Shrine Empire Gallery Pvt. Ltd. Vs DCIT (ITAT Delhi)
Delhi ITAT Deletes Section 270A Penalty as AO Failed to Specify Exact Charge of Misreporting
The Delhi ITAT deleted the penalty levied under section 270A, holding that the Assessing Officer failed to specify the exact statutory charge of misreporting of income as required under section 270A(9). The Tribunal held that such a defect is not a mere technical irregularity but a jurisdictional defect that vitiates the entire penalty proceedings.
The case arose out of a search under section 132 in the Samir Modi group, pursuant to which proceedings under section 153C were initiated against the assessee. The Assessing Officer made an addition of ₹5,29,575 towards estimated business profits from alleged unrecorded cash receipts reflected in seized Excel sheets and thereafter levied a penalty of ₹2,75,380 (200% of tax sought to be evaded) under section 270A for alleged misreporting of income.
Before the Tribunal, the assessee contended that while the assessment order referred to “under-reporting of income in consequence of misreporting”, the show-cause notice and penalty order merely alleged “misreporting of income” without identifying the specific clause of section 270A(9)(a) to (g) that was allegedly attracted. The Tribunal found merit in this contention.
The Tribunal observed that section 270A draws a clear distinction between under-reporting of income and under-reporting in consequence of misreporting, and that the enhanced penalty of 200% can be imposed only if the case falls within one of the exhaustively enumerated instances of misreporting under section 270A(9)(a) to (g). Failure to specify the exact limb of default renders the penalty proceedings invalid.
Relying on the decisions of the Delhi High Court in Schneider Electric South East Asia (HQ) Pte. Ltd. v. ACIT and Prem Brothers Infrastructure LP v. NFAC, the Tribunal held that the defect was non-curable, deleted the penalty, and allowed the assessee’s appeal.
Cases Discussed
- Schneider Electric South East Asia (HQ) Pte. Ltd. v. ACIT (Delhi High Court),[2022] 145 taxmann.com 665
- Prem Brothers Infrastructure LP v. NFAC (Delhi High Court),[2022] 142 taxmann.com 38
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the assessee against the order dated 22.10.2025 of the Ld. Commissioner of Income Tax (A)-26, Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No: ITBA/APL/S/250/2025-26/1081924041(1) arising out of the order dated 30.08.2024 u/s 271DA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by Circle, Range-4, for AY: 2019-20.
2. Heard and perused the records. A search and seizure action under section 132 of the Act was conducted on 03.02.2021 in the cases of Shri Samir Modi and others and allegedly during the course of the said search, certain loose papers, digital records, excel sheets and other documents were found and seized and based solely on such seized material and information purportedly pertaining to the Appellant, proceedings under section 153C of the Act were initiated and assessment was completed vide order dated 19.01.2024, wherein addition on account of alleged business profits amounting to Rs.5,29,575/- was made by estimating profit on alleged unrecorded cash receipts reflected in the seized excel sheets. Simultaneously, penalty proceedings under section 270A of the Act were initiated alleging under-reporting of income in consequence of misreporting. The impugned penalty order dated 22.07.2024 under section 270A of the Act, was passed levying penalty of Rs.2,75,380/- (being 200% of tax on income sought to be evaded) for alleged misreporting of income. Aggrieved thereby, the Appellant preferred an appeal before the Ld. CIT(A)but failed for which assessee is in appeal before this Tribunal.
4. It is ground no. 2, which is stressed for disposal as allegedly the impugned order is illegal, being not based on valid charge. Though ld. DR, submits that the alleged discrepancy is technical we find that on perusal of the assessment order dated 19.01.2024, that satisfaction as recorded and penalty proceedings as were initiated by the Ld. AO, were alleging act of “under-reporting of income in consequence of misreporting”. Then in the show cause notice issued under section 274 r.w.s 270A of the Act dated 19.01.2024, (available at Pg. No. 34 of PB) as well as the impugned penalty order dated 22.07.2024, the allegation of the Ld. AO has made is qua”misreporting of income”. Thus failing to specify the exact charge of default as to the particular limb of section 270A(9)(a) to 270A(9)(g) of the Act, pursuant to which penalty has been invoked therein.
5. Now, Section 270A of the Act, draws a clear distinction between under-reporting of income and under-reporting in consequence of misreporting. Since the enhanced penalty of 200% under section 270A(8) can be levied only where the case falls within any of the specific instances of misreporting enumerated under section 270A(9)(a) to (g), it is incumbent upon the Ld. AO to clearly specify the exact limb of default attracted to validly invoke applicable penalty provision. Failure to demonstrate that the case falls within one of the exhaustively enumerated instances contained in clauses (a) to (g) of section 270A(9), penalty at the enhanced rate of 200% cannot be sustained. Reliance of same is placed on the decision of Hon’ble Delhi High Court in case of Schneider Electric South East Asia (HQ) Pte. Ltd. v. ACIT |2022] 145 taxmann.com 665 and Prem Brothers Infrastructure LP v. NFAC [2022] 142 taxmann.com 38. Thus the entire proceedings, therefore, get vitiated and are non-curable defects.
6. Thus ground no. 2 is sustained and the appeal is allowed. The impugned penalty is deleted.
Order pronounced in the open court on 05.08.2026.
