Case Law Details
Sukrit Kalia Vs ITO (ITAT Delhi)
Delhi ITAT Quashes ₹20.56 Lakh Penalty u/s 270A – Vague Penalty Notice Without Specifying Exact ‘Limb’ Held Void-Ab-Initio
The Delhi ITAT deleted penalty of ₹20.56 lakh levied at 200% under section 270A after holding that the penalty notice itself was legally defective for failing to specify the exact charge or “limb” under which penalty proceedings were initiated.
The assessee, an individual professional, had originally filed return declaring income of about ₹79.62 lakh. During scrutiny, the AO noticed that although actual rent paid was only ₹10.20 lakh, the assessee had claimed HRA exemption u/s 10(13A) amounting to ₹25.46 lakh. The AO disallowed the claim and thereafter levied penalty u/s 270A treating the case as one of “misreporting” of income and imposed penalty at 200% of tax payable.
Before the Tribunal, the assessee argued that the penalty notice issued u/s 270A did not specify whether the proceedings were for “under-reporting” or “misreporting” of income and therefore the very initiation of penalty proceedings was invalid. The assessee also contended that the incorrect HRA claim arose due to mistakes committed by the previous counsel while classifying professional receipts as salary income.
The ITAT accepted the legal plea and observed that the notice dated 13.03.2024 did not clearly mention under which specific limb of section 270A penalty was proposed. Relying on the Delhi High Court judgment in Prem Brothers Infrastructure LLP v. NFAC, the Tribunal held that such vague and omnibus notices are unsustainable in law since the assessee must be made aware of the precise charge against him.
Accordingly, the Tribunal held the penalty notice itself to be “void-ab-initio”, quashed the consequential penalty order, and allowed the assessee’s appeal in entirety.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal preferred by the assessee is against the order of the learned Commissioner of Income-tax (Appeals), NFAC, Delhi dated 09.12.2025 arising out of penalty order passed under section 270A of the Income-tax Act, 1961 (in short “the Act”) dated 26.09.2024 by the Assessment Unit, Income-tax Department concerning Assessment Year 2022-23.
2. Brief facts of the case are that the assessee is an individual and filed his return of income for the A.Y. 2022-23 on 29.07.2022 by declaring a total income of Rs.79,62,950/-. The case of the assessee was selected for scrutiny under CASS and the reason for selection of the case was ‘Deduction from total Income under Chapter VI-A.” The case of the Revenue is that the assessee had paid actual rent amounting to Rs.10,20,000/- but he had claimed HRA exemption u/s.10(13A) of the Act amounting to Rs.25,46,871/-. As the assessee failed to furnish details regarding HRA exemption, the same was disallowed and added back to the total income of the assessee in the assessment completed u/s 143(3) r.w.s. 144B of the Income-tax Act on 13-03-2024 by determining total income of Rs.1,05,09,821/-. The AO further initiated penalty proceedings u/s 270A of the Act against the assessee for under reporting of income of Rs.25,46,871/- which was in consequence of misreporting thereof. The AO held that there is under reported income and levied the penalty of Rs.20,56,176/- (200% of tax payable) and passed the penalty order u/s. 270A of the Act dated 26.09.2024.
3. Aggrieved against the order dated penalty, the assessee preferred the appeal before the CIT(A) who dismissed the appeal of the assessee by observing that the assessee committed default within meaning of section 270A of the Act and the AO has rightly levied the penalty u/s 270A of the Act to the tune of Rs.20,56,176/-.
4. Aggrieved, assessee is in appeal before the Tribunal with the following grounds :
1. “That the order of Ld. CIT(A) is bad and against the law.
2. That the notice issued by the Ld. CIT(A) is defective in law, as it fails to mention the specific limbs of Section 270A.
3. That the Ld. CIT(A) has wrongly passed order u/s 270A without clearly mentioning the specific limbs of the Section 270A.
4. That the Ld.. CIT(A) wrongly upheld penalty levied u/ s 270A of Rs.20,56,176/-, as none of the conditions of misreporting under section 270A are applicable and protection allowed under section 270A is not provided.
5. That the learned CIT(A) erred in law and on facts in upholding the penalty by treating the addition of Rs.25,46,871/- as a case of misreporting under section 270A, despite the fact that the assessee had disclosed all the income details and his counsel claimed wrong rebate.
6. That the Ld. CIT(A) has wrongly upheld penalty at the rate of 200% by treating the bonafide mistake as underreported income is in consequence of misreporting.
7. That the Ld. CIT(A) failed to appreciate the fact that the assessee had paid tax of Rs.15,17,369/- on 18.03.2024 within time, and is eligible for immunity from penalty under section 270AA. Therefore, the Ld. CIT(A) wrongly upheld the penalty levied u/s 270A.
8. That the previous counsel of the appellant wrongly showed receipt from profession amounting to Rs.48,69,664/- as salary income.
9. That the exemption of HRA u/s 10(13A) was wrongly claimed by the appellant’s previous counsel.
10. That the penalty was imposed without proper opportunity of hearing, making it against the principles of natural justice.
11. That the assessee craves leave to add, amend, alter OR withdraw any ground of appeal before the final date of hearing.”
5. At the outset, learned Counsel for the assessee submitted that the specific limbs of section 270A of the Act was not mentioned clearly in the penalty notice and therefore, the penalty proceedings u/s 270A is vitiated.
6. Per contra, learned DR relied upon the order of penalty.
7. We have heard the rival submissions and perused the material available on record. We find that the notice dated 13.03.2024 u/s 270A of the Act, enclosed in the paper book at page 1, does not mention under which specific limb of section 270A of the Act, the penalty is being initiated. We therefore, following the decision of the hon’ble Delhi High Court in the case of Prem Brothers Infrastructure LLP V NFAC (W.P.(C) 3841/2022 dated 10.05.2022, consider the notice u/s 270A, without specifying the sub-clause of section 270A for levying penalty, as vague and unsustainable in the eyes of law. Accordingly, the same is considered as void-ab-intio. The penalty notice u/s 270A and the consequent penalty order is accordingly quashed. Ground 2 is allowed.
8. In the result, appeal of the assessee in ITA No.1206/Del/2026 is allowed.
Order pronounced in the open court on 22.05.2026
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