Renil E K Kumar C/o Fiscal Law Partners Vs DCIT (ITAT Bangalore)
Form 16 Trap – ITAT Bangalore Deletes ₹51 Lakh Penalty, Says Every Wrong Claim Is Not Misreporting!
The Bangalore ITAT deleted a penalty of ₹51.20 lakh levied u/s 270A on an employee of Wipro who had claimed exemption u/s 10(10CC) on ESOP-related perquisites based on the employer’s Form 16. The Tribunal noted that the employer itself had shown the amount as exempt and had not deducted TDS, leading the assessee to hold an honest and bona fide belief that the claim was valid.
The Tribunal strongly criticised the AO for being “completely confused” between under-reporting and misreporting of income. While the show-cause notice alleged only under-reporting, the final penalty order imposed 200% penalty for misreporting without clearly specifying the exact limb under section 270A(2) or 270A(9). The ITAT held that such vague and shifting charges violate principles of natural justice and render the penalty proceedings invalid.
The Tribunal also laid down a detailed “step-ladder” for levy of penalty u/s 270A — first establishing under-reporting, then examining whether the case falls within the exceptions of section 270A(6), and only thereafter considering misreporting. It emphasized that penalty provisions must be strictly construed and cannot be invoked mechanically for every addition or disallowance.
Holding that the assessee had disclosed all material facts and acted on a bona fide belief arising from Form 16 issued by the employer, the ITAT directed deletion of the entire penalty.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
