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Judgment
PER MAHAVIR SINGH, VP:
This appeal by the assessee is emanating from the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred as CIT(A)), dated 10.3.2026. Penalty was framed by the Assessment Unit vide order dated 09.09.2024 u/s 270A of the Income Tax Act, 1961 (hereinafter referred as “Act”) relevant to assessment year 2022-23.
Heard both the parties at length and perused the records.
It emerges at the outset that the assessee’s instant appeal raises the first and foremost legal issue of the validity of the impugned section 270A penalty itself for the precise reason that the Assessing Officer in the penalty order dated 9.09.2024 nowhere specified the corresponding limbs in clauses (a) to (f) to sub-section 9 read with subsection (8) thereof. His case in other words is that the Assessing Officer has failed to comply with the rigor of section 270A(8) and (9) (a to f) before concluding that the assessee committed any default of under-reporting of income as a consequence to misreporting.
Learned DR relied upon the orders of the authorities below.
Considered the rival submissions and material placed on record. A perusal of the provisions of section 270A of the Act reveals that it identifies two different set of defaults for attracting penalty, both inviting different quantum of penalty. The section recognized underreporting of income as one default attracting penalty @ 30% of the tax payable on the underreported income and the other default attracting penalty @200% of the tax payable on such income. While sub-section (1) to (7) of section 270A deal with underreporting of income, sub section (8) & (9) dealt with underreporting as a consequence of misreporting. This is evident from a bare perusal of the provisions of section 270A of the Act. It is noted that the provisions of law identified two separate set of defaults, it was incumbent on the AO to identify the specific default committed by the assessee, the present being penalty proceedings. However, the AO himself was not sure of the default committed by the assessee. Section 270A(9) of the Act specifically identifies the circumstances of misreporting as a consequence of under-reporting in Clause (a) to (f) as under:-
“(9)The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:-
(a)Misrepresentation or suppression of facts;
(b)Failure to record investments in the books of account;
(c)Claim of expenditure not substantiated by any evidence;
(d)Recording of any false entry in the books of account
(e)Failure to record any receipt in books of account having a bearing on the total income; and
(f)Failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.”
We observed that the AO in his penalty order does not pin point which specific case is fulfilled in the assessee’s case. Therefore, we hold that it was not even a case fit for levy of penalty for misreporting as a consequence of under reporting. This view is supported by the decision of the Hon’ble Delhi High Court in the case of Schneider Electric South Asia Ltd. Vs. ACIT (2022) 443 ITR 186 (Del) and the very recent decision of the Agra Bench of the Tribunal in the case of Sonal Jain vs. ITO dated 16.6.2026 passed in ITA No. 135/Agr/2026 (AY 2017-18). Thus, respectfully following the aforesaid precedents, the impugned penalty of Rs.80,050/-stands deleted in very terms. We hold and direct accordingly.
In the result, the assessee’s appeal is allowed.
Order pronounced in the Open Court on 08.09.2026.