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Judgment
Per Renu Jauhri, Accountant Member:
The above captioned appeal is preferred by the assessee against the order dated 18.08.2025, passed by CIT(A)/NFAC u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for A.Y. 2019-20.
The assessee has raised following grounds of appeal:
"1.1That on the facts and circumstances of the case, the Lei. CIT(A) was not justified in deciding the appeal ex-parte without affording proper and reasonable opportunity of being heard.
1.2That the impugned order has been passed in contravention of principles of natural justice and same is illegal and bad in law.
2.1That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the penalty of Rs.4,35,343/- u/s 270A of the Act on the alleged ground of under-reporting of Income without appreciating the bonafide facts of the case.
2.2That the penalty being in respect of trading addition of Rs. 27,90,665/- made on estimate basis by applying ad-hoc net-profit rate of 5%, there is no case of under-reporting of income in terms of section 270A of the Act.
3.That in the absence of valid approval u/s 274(2) of the Act, the Id. CIT(A) was not justified in upholding the validity of the order passed u/s 270A of the Act.
4.That the CIT(A) has grossly erred in confirming imposition of penalty u/s 270A of the Act which is not sustainable on facts and bad in law."
Brief facts of the case are that the assessment u/s 144 r.w.s. 147 was made at an income of Rs.27,90,655/- after making addition @ 5% of total business receipts of Rs.5,58,13,102/- vide order dated 21.03.2024. Penalty proceedings u/s 270A were also initiated for under-reporting of income. The assessee filed an application on 18.04.2024 for immunity from imposition of penalty u/s 270AA of the Act. The assessee's application was rejected on the ground that the assessment was made u/s 144 and hence it was not eligible for grant of immunity u/s 270AA of the Act. Thereafter, Id. AO proceeded to levy the penalty for under-reporting of income @ 50% of the tax sought to be evaded (Rs.8,70,686/-). Accordingly, penalty of Rs.4,35,343/- has been imposed by the AO u/s 270A for under-reporting vide order dated 25.09.2024.
We have heard the rival submissions and perused the material available on record. We note that the Id. AO has imposed the penalty for under-reporting without specifying the clause of section 270A(2) vide which the assessee has been considered to have under-reported his income. We further note that the income stated to be under-reported has been computed on estimate basis by applying rate of 5% on gross business receipts. Under sub-section (6) of section 270A, it has been provided the under-reported income shall not include estimated income in certain specified circumstances. There is no discussion in the penalty order as to how the assessee’s case is not covered by the provisions of sub-section (6) of section 270A. After considering the totality of facts and circumstances, we are of the considered view that the penalty for under-reporting of income computed on estimate basis is not justified and the same is hereby deleted.
In the result, appeal of the assessee allowed.