Nisha Yogeshkumar Darji Vs ITO (ITAT Ahmedabad)
Summary: ITAT Ahmedabad deleted penalty of Rs.1,87,200 levied under Section 270A on disallowance of a deduction of Rs.3,00,000 claimed under Section 80GGC for donation to a political party. The assessee had claimed deduction for donation to Rashtriya Samajwadi Party (Secular).
Following information arising from search proceedings concerning certain political parties and charitable organisations, reassessment proceedings were initiated and the deduction was disallowed. The Assessing Officer thereafter imposed penalty at 200% of the tax payable, treating the case as under-reporting of income in consequence of misreporting. The Tribunal followed its coordinate Bench decision in Hiro Mulchand Tanwani Vs ITO, where it was held that mere disallowance of an openly disclosed Section 80GGC deduction does not automatically establish misreporting. Section 270A distinguishes under-reporting from the specific categories of misreporting enumerated in Section 270A(9), and the Revenue must establish facts bringing the case within those categories.
A deduction claimed transparently in the return, though subsequently found inadmissible, does not by itself establish that the assessee furnished false evidence, suppressed facts or deliberately misrepresented particulars. The Tribunal additionally found that the Assessing Officer had failed to specify the particular limb of Section 270A(9) under which the penalty was levied. On this independent ground also, penalty for under-reporting in consequence of misreporting could not survive. The Tribunal accordingly deleted the entire penalty of Rs.1,87,200. However, the assessee’s other challenges to the validity of the penalty proceedings were rejected and the appeal was, therefore, partly allowed.
Cases Discussed
- Hiro Mulchand Tanwani Vs. ITO, ITA No.110/AHD/2026, order dated 15.05.2026 (ITAT Ahmedabad) — Followed. The coordinate Bench held that disallowance of a deduction claimed under Section 80GGC does not by itself establish “misreporting of income” under Section 270A. Where the donation and deduction were disclosed in the return and there was no material establishing false evidence, suppression of facts or deliberate misrepresentation, the higher penalty for misreporting could not be sustained.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. This appeal has been preferred by the Assessee against the Order, dated 09/01/2026, passed by National Faceless Appeal Centre, Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Penalty Order, dated
01/08/2026, passed under Section 270A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment year 2019- 2020.
2. The Assessee has raised the following grounds of appeal:
“1. The Ld. CIT(A) erred in law in upholding the validity of the penalty order passed u/s 270A of the I.T. Act dated 09-01- 2026 despite the same being bad in law, null and void.
2. Ld. CIT(A) erred in law and on facts in not allowing the ground of appeal raised by appellant that the Ld. AO(NFAC) had erred in law and assumed improper jurisdiction by not mentioning in the Assessment Order as well as in penalty notices as to under which limb / clause i.e. (a) to (f) of sub- section (9) of section 270A of the Act, the penalty proceeding was initiated. Even the same is not mentioned in the penalty order passed u/s 270A of the Act.
3. The deduction claimed by appellant u/s 80GGC of the Act represents genuine claim and therefore, Ld. CIT(A) erred in law and on facts in confirming the penalty levied of Rs. 1,87,200/- u/s 270A of the Act which was consequent to the invalid disallowance of the said genuine deduction.
4. Ld. CIT(A) erred in law and on facts in confirming the levy of Rs. 1,87,200/- u/s 270A of the I.T. Act.”
3. The brief facts of the case are that the appellant filed his return of income for the Assessment Year 2019-2020 declaring total income at INR. 20,67,370/- after claiming deduction of INR.3,00,000/- under Section 80GGC of the Act being donation to political party [i.e. Rashtriya Samajwadi Party (Secular)]. Information was circulated within Department after search and seizure action under Section 132 in the cases of these political parties and charitable organizations that group of persons used certain unrecognized political parties to carry out the scam of soliciting bogus donations in the form of donations received from various persons in lieu of commission and ultimately donations are returned back to the original donors. Since the Assessee claimed deduction under Section 80GGC on account of donation to such political party, the Assessing Officer initiated reassessment proceedings under Section 147 of the Act and issued notice under Section 148 of the Act on 24/04/2023. The Assessing Officer completed the assessment by passing an Assessment Order under Section 147/144 of the Act on 15/03/2025 making disallowance of donation of INR.3,00,000/- claimed under Section 80GGC of the Act. Accordingly, the total income of Assessee was assessed at INR.18,92,370/- as against the returned income of INR.15,92,370/-. Consequent to the aforesaid additions, the penalty proceedings under Section 270A of the Act was imitated for under- reporting of income in inconsequence of misreporting. The Assessing Officer vide Penalty Order, dated 23/06/2025, levied the penalty of INR.1,87,200/- under Section 270A of the Act being 200% of the amount of tax payable on income under reported in consequence of misreporting by the Assessee.
4. Aggrieved by the penalty order, the Assessee preferred an appeal before the Learned CIT(A). However, the Learned CIT(A), vide Order, dated 09/01/2026, passed under Section 250 of the Act dismissed the said appeal.
5. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal.
6. When the appeal was taken up for hearing, at the outset, the Authorised Representative for the Assessee submitted that the issue raised by the Assessee in the present appeal stands covered by the decision of the Ahmedabad Bench of the Tribunal. Per Contra, the Learned Departmental Representative relied upon the order passed by the Assessing Officer and the Learned CIT(A).
7. On perusal of the decision of Ahmedabad Bench of the Tribunal in the case ofHiro Mulchand Tanwani Vs. ITO [ITA No.110/AHD/2026, dated 15/05/2026] we find that the Tribunal has held as under:
“3. The assessee challenged the levy of penalty under Section 270A of the Income-tax Act, 1961, contending that the Assessing Officer was not justified in treating the disallowance of deduction claimed under Section 80GGC as a case of “misreporting of income.” The facts reveal that the assessee had filed the return of income for Assessment Year 2019-20 declaring total income of Rs.13,25,710 after claiming deduction of Rs.1,50,000 under Section 80GGC in respect of donation made to a political party, namely Manvadhikar National Party. Subsequently, the assessment was reopened under Section 148 to verify the genuineness of the said donation. In the reassessment completed under Section 147 read with Section 144B, the Assessing Officer disallowed the deduction and assessed the total income at Rs.14,75,710, and thereafter levied penalty of Rs.93,600 under Section 270A on the ground that the assessee had under- reported income in consequence of misreporting.
4. The contention of the Assessing Officer that the assessee had accepted the addition by not filing an appeal against the disallowance cannot, by itself, be a valid basis for concluding that there was misreporting of income. The mere fact that the assessee chose not to challenge the quantum addition due to the relatively small amount involved and in order to avoid prolonged litigation does not amount to an admission of concealment or furnishing of false particulars. It is well settled that penalty proceedings are distinct and independent from assessment proceedings, and the findings in the assessment order are not conclusive for the purpose of levy of penalty. Section 270A draws a clear distinction between “under-reporting of income” and “misreporting of income.” Misreporting is attracted only in specific circumstances enumerated in sub-section (9), such as misrepresentation or suppression of facts, failure to record investments, claiming of expenditure not substantiated by evidence, recording false entries, or failure to report receipts. In the present case, the assessee had duly disclosed the donation in the return of income and claimed deduction under Section 80GGC based on the belief that the payment qualified for deduction. The disallowance arose because the Assessing Officer was not satisfied about the genuineness or eligibility of the donation. However, there is no material on record to establish that the assessee had furnished any false evidence, suppressed any facts, or made any deliberate misrepresentation. A claim of deduction made in the return, even if ultimately found to be inadmissible, does not automatically lead to the conclusion that the assessee has misreported income. Unless the Revenue demonstrates with cogent evidence that the claim was bogus and knowingly made on the basis of false particulars, penalty for misreporting cannot be sustained. At best, the case may fall within the ambit of under-reporting of income, but even that would require the Assessing Officer to establish that the conditions prescribed under Section 270A are satisfied. In the absence of any finding that the assessee deliberately furnished inaccurate particulars or fabricated documents, the higher penalty prescribed for misreporting is not legally tenable. Accordingly, considering that the deduction was claimed transparently in the return of income and that the disallowance was based solely on the Assessing Officer’s adverse view regarding its admissibility, the levy of penalty under Section 270A on misreporting of income is unsustainable in law. The penalty of Rs.93,600 is therefore directed to be deleted.”
8. In the absence of any change in factual matrix and legal proposition, following the above decision of the Co-ordinate Bench of the Tribunal, we delete the Penalty of INR.1,87,200/- levied upon the Assessee under Section 270A of the Act.
9. We also note that the Assessing Officer has failed to specify the limb of Section 270A(9) under which penalty has been levied. For this reason also the levy of penalty for under-reporting in consequence of misreporting cannot be sustained. However, we reject the other contentions raised by the Assessee challenging the validity of the penalty proceedings.
10. In view of the above, all the grounds raised by the Assessee are partly allowed.
11. In terms of paragraph 10 above, the appeal of the Assessee is partly allowed.
Order pronounced on 30.07.2026.
