Case Law Details
Dipesh Narendrakumar Patel Vs ITO (ITAT Surat)
Summary: The ITAT Surat deleted the penalty of ₹1,12,320 levied under Section 270A of the Income-tax Act, holding that there was neither under-reporting nor misreporting of income by the assessee. The assessee had originally claimed a deduction of ₹1,80,000 under Section 80GGC for a donation to a political party. Following a search operation that revealed alleged bogus donations through certain political parties, the assessee, upon receiving a notice under Section 148, voluntarily withdrew the deduction and filed a revised return declaring the additional income. The Assessing Officer accepted the income declared in the return filed in response to the reopening notice and made no further addition. Despite this, penalty proceedings under Section 270A were initiated and penalty was imposed for alleged under-reporting and misreporting of income. The Tribunal held that once the returned income was accepted without any variation or addition, the case could not be treated as one of under-reporting or misreporting, and therefore the penalty was unsustainable and liable to be deleted.
Core Issue: Whether penalty under section 270A for under-reporting and misreporting of income can be levied when the assessee, after receiving notice under section 148, voluntarily withdrew the deduction earlier claimed under section 80GGC in the return filed in response to the reassessment notice and the Assessing Officer completed the reassessment by accepting such returned income without making any further addition or variation.
Facts: The assessee, an individual, originally filed his return of income for AY 2019-20 on 03.08.2019 declaring total income of ₹18,25,640. In the original return, he had claimed deduction of ₹1,80,000 under section 80GGC in respect of donation made to Rashtriya Samajwadi Party (Secular).
Subsequently, a search and seizure operation under section 132 was conducted on 07.09.2022 on certain registered unrecognized political parties and related entities. During the search, the Department allegedly found that these entities were accepting donations through banking channels and returning the corresponding amounts in cash to donors. Based on information gathered during the search, the Department formed a view that the assessee’s donation of ₹1,80,000 to Rashtriya Samajwadi Party (Secular) was not genuine and represented a bogus donation claim.
Accordingly, proceedings under section 148A were initiated and an order under section 148A(d) was passed. Pursuant thereto, notice under section 148 was issued on 10.04.2023.
In response to the notice under section 148, the assessee filed a fresh return of income on 18.04.2023 declaring total income of ₹20,05,640. While filing this return, the assessee voluntarily withdrew the deduction claimed under section 80GGC and offered the amount of ₹1,80,000 to tax. Thus, the entire disputed amount stood disclosed by the assessee himself in the reassessment return.
Thereafter, the reassessment was completed under section 147 read with sections 143(3) and 144B on 10.03.2025. The Assessing Officer accepted the income returned by the assessee at ₹20,05,640 and did not make any addition, disallowance or variation in respect of the donation amount or any other issue. Despite accepting the returned income, the AO initiated penalty proceedings under section 270A alleging under-reporting and misreporting of income and ultimately levied penalty of ₹1,12,320. The CIT(A) confirmed the penalty.
AO’s Findings: According to the AO, the assessee had originally claimed a bogus deduction of ₹1,80,000 under section 80GGC. The search proceedings conducted on the political party allegedly established that the donation was not genuine. The AO therefore treated the case as one involving under-reporting of income arising due to misreporting within the meaning of section 270A(9). Although the assessee had withdrawn the deduction in the reassessment return, the AO held that the original wrong claim constituted misreporting and accordingly levied penalty of ₹1,12,320 under section 270A.
CIT(A)’s Findings: The CIT(A) upheld the penalty and agreed with the AO that the assessee had wrongly claimed deduction under section 80GGC in the original return. The appellate authority therefore sustained the levy of penalty under section 270A.
ITAT Findings: The Tribunal deleted the penalty in entirety. It observed that the most crucial fact was that after issuance of notice under section 148, the assessee voluntarily withdrew the deduction claimed under section 80GGC and filed a revised computation through the return furnished in response to the reassessment notice. The assessee thus disclosed the additional income of ₹1,80,000 on his own and accepted taxability thereof.
The Tribunal further noted that while completing reassessment, the AO accepted the income returned by the assessee and did not make any addition or variation whatsoever. The reassessment order merely accepted the income declared by the assessee in response to notice under section 148.
The Tribunal held that once the reassessment return was accepted as filed and no further addition was made by the AO, there was no basis for alleging either under-reporting or misreporting of income. The very foundation for levy of penalty under section 270A disappeared because the income assessed was exactly the same as the income returned by the assessee in the reassessment proceedings.
The Tribunal emphasized that where the assessee himself withdraws a deduction claim and offers the amount to tax before completion of reassessment and the AO accepts such disclosure without variation, the case cannot be categorized as one of under-reporting or misreporting. Therefore, the penalty levied under section 270A was unsustainable.
Case Laws Relied Upon:
1. Schneider Electric South East Asia (HQ) Pte Ltd. vs. ACIT
2. DD Target PMT Ltd. vs. DCIT
Relevant Para: Para 7.
Held: Where the assessee, in response to notice under section 148, voluntarily withdrew the deduction earlier claimed under section 80GGC and disclosed the corresponding income in the reassessment return, and the Assessing Officer completed reassessment by accepting such returned income without making any addition or variation, the case does not involve either under-reporting or misreporting of income. Consequently, penalty under section 270A was held to be unsustainable and was deleted. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “Ld. CIT(A)”] dated 25.11.2025 for the Assessment Year (in short “AY”) 2019-20.
2. The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case, the order passed by the CIT(A), NFAC, Delhi is bad both in the eyes of law and on facts.
1.1 Ld. CIT(A) has erred in law and on fact in confirming the action of the AO despite the fact that the penalty order passed by the AO is illegal, invalid and liable to be quashed.
2. On the facts and circumstance of the case, the Learned CIT(A) has erred both on facts and in laws in confirming the action of the AO levying penalty of Rs. 1,12,320/- invoking the provision of section 270A read with section 274 of the Income-tax Act.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty on the amount of Rs. 1,80,000/- despite the fact that the alleged amount has already been declared by the assessee in the return of income filed in response to notice under section 148 of the Act and the same was accepted by the AO in the assessment order passed under section 147 r. w.s. 1448 of the Act and no adverse inference or variation has been made by the AO in the amount disclosed by the assessee.
4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty ignoring the factual metrics that there is no variation between income assessed and income returned for donation amounting to Rs. 1,80,000/, Even no SCN was issued for proposed variation while completing assessment.
(ii) That the above said penalty has been confirmed ignoring the fact that there is no malafide intention of the assessee for not making the disallowance and hence, no penalty is leviable.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty levied despite the fact that the notice issued by AO under section 270A read with section 274 of the Act does not specify the charge mentioned under specified clauses of section 270A(9) of the Act.
6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty despite the fact that there is neither misreporting of income nor under-reporting of income.
7. On the facts and circumstances of the case the learned CIT (A) has erred both on facts and in law in confirming the penalty levied by the AO ignoring the contention of the assessee that the penalty proceedings are independent proceedings, as such mere addition/disallowance does not lead to levy of penalty.
8. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the penalty levied u/s 270A of the Act despite the fact that no finding has been given on merit regarding underreporting of income in the order passed by the AO.”
3. The assessee being an individual filed his return of income for A.Y. 201920 on 03.08.2019 declaring total income of Rs.18,25,640/-. The Ld. Assessing Officer (in short “Ld. AO”) observed that during the relevant assessment year, the assessee claimed bogus deduction u/s 80GGC of the Income Tax Act, 1961 (in short “the Act”) to the extent of Rs.1,80,000/-. A search and seizure action was conducted u/s 132 of the Act on registered unrecognised political parties, group of Ahmedabad on 07.09.2022. It was found that the said parties and charitable organisations accept donations from various individuals through banking channel and thereafter return the donation amount to the respective doner in cash. The search operation revealed that the assessee made bogus donation of Rs.1,80,000/- to one such party namely Rashtriya Samajwadi Party (Secular). Notice u/s 148 of the Act was issued on 10.04.2023 by way of passing order u/s 148A(D) of the Act. In response to such notice u/s 148 of the Act, return of income was filed by the assessee on 18.04.2023 declaring total income of Rs.20,05,640/- by way of withdrawing the said claim of deduction u/s 80GGC of the Act to the tune of Rs.1,80,000/-. Accordingly, the assessment order u/s 147 r.w.s. 143(3) r.w.s. 144B of the Act was completed on 10.03.2025 thereby assessing the total income at Rs.20,05,640/- by way of accepting the income declared by the assessee, in response to the notice u/s 148 of the Act. The Ld. AO has initiated penalty proceedings u/s 270A of the Act thereby stating that the assessee has underreported his income which is in consequence of misreporting. Notice u/s 274 r.w.s. 270A of the Act was issued on 10.03.2025. The assessee filed reply. After taking cognizance of the assessee’s reply the Ld. AO imposed penalty of Rs.1,12,320/- u/s 270A of the Act.
4. Being aggrieved by the penalty order u/s 270A of the Act, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the assessee has already declared the said amount of Rs.1,80,000/- in his return of income and has withdrawn the claim of deduction u/s 80GGC of the Act. Thus, the assessee has given the full and clear details of his income and there was no variation between income assessed and income returned for donation. The Ld. AR relied upon the decision of Hon’ble Delhi High Court in case of Schneider Electric South East Asia (Hq) Pte Ltd. vs. ACIT, International Taxation (2022) 3 TMI 1295-Delhi. The Ld. AR also relied upon the decision of the Tribunal in case of Dd Target Pmt Pvt. Ltd. vs. DCIT (ITA No.2773 to 2776/Del/2023 order dated 17.01.2025).
6. The Ld. Departmental Representative (in short “Ld. DR”) for the Revenue relied upon the assessment order, penalty order and the order of the Ld. CIT(A).
7. Heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee, while giving details of return of income in response to notice u/s 148 of the Act, has categorically withdrawn the deduction claimed by him u/s 80GGC of the Act. The Ld. AO has accepted the assessee’s return of income and has not made any addition to that extent. Thus, it cannot be termed as underreporting or misreporting of the income of the assessee. The decision of the Hon’ble Delhi High Court in case of Schneider Electric South East Asia (Ha) Pte Ltd (supra) also reiterates the same. Thus, the penalty order u/s 270A of the Act does not survive.
8. In result, appeal of the assessee is allowed.
Order pronounced in the open court on 04.06.2026
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