Kaushal Jugal Taparia Vs DCIT (ITAT Ahmedabad)
Summary : The ITAT Ahmedabad partly allowed the assessee’s appeal and deleted the penalty of ₹41,602 levied under Section 270A of the Income-tax Act, 1961 for Assessment Year 2019-20. The assessee’s deduction of ₹1,00,000 claimed under Section 80GGC in respect of donation to Yuva Jan Jagriti Party had been disallowed during reassessment, following which penalty was imposed at 200% of tax on the alleged under-reported income on the ground of misreporting. The Tribunal noted that both parties agreed the issue was covered by the Ahmedabad Bench decision in Hiro Mulchand Tanwani Vs. ITO. Following that decision, and observing that there was no change in the factual matrix or legal proposition, the Tribunal deleted the penalty. It also recorded that the Assessing Officer had failed to specify the particular limb of Section 270A(9) under which the penalty was levied, and held that, for this reason also, the penalty for under-reporting in consequence of misreporting could not be sustained. Ground No. 1 was allowed, the remaining grounds were dismissed as academic/infructuous, and the appeal was partly allowed.
Ratio. Mere disallowance of deduction claimed under section 80GGC for donation to a political party does not automatically amount to misreporting of income under section 270A(9). In the absence of evidence of false particulars, suppression of facts or deliberate misrepresentation, the enhanced penalty for misreporting cannot be sustained. Further, failure of the Assessing Officer to specify the particular limb of section 270A(9) under which penalty is levied is fatal to the validity of the penalty.
Facts. The assessee filed the return of income claiming deduction of ₹1,00,000 under section 80GGC towards donation to Yuva Jan Jagriti Party. Based on information received pursuant to search proceedings on certain Registered Unrecognised Political Parties (RUPPs), the Assessing Officer reopened the assessment under section 148, alleging that the political party was providing accommodation entries in the guise of donations. The deduction under section 80GGC was disallowed in the reassessment under sections 147/144B and penalty of ₹41,602, being 200% of tax on the alleged under-reported income, was levied under section 270A treating the case as one of misreporting of income. The CIT(A) confirmed the penalty.
Held. Allowing the appeal, the ITAT held that the issue was squarely covered by its earlier decision in Hiro Mulchand Tanwani v. ITO, wherein it was held that mere rejection of a deduction claim does not constitute misreporting of income. The Tribunal observed that the assessee had transparently disclosed the donation in the return of income and claimed deduction under section 80GGC. The addition arose solely because the Assessing Officer doubted the genuineness or admissibility of the claim. There was no material establishing that the assessee had fabricated evidence, suppressed material facts or knowingly made a false claim.
The Tribunal reiterated that penalty proceedings are distinct from assessment proceedings and acceptance of the quantum addition or failure to challenge it cannot, by itself, establish concealment or misreporting. Section 270A clearly distinguishes under-reporting of income from misreporting of income, and the enhanced penalty under section 270A(9) can be imposed only in the specific circumstances enumerated therein, such as misrepresentation, suppression of facts, false entries or claims unsupported by evidence. An unsuccessful claim for deduction, without more, does not fall within those categories.
The Tribunal further held that the Assessing Officer had failed to specify the particular limb of section 270A(9) under which the penalty was imposed. Such failure to identify the statutory basis of the alleged misreporting constituted an independent legal defect rendering the penalty unsustainable.
Final Conclusion. The appeal was partly allowed. The penalty of ₹41,602 levied under section 270A for alleged misreporting of income was deleted. The Tribunal reaffirmed that a disallowance of deduction under section 80GGC, without evidence of deliberate falsity or suppression and without specifying the applicable limb of section 270A(9), cannot justify the enhanced penalty prescribed for misreporting of income.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. This appeal has been preferred by the Assessee against the Order, dated 11/11/2025, 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 07/07/2025, 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 7 grounds all directed against the order of the Learned CIT(A) conforming the levy of penalty of INR.41.602/- under Section 270A of the Act.
3. The brief facts of the case are that the Assessee had filed return of income for Assessment Year 2019-2020 on 12/08/2019 declaring total income of INR.7,13,850/-. The return was processed vide intimation under Section 143(1) of the Act. Subsequently, the Assessing Officer had information that a search action under Section 132 of the Act was conducted on Registered Unrecognized Political Parties (RUPP) in which Yuva Jan Jagriti Party was also covered. It was found that the aforesaid political parties were providing accommodation entries in the form of bogus donations. As per the information the Assessee had obtained accommodation entry of INR.1,00,000/- in the form of donation to political party (i.e. Yuva Jan Jagriti Party) during the previous year relevant to Assessment Year 2019-2020. Reassessment proceedings were initiated in the case of the Assessee and notice, dated 13/04/2023, was issued to the Assessee under Section 148 of the Act. The Assessing Officer passed Assessment Order under Section 147 rws 144 rws 144B of the Act, dated 13/02/2025, assessing total income of INR.8,13,850/- after making addition of INR.1,00,000/- by disallowing the deduction claimed under Section 80GGC of the Act in the original return of income and initiated penalty proceedings under Section 270A of the Act. The aforesaid penalty proceedings culminated into passing of the Penalty Order, dated 07/07/2025, whereby penalty of INR.41,602/- computed @200% of tax on under-reported income of INR.1,00,000/-. The appeal preferred by the Assessee before the Learned CIT(A) did not yield any favourable results as the Learned CIT(A) dismissed the appeal vide order dated 11/11/2025, passed under Section 250 of the Act.
4. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal.
5. When the appeal was taken up for hearing, at the outset, both the sides fairly submitted that the issue raised by the Assessee in the present appeal stands covered by the decision of the Ahmedabad Bench of the Tribunal in the case of Hiro Mulchand Tanwani Vs. ITO [ITA No.110/AHD/2026, dated 15/05/2026] the relevant extract of which reads 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 underreported 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.”
6. In the absence of any change in factual matrix and legal proposition, following the above decisions of the Co-ordinate Benches of the Tribunal, we delete the Penalty of INR.41,602/- levied upon the Assessee under Section 270A of the Act.
7. 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.
8. In view of the above, Ground No. 1 raised by the Assessee is allowed while all the other grounds are dismissed as having been rendered academic/infructuous.
9. In terms of paragraph 8 above, the appeal of the Assessee is partly allowed.
Order pronounced on 30.07.2026.
