonged litigation and maintain peace of mind. The AO has initiated penalty proceedings u/s 270A vide notice dated 20/12/2024 and subsequent notices. The assessee had filed an application to seek an immunity U/s 270AA of the Income Tax Act, 1961. The said application was rejected with a reason that the income is misreported.
Penalty of Rs. 2,31,504 imposed at 200 percent of the assessee tax was under the category of under-reporting in consequential of misreporting of income.
4. Being aggrieved by the penalty order passed u/s. 270A(9), the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The ld. A.R. submitted that the CIT(A) erred in confirming the penalty in respect of under-reporting in consequential of misreporting of income at the rate of 200% of the assessed tax. The assessee has rightly claimed donation u/s. 80GGC for a donation of Rs. 3,71,000/- for political party. This cannot be stated as mis-reporting/under reporting as the assessee was genuinely believing the deduction to that extent. The ld. A.R. relied upon the following decisions:-
(i) G R Infraprojects Ltd. vs. ACIT (2024) 158 com80 (Rajasthan)
(ii) Prem Brothers Infrastructure LLP vs. NFAC (2022) 142 com38 (Delhi)
(iii) Abhishek Jayketu Joshi vs. AC Cir 42(2)(1) order dated 13-01-2026
6. The ld. D.R. relied upon the assessment order and the order of the CIT(A).
7. Heard both the parties and perused all the relevant material available on record. The Assessing Officer has categorically verified the deduction which was claimed by the assessee u/s. 80GGC and this cannot be stated mis-reporting/under reporting as the assessee was considering that the donation falls u/s. 80GGC. Therefore, penalty imposed u/s. 270A is not justified. The support of this penalty to be quashed also is based on the decision of Hon’ble High Court in case of Prem Brothers Infrastructure LLP (supra) where it was categorically held that there is not even a whisper as to which limb of 270A of the Act is attracted and how the ingredient of sub-section (9) of section 270A is satisfied. In absence of such particulars, the mere reference to the word mis-reporting by the respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. In the present case also, the Assessing Officer has not mentioned the proper limb or has not given the details while imposing the penalty. Therefore, the penalty does not sustain.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15-05-2026
