Yadava Reddy Appidi Vs DCIT (ITAT Hyderabad)
The assessee appealed before the Income Tax Appellate Tribunal (ITAT), Hyderabad, against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2022-23, which upheld a penalty imposed under Section 270A of the Income-tax Act. The assessee had filed the return of income declaring total income of ₹1,21,73,440, including capital gains from security transactions. The case was selected for scrutiny, and the Assessing Officer (AO) completed the assessment under Sections 143(3) read with 144B by making additions towards Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) arising from the redemption of mutual funds. Consequent penalty proceedings under Section 270A for underreporting of income were initiated.
During the penalty proceedings, the AO issued show cause notices asking the assessee to explain why penalty should not be levied for underreporting of income resulting from misreporting. The assessee submitted that the capital gains from redemption of mutual funds had not been reported because the Portfolio Management Service (PMS) provider’s transaction statement did not include those transactions. The assessee contended that he had voluntarily reported capital gains based on the PMS statement, admitted the omission during assessment proceedings, and paid the applicable taxes. Therefore, he argued that the case did not involve underreporting of income arising from misreporting for the purposes of Section 270A.
