Siddharth Laxmikant Vaderkar Vs ITO (ITAT Ahmedabad)
Summary: ITAT Ahmedabad deleted penalty of ₹97,362 levied under Section 270A for alleged under-reporting of income in consequence of misreporting arising from disallowance of a Section 80GGC deduction. The assessee, an individual, had filed his return for AY 2019-20 declaring income of ₹4,12,060 and claimed deduction of ₹3,00,000 for a donation to “Rashtriya Samajwadi Party (Secular)”. The assessment was subsequently reopened under Section 147 and, by reassessment order dated 10.12.2024, the AO disallowed the deduction alleging that the donation was bogus. Although the assessee maintained that the donation was genuine and supported by documentary evidence, he did not challenge the reassessment in order to avoid prolonged litigation.
The AO thereafter imposed penalty at 200% of tax payable, amounting to ₹97,362, treating the case as misreporting of income. CIT(A)/NFAC dismissed the assessee’s appeal on 06.01.2026. Before the Tribunal, both sides agreed that the issue was covered by Hiro Mulchand Tanwani Vs ITO, ITA No.110/Ahd/2026, dated 15.05.2026. In that decision, the Ahmedabad Tribunal held that failure to challenge a quantum addition does not by itself constitute an admission of concealment or false particulars; penalty proceedings remain distinct from assessment proceedings. Section 270A distinguishes under-reporting from the specific instances of misreporting enumerated in sub-section (9).
A deduction transparently claimed in the return, even if subsequently disallowed, does not automatically establish misrepresentation, suppression of facts or deliberate furnishing of false particulars. Higher penalty for misreporting requires cogent material establishing the prescribed misconduct. Finding no change in the factual matrix or legal proposition from Hiro Mulchand Tanwani, the Tribunal followed that decision and deleted the entire Section 270A penalty. The assessee’s appeal was accordingly allowed.
Cases Discussed
- Hiro Mulchand Tanwani Vs ITO, ITA No.110/Ahd/2026, order dated 15.05.2026 (ITAT Ahmedabad) — Followed. Non-filing of an appeal against disallowance of a Section 80GGC deduction does not by itself establish misreporting. Where the deduction was transparently claimed and Revenue failed to establish false evidence, suppression or deliberate misrepresentation, penalty under Section 270A for misreporting was unsustainable.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi order dated 06.01.2026 relevant to Assessment Year 2019-20.
2. The assessee has raised the following grounds of appeal:
1. In law and in the facts and circumstances in the case of the Appellant, the order passed under section 250 of the Act is erroneous and invalid and deserves to be quashed as the same is in violation of principles of natural justice.
2. In law and in the facts and circumstances in the case of the Appellant, the CIT(A) has erred in not considering that the reassessment order passed by AO was “bad in law” since the notice under section 148 was issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessment Centre, violating Section 151A and CBDT Notification No. 18/2022, thus consequential penalty order u/s 270A was also bad in law.
3. in law and in the facts and circumstances in the case of appellant, the Ld. CIT(A) has erred in allowing the levy of penalty of Rs. 97,362/-when no penalty can be levied as the case of the appellant.
4. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of appeal.
3. The brief facts of the case are that the appellant, an individual, filed the return of income for Assessment Year 2019-20 on 26.07.2019 declaring a total income of ₹4,12,060/- vide Acknowledgement No. 711807550260719. In the said return of income, the appellant claimed deduction under section 80GGC of the Income-tax Act, 1961 amounting to ₹3,00,000/- in respect of a donation made to “Rashtriya Samajwadi Party (Secular)”. Subsequently, the assessment was reopened under section 147 of the Act. The Assessing Officer completed the reassessment vide order dated 10.12.2024 and disallowed the deduction claimed under section 80GGC amounting to ₹3,00,000/- on the allegation that the donation made to the aforesaid political party was bogus in nature. Consequently, the Assessing Officer initiated penalty proceedings under section 270A of the Act on the ground of under-reporting of income in consequence of misreporting. The assessee submits that the donation was genuine and duly supported by all relevant documentary evidence. However, with a view to buying peace and avoiding prolonged litigation, the appellant did not challenge the reassessment order passed under section 147 of the Act. During the penalty proceedings, the appellant reiterated that the donation was genuine and contended that no penalty was leviable under section 270A of the Act. The Assessing Officer, however, did not accept the appellant’s explanation and, vide penalty order dated 27.06.2025, levied penalty under section 270A at 200% of the tax payable, amounting to ₹97,362/-.
4. Aggrieved by the penalty order, the appellant preferred an appeal before the learned Commissioner of Income-tax (Appeals). However, the learned CIT(A), vide order passed under section 250 of the Income- tax Act dated 06.01.2026, dismissed the appeal.
5. At the outset, both the parties fairly submitted that the issue raised by the assessee in the present appeal stands covered by the order of the Tribunal in the case of Hiro Mulchand Tanwani Vs. ITO for A.Y 2019-20 in ITA No.110/Ahd/2026 dated 15.05.2026. For the sake of ready reference, the operative portion of said order is reproduced 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…”
In the absence of any change in factual matrix and legal proposition brought to our notice, the penalty levied under section 270A of the Act is hereby deleted.
6. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 07.07.2026.
