Kshitij Interiors Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Survey Disclosure Accepted in Return Cannot Trigger Section 270A Penalty: ITAT Mumbai Deletes 200% Misreporting Penalty
The Mumbai ITAT (“E” Bench) allowed the appeal of Kshitij Interiors Pvt. Ltd. for AY 2017-18 and deleted the penalty of ₹1.03 crore levied under section 270A(8) for alleged misreporting of income.
A survey under section 133A was conducted during the relevant previous year, during which the assessee disclosed cash receipts of ₹1.56 crore. The assessee subsequently offered this amount to tax in its return of income filed within the statutory time. The assessment under section 143(3) accepted the returned income without any addition, though the Assessing Officer initiated penalty proceedings on the premise that the income was disclosed only because of the survey.
The Tribunal held that when the assessed income is not greater than the returned income, the foundational requirement of “under-reported income” under sections 270A(2) and 270A(3) is not satisfied. It further held that mere disclosure of income during survey, followed by its inclusion in the return and acceptance in assessment, does not constitute “misreporting” within the meaning of section 270A(9), in the absence of any false entry, suppression of facts, or other ingredients specified in clauses (a) to (f) of section 270A(9).
The ITAT also found the initiation of penalty proceedings to be vitiated by vagueness, as the Assessing Officer failed to specify whether penalty was initiated for under-reporting or misreporting, despite materially different consequences under the two limbs.
Placing reliance on the Gujarat High Court decision in PCIT v. Prafulbhai Vallabhdas Fuletra and noting the absence of any contrary binding precedent, the Tribunal held that the penalty under section 270A(8) was unsustainable in law. Accordingly, the penalty was deleted and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the assessee against the order dated 17.09.2025 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year 2017–18, whereby the learned CIT(A) confirmed the penalty of Rs. 1,03,15,656/- levied by the Assessing Officer under section 270A(8) of the Act.
