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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)-26, New Delhi, dated 24.12.2025, arising out of penalty order dated 22.03.2025 passed under section u/s 270A of the Act for the Assessment Year 2022-23. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.The Ld. CIT(A) has erred on facts and in law in confirming the penalty order passed by the AO by treating the sum of Rs. 1,17,69,000/- which was duly reported in the ITR to be income sought to be evaded.
2.The Ld. CIT(A) has erred on facts and in law in dismissing the appeal of the appellant by confirming the order of the AO and treating the sum of Rs. 1,17,69,000/- to be under reported income within the meaning of section 270A(2) of the Income Tax Act and has further erred in confirming levy of penalty of Rs. 12,83,998/- on the same as per section 270A(7) of the Act.
3.The Ld. CIT(A) has erred on facts and in law in grossly mis-interpretating provisions of section 270A of the Income Tax Act.
The only issue arising in the present appeal is the action of ld. CIT(A) in confirming the penalty order u/s 270A(2) of the Act of Rs.12,83,998/-. As per brief factual matrix of the case, the assessee had filed its Return of Income on 04.11.2022, declaring income of Rs.8,43,02,530/-. The ld. Assessing Officer assessed the same u/s 143(3) vide his order dated 22.03.2025. Through the impugned assessment order, the ld. Assessing Officer proceeded to modify the tax rates applicable on interest income of the minor amounting to Rs.1,17,69,000/-clubbed in his hand. While doing so the ld. Assessing Officer denied the appellant benefit of reduced rate of taxation as per India UAE treaty. The ld. Assessing Officer also denied the assessee TDS credit of Rs.2,62,824/- on the premise that corresponding rental income has not been offered. The ld. Assessing Officer proceeded to levy penalty u/s 270A of the Act vide his order dated 22.03.2025 amounting to Rs.12,83,998/-. The ld. CIT(A) confirmed the penalty order of ld. Assessing Officer.
Heard, perused the materials available on records.
It is the case of the ld. Counsel for the assessee, Shri Sudesh Garg, that as the returned income and assessed income are same, there cannot be any case for invocation of penal provisions u/s 270A for under reporting and/or misreporting of income. It was contended that the issue involves mere curtailment of tax rates and no case for any under reporting or misreporting of income has been made out.
The ld. DR placed reliance upon the orders of the lower authorities.
Section 270A of the Act mandates imposition of penalty upon a tax payer in proven cases of under reporting or misreporting of income. We have noted that in the present case by virtue of the returned income and assessed income being the same is not made out. The issue is merely the tax rates applicable on account of tax treaty between India and UAE qua which minors income was clubbed in appellant’s hand. As regards the claim of extra TDS, we have noted from the explanation of the assessee extracted on page-2 of the assessment order that the same also does not suffers from any major lacuna.
Accordingly, we are of the considered view that in the interest of justice, no case for any penalty u/s 270A for under reporting and/or misreporting of income is made out. Accordingly, we set-aside the order of lower authorities and direct the ld. Assessing Officer to delete the penalty u/s 270A imposed vide his order dated 22.03.2025.
In the result, the appeal of the assessee is allowed.