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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)/National Faceless Appeal Centre, New Delhi, dated 02.12.2025 arising out of Penalty Order dated 27.06.2025 passed under section u/s 270A of the Act for the Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.That the Ld. CIT (Appeals) erred in confirming the penalty u/s 270A for under reporting of income, although there is no under reporting of income by the appellant.
2.That the Ld. CIT (Appeals) erred in confirming the penalty of Rs.9,11,142/- u/s 270A imposed by the AO, although Ld. AO neither in the assessment order nor in the penalty notices, had not specifically mentioned that under which clause of sec. 270A the case of appellant falls.
The only issue contested by the appellant through the above grounds of appeal is regarding the imposition of penalty u/s 270A of the Act. The ld. Counsel for the assessee narrate the following brief factual matrix of the case. Order u/s 143(3) dated 27.12.2019 was passed in this case by the Ld. Assessing Officer making additions of Rs.2,98,66,092/-. In appeal, the ld. First Appellate Authority deleted all the additions save an addition of Rs.52,65,499/-. The said amount was an amount shown as revenue loss by the appellant suffered on account of damages suffered during vandalism in riot. The appellant did not contest the decision of the ld. CIT(A) any further. The ld. Assessing Officer imposed a penalty of Rs.36,4,568/- u/s 270A of the Act.
It is the case of the appellant assessee that the penalty u/s 270A is untenable as the ld. Assessing Officer has issued an infructuous notice u/s 270A. It has been argued that all the impugned notices dated 27.12.2019, 31.05.2021, 23.07.2021, 21.12.2021 and 06.06.2025 do not specify as to which provision of section 270A(8) r.w.s. 270A(9) of the Act has the assessee violated so as to attract levy of penalty in its case. It has been argued that its only the penalty order where the assessee was reported to have violated provision of section 270A(8) r.w.s. 270A(9)(a) of the Act. It was argued that in the absence of a specific charge prescribed in section 270A(9)(a) to (f) of the Act would not make the assessee exigible for any penalty. The ld. Counsel further argued that on merits also, the assessee does not deserves any imposition of penalty since its claim of damages incurred on account of riots being a capital or revenue expenditure is itself a debatable issue. Reference was invited to decision of Hon’ble Nagpur Tribunal in the case of Ravindra M. Kharche (161 taxmann.com 712) and of this Tribunal in Akum drugs and pharmaceutical Ltd. 175 taxmann.com 135. It was submitted that there is neither any misrepresentation of fact nor any separation thereof so as to attract penalty u/s 270A. The assessee has placed on record a paper book, inter alia, comprising copy of penalty notices issued to it.
The ld. DR placed reliance on the order of the lower authorities.
We have heard rival submissions in the light of material placed on record. Upon perusal of impugned penalty notices u/s 270A right from 27.12.2019 till 06.06.2025, we have noted that there is no specification of specific provision of section 270A(9), which has been violated by the assessee. Provisions of section 270A(9)(a) to (f) of the Act are in the nature of specific charges upon which a taxpayer can be confronted for suppression or misrepresentation of facts and for the misconduct of misreporting of income. We have noted that in absence of any specific charges indicated in the penalty notices, the Revenue has lost any authority to impose any penalty on the assessee. We have also noted from the order of the lower authorities that the issue of the impugned claim of expenses being capital or revenue is a debatable issue indeed.
On the issue of necessity to indicate specific charges, we have noted the decision of Hon’ble Delhi High Court in the case of SCHNEIDER ELECTRIC SOUTH EAST ASIA (HQ) PTE LTD as at 145 taxmann.com 665 observing as under:-
“….6. Having perused the impugned order dated 09th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated.
7.This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary….”
Further, this Tribunal in the case of B.R. Agrotech Ltd. in ITA No.8970/DEL/2025 vide order dated 10.06.2026 held as under :-
“……4. The ld. Counsel for the assessee argued that no case of maintainability of any penalty for under reporting of income has been made out in its case. It was argued that it is trite law that whenever there is a case of debatable issue, no penalty can be imposed. Reliance was placed upon the decision of Hon’ble Apex Court in the case of Reliance Petro Products 189 taxmann 322, Dhanuka Agritech Ltd. as at ITA No.1794/Del/2023 and in the case of Jubiliant Securities Pvt. Ltd. as at ITA No.2545/Del/2022 of Delhi Tribunal. Thus, it was argued that no penalty is leviable in respect of claims of expenditure which are debatable in nature. The ld. Counsel argued that the debatable issue was whether the expenditure has to be claimed on the basis of provision of expenditure or payment of expenditure.
5.The ld. DR placed reliance upon the order of the lower authorities.
6.Heard rival parties perused the material available on records. We find force in the argument of the assessee that no penalty is leviable in case of debatable entries. As per facts of the case, the Form 3CD report showed that the auditor had disallowed the expenditure of leave encashment. However, while filing the ITR, the assessee did not follow auditor’s recommendation and incorrectly claimed the expenditure. It is settled principle of law that a mens rea has to be established while invoking penal provisions. We have noted that in the present case, the Revenue has failed to establish any mens rea which can attach the blame of penalty upon the assessee. Accordingly, in the interest of justice, we deem it appropriate to set-aside the order of the ld. CIT(A) and quash the penalty order dated 13.02.2025. All the grounds of appeal of the assessee are therefore allowed.
7.In the result, the appeal of the assessee is allowed. ….”
We have noted that the facts of the present case are identical to those in the judicial precedents discussed hereinabove. Accordingly, in respectful to the same, we delete the penalty u/s 270A imposed by the ld. Assessing Officer and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.