ITO Vs Parag Chandulal Parikh (ITAT Ahmedabad)
Section 270A: “Misreporting” Needs a Specific Charge, Not Just a Withdrawn Donation
₹37,440 Penalty Deletion Upheld
The Ahmedabad Tribunal has upheld deletion of a ₹37,440 penalty under Section 270A imposed after the assessee withdrew a ₹90,000 political-donation deduction under Section 80GGC in his reassessment return.
The Tribunal found that the Assessing Officer had neither explained how the assessee had misreported income nor identified the specific sub-clause of Section 270A(9) attracting the penalty.
Following earlier coordinate Bench decisions, it held that withdrawal or disallowance of a deduction cannot automatically establish under-reporting in consequence of misreporting. The Revenue’s appeal was dismissed.
Political Donation Led to Reassessment
The assessee originally filed his return for AY 2019-20 declaring total income of ₹7,75,230, after claiming a deduction of ₹90,000 for a donation to Rashtriya Samajwadi Party (Secular).
Following search proceedings concerning political parties and charitable organisations, information circulated within the Department alleged that certain unrecognised political parties were being used to provide accommodation entries through bogus donations.
The alleged mechanism involved receiving donations through banking channels and returning the money to donors after deducting commission.
Since the assessee had claimed a deduction for a donation to one of the parties concerned, the Assessing Officer initiated reassessment and issued a notice under Section 148.
Deduction Withdrawn in the Reassessment Return
In response, the assessee filed a return declaring total income of ₹8,65,230, withdrawing the ₹90,000 deduction claimed in the original return.
The Assessing Officer completed reassessment under Section 147 read with Section 144B on 13 December 2024, accepting the income disclosed in that return.
He then initiated penalty proceedings in respect of the original deduction and imposed a ₹37,440 penalty on 13 June 2025.
The CIT(A) deleted the penalty. The Revenue challenged that relief before the Tribunal, contending that the assessee had knowingly claimed a bogus deduction involving a political party engaged in accommodation-entry activities.
Penalty Requires Its Own Examination
The Tribunal followed Hiro Mulchand Tanwani Vs ITO, ITA No. 110/AHD/2026, dated 15 May 2026.
That decision concerned a political-donation deduction disallowed during reassessment, followed by a penalty for misreporting. It emphasised that assessment and penalty proceedings are distinct, and the findings in the assessment order are not conclusive for imposing penalty.
Acceptance of an addition, including a decision not to challenge it, does not by itself amount to an admission that false particulars were furnished. An assessee may choose to avoid further litigation for practical reasons.
The relevant enquiry remains whether the evidence establishes the statutory circumstances attracting the penalty actually imposed.
Under-Reporting and Misreporting Are Different
The reasoning reproduced by the Tribunal highlighted the distinction drawn by Section 270A between under-reporting of income and misreporting of income.
Misreporting is linked to the circumstances enumerated in Section 270A(9), including misrepresentation or suppression of facts, failure to record investments, unsupported expenditure claims, false entries and failure to report receipts.
The earlier decision held that a deduction disclosed in the return, even if ultimately found inadmissible, does not automatically become a misreported claim.
It required cogent evidence establishing the basis for treating the claim as bogus and knowingly made on false particulars. It also recognised that any penalty for under-reporting would independently require satisfaction of the relevant statutory conditions.
Assessing Officer Failed to Identify the Default
Apart from following the earlier decisions, the Tribunal identified a specific deficiency in the present penalty order.
The CIT(A) had observed that the Assessing Officer did not explain the manner in which the assessee had under-reported or misreported income, and had imposed the penalty without giving reasons.
The Tribunal further recorded that the Assessing Officer had not specified the particular sub-limb of Section 270A(9) under which the misreporting penalty was levied.
This omission mattered because the provision identifies distinct circumstances. A conclusion labelled “misreporting” must be supported by findings connecting the assessee’s conduct to the applicable statutory default.
Earlier Decisions Followed; Revenue Appeal Dismissed
The Tribunal noted that Hiro Mulchand Tanwani had also been followed in Siddharth Laxmikant Vaderkar Vs ITO, ITA No. 1072/AHD/2026, dated 7 July 2026.
Finding no change in the factual matrix or legal proposition warranting departure, it upheld the CIT(A)’s deletion of ₹37,440 and dismissed the Revenue’s appeal.
The order concerns the penalty. It does not restore the ₹90,000 deduction withdrawn in the reassessment return.
Author’s Comments
The significant feature of this decision is the absence of a reasoned, specific finding of misreporting. Information concerning the recipient political party and withdrawal of the deduction did not dispense with that requirement.
In practice, a Section 270A penalty order should be examined for the precise charge, the evidence relied upon and the connection between that evidence and the applicable clause of sub-section (9).
This decision does not grant blanket protection to false donation claims. It requires the Revenue to establish the statutory default before imposing the corresponding penalty.
A deduction may be withdrawn. “Misreporting” must still be identified, explained and supported by evidence.
Cases Discussed
- Hiro Mulchand Tanwani Vs ITO, ITA No. 110/AHD/2026, ITAT Ahmedabad, dated 15/05/2026 — Followed. The Tribunal had held that acceptance of a disallowance does not by itself establish misreporting and that penalty proceedings require independent satisfaction of the conditions prescribed under Section 270A.
- Siddharth Laxmikant Vaderkar Vs ITO, ITA No. 1072/AHD/2026, ITAT Ahmedabad, dated 07/07/2026 — Followed as a coordinate Bench decision applying Hiro Mulchand Tanwani in a Section 270A political-donation penalty matter.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Revenue against the Order, dated 18/12/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had partly allowed the appeal against the Penalty Order, dated 13/06/2025, passed under Section 270A of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2019-2020.
2. The Revenue has raised the following grounds of appeal:
1. The Ld.CIT(A) has erred in law and on facts in deleting the Penalty of Rs.37,440/- made by the Assessing Officer u/s 270A of the Act for misreporting of income, without appreciating that the assessee had knowingly claimed a bogus deduction of Rs. 90,000/- u/s 80GGC of the Act as the Rashtriya Samajwadi Party (Secular) is registered unrecognized political party (RUPPs), which was covered in search action, and it has been established to a bogus entity engaged in providing accommodation entries u/s 80GGC, and returned the donation in cash in lieu of certain commission.
3. The brief facts of the case are that the Assessee filed his return of income for the Assessment Year 2019-2020 declaring total income at INR.7,75,230/- after claiming deduction of INR.90,000/- 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. In response, the Assessee filed return of income declaring total income at INR.8,65,230/- thereby withdrawing the deduction of INR.90,000/- claimed under Section 80GGC of the Act in the original return of income. The Assessing Officer completed the assessment by passing an Assessment Order under Section 147/144B of the Act on 13/12/2024 accepting the income declared in the return of income filed under Section 148 of the Act. In respect of deduction claimed by the Assessee under Section 80GGC of the Act in the original return of income, the Assessing Officer initiated penalty proceedings under Section 270A of the Act and vide Order, dated 13/06/2025, levied the penalty of INR.37,440/-under Section 270A of the Act.
4. Aggrieved by the penalty order, the Assessee preferred an appeal before the Learned CIT(A). Vide Order, dated 18/12/2025, the Learned CIT(A) deleted the penalty levied under Section 270A of the Act and allowed dismissed the said appeal.
5. Being aggrieved, the Revenue has preferred the present appeal before the Tribunal.
6. We have heard the Learned Departmental Representative and have perused the material on record.
7. During the course of hearing it was pointed out that the issue raised by the Revenue 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 read 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. The above decisions was followed by the Co-ordinate Bench of the Tribunal in the case of Siddharth Laxminkant Vaderkar Vs. Income Tax Officer, Ward 4(2)(3) Ahmedabad [ITA No. 1072/AHD/2026, Dated 07/07/2026]. In the absence of any change in factual matrix and legal proposition, we find no reason to depart from the view taken by Co-Ordinate Benches of the Tribunal.
9. Further, we note the Learned CIT(A) has observed that the Assessing Officer has not mentioned the way in which the assessee has misreported or underreported the income; and has simply levied the penalty without giving any reason. We note that in the present case, the Assessing Officer has not specified specific sub-limb of Section 270A(9) of the Act under which penalty has been levied for underreporting of income in consequence of misreporting.
10. In view of the above, following the above decisions of the Co-ordinate Benches of the Tribunal, we decline to interfere with the order passed by the Learned CIT(A) deleting the Penalty of INR.37,440/- levied upon the Assessee under Section 270A of the Act. Accordingly, all the grounds raised by the Revenue are dismissed.
11. In the result, the present appeal preferred by the Revenue is dismissed.
Order pronounced on 30.09.2026
