Vague Section 270A(9) Penalty Notice Invalidates ₹3.99 Lakh Penalty: ITAT Jaipur

Jagdish Chandra Sharma Vs ITO (ITAT Jaipur)

Summary: The Income Tax Appellate Tribunal (ITAT), Jaipur SMC Bench, in Jagdish Chandra Sharma Vs ITO, allowed the assessee’s appeal and quashed a penalty of Rs. 3,99,784/- imposed under Section 270A of the Income Tax Act, 1961, for Assessment Year 2018-19. The assessee had filed a return of income on 25.04.2022 in response to a notice under Section 148, and the Assessing Officer completed reassessment on 10.03.2023 by accepting the returned income. Nevertheless, penalty proceedings were initiated for under-reporting of income in consequence of misreporting, and a penalty of Rs. 3,99,784/-, representing 200% of the tax amount of Rs. 1,99,892/-, was imposed. The National Faceless Appeal Centre, Delhi, confirmed the penalty through its order dated 28.12.2025.

Before the Tribunal, the assessee challenged the penalty principally on the ground that the income disclosed in response to the reassessment notice had been accepted without any addition or variation. It was contended that, in the absence of any difference between returned and assessed income, the essential conditions for invoking Section 270A were not satisfied. The assessee further argued that the Assessing Officer had failed to identify the precise statutory charge in the penalty notice issued under Section 274 read with Section 270A. The notice did not specify which clause of Section 270A(9) was alleged to have been violated. The Tribunal also observed that the assessment order did not record proper satisfaction identifying the relevant category of misreporting.

Relying on the Rajasthan High Court decision in G.R. Infraprojects Limited Vs ACIT, the Delhi ITAT ruling in Greenwoods Govt. Officers Welfare Society Vs DCIT, and the Delhi High Court decision in GE Capital US Holdings Inc Vs DCIT, the Tribunal held that failure to communicate the specific statutory limb under which an assessee is proposed to be penalised vitiates the penalty proceedings. The Bench concluded that the Assessing Officer had neither identified the applicable clause of Section 270A(9) while recording satisfaction nor specified it in the penalty notice. Accordingly, the penalty confirmed by the CIT(A) was held unsustainable and quashed, and the assessee’s appeal was allowed.

Cases Discussed

• G.R. Infraprojects Limited Vs Assistant Commissioner of Income Tax (Rajasthan High Court); D.B. Civil Writ Petition No. 5594/2023; 02/01/2024. The Tribunal relied on this decision for the principle that failure to specify the relevant part of Section 270A(9) makes initiation of misreporting penalty proceedings legally unsustainable.
• Greenwoods Govt. Officers Welfare Society Vs DCIT; (2024) 160 taxmann.com 105 (ITAT Delhi); ITA No. 609/Del/2023; 26/10/2023. The coordinate Bench decision was relied upon for deletion of penalty where the relevant statutory limb had not been specified.
• GE Capital US Holdings Inc Vs DCIT; (2024) 163 taxmann.com 146 (Delhi High Court); W.P.(C) 3312/2022; 31/05/2024. The Tribunal relied upon the Delhi High Court’s reasoning concerning the requirement to identify the specific statutory charge in proceedings involving alleged misreporting of income.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

The Appellant, Jagdish Chandra Sharma (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 28.12.2025 passed by the National Faceless Appe4al Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] confirming the penalty of Rs. 3,99,784/- u/s 270A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) qua assessment year 2018-19 on the grounds inter-alia that:-

“1. That the order passed by the Ld. Commissioner of Income Tax (Appeals) confirming the penalty levied u/s 270A of the Income Tax Act, 1961 is illegal, arbitrary and contrary to the provisions of law and facts on record.

2. That the Ld. Authorities below erred in levying and sustaining penalty u/s 270A despite the fact that the income returned by the assessee in response to notice issued u/s 148 was fully accepted in the assessment framed u/s 147/148 and no addition or variation whatsoever was made by the Assessing Officer.

3. That in absence of any difference between the returned income and assessed income, there is no “under-reported income” as defined under section 270A(2) read with section 270A(3), and therefore levy of penalty is without jurisdiction.

4. That the essential condition precedent for initiation of penalty proceedings u/s 270A, namely existence of “under-reported income” or “misreported income”, is not satisfied in the present case, hence the penalty order deserves to be quashed.

5. That the Ld. Authorities failed to appreciate that once the income declared in return filed u/s 148 has been accepted in toto, the assessment does not result in any enhancement of income and therefore computation mechanism under section 270A fails.

6. That the penalty proceedings initiated are mechanical in nature and without recording proper satisfaction as required under law.

7. That the provisions of section 270A being penal in nature must be strictly construed and cannot be invoked in absence of clear finding of under-reporting.

8. That the penalty order is bad in law and deserves to be deleted in entirety.

9. The appellant craves leave to add, amend, alter or withdraw any of the grounds of appeal on or before the date of hearing.”

2. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are : During the initiation of reopening proceedings a notice u/s 148 of the Act was issued to the assessee on 30.032022 and in response thereto assessee has filed return of income declaring total income at Rs. 12,91,900/- on 25.04.2022 for A.Y. 2018-19. On the basis of completed assessment vide order dated 10.03.2023 penalty proceedings u/s 270A of the Act were initiated for underreporting of the income, resulting into misreporting for which show cause notice was issued. On failure of the assessee to respond, penalty has been levied to the tune of Rs. 3,99,784/- being 200% of tax payable i.e. Rs. 1,99,892/- u/s 270A of the Act.

3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal, who has confirmed the penalty levied by the AO. Feeling aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.

4. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file.

5. Undisputedly, in response to the notice u/s 148 of the Act, the assessee declared total income at Rs. 12,71,900/-, which was accepted by framing assessment u/s 143(3) r.w.s. 147 r.w.s. 144B of the Act. It is also not in dispute that on filing revised return by the assessee, which was accepted in toto, no revenue loss has been accrued to the Revenue department. Ld. AR for the assessee challenging the impugned penalty order contended that the assessee has not been made aware by the AO while issuing penalty notice u/s 274 r.w.s. 270A of the Act as to under which of the limb of section 270A of the Act, the assessee is going to be charged.

6. In the backdrop of the aforesaid undisputed facts and the contention raised by the Ld. AR for the assessee the sole question arises for determination in this case “as to whether penalty proceedings were initiated u/s 270A of the Act stood vitiated on account of vague and ambiguous notice not specifying a particular limb of section 274 of the Act.”

7. For ready perusal penalty notice issued u/s 274 r.w.s. 270A is extracted for ready perusal as under:-

8. Bare perusal of the penalty notice issued to the assessee shows that it is not recorded therein as to under which part of section 270A(9) of the Act, the assessee is going to be charged/penalized. Similarly when we see the assessment order again proper satisfaction has not been recorded by the Assessing Officer as to under which part of Section 270A(9) of the act stood violated.

9. It is settled principle of law that when the assessee has not been informed as to under which the provisions of the Act, he is going to be charged/penalized subsequent penalty proceedings are vitiated.

10. The Hon’ble High Court of Rajasthan at Jodhpur incase of G.R. Infraprojects Limited vs. ACIT, D.B Civil Writ Petition No. 5594/2023 vide order dated 02.01.2024, decided the identical issue by holding that when the Assessing Officer has failed to specify that which part of sub-section (9) of Section 270A is attracted in the case of petitioner-company, the said initiation is nonest.

11. The Coordinate Bench of Tribunal has also decided an identical issue in the case cited as Greenwoods Govt. Officers Welfare Society vs. DCIT 160 taxmann.com 105 (2024) (ITAT Delhi) by deleting the penalty on the grounds that when limb has not been specified penalty is not sustainable.

12. Similarly Hon’ble Delhi High Court in case of GE Capital US Holding INC (2024) 163 taxmann.com 146 (Delhi) also held that when the show cause notice does not specify the limb under which assessee is being charged/penalized order is liable to be quashed.

13. In view of what has been discussed above, we are of the considered view that the Assessing Officer has failed to record the satisfaction while framing assessment as to under which of the limb, the assessee is going to be penalized and he has further failed to specify in the notice issued u/s 274 r.w.s. 270A as to under which part of proceedings u/s 270A(9) of the Act, which makes the entire penalty proceedings vitiated, hence the impugned penalty levied by the AO and confirmed by the Ld. CIT(A) is not sustainable, hence quashed.

14. Resultantly, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 23-09-2026 .