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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [‘CIT(A)’ in short] dated 23.01.2026 arising from the penalty order dated 24.07.2024 passed u/s 270A of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the Assessment Unit for the A.Y. 2019-20.
The following grounds raised by the assessee, which reads as under:
1.“The Ld. CIT(A) erred in confirming penalty u/s 270A despite the fact that the income returned by the appellant was accepted without any variation, and hence there was no under-reporting of income.
2.The Ld. CIT(A) erred in law in invoking provisions of section 270A merely on the ground that return was filed u/s 148, without appreciating that penalty can be levied only on under-reported income.
3.The Ld. CIT(A) erred in confirming penalty on the entire assessed income instead of restricting it to the alleged under-reported income, which in the present case is NIL.
4.The Ld. CIT(A) failed to appreciate that the appellant is a salaried employee and tax was already deducted at source, and non-filing of return was due to a bona fide belief, hence penalty is not leviable.
5.The order passed by the Ld. CIT(A) is arbitrary and unsustainable as it confirms penalty without any finding of concealment or misreporting of income.
6.The appellant craves leave to add, amend or alter any ground at the time of hearing.”
Brief facts of the case are that the assessee is a salaried employee. The assessee could not file the return of income under section 139(1) of the Act. The TDS however, was deducted by the employer and the entire salary income was duly reflected in Form No.16 as well as Form No.26AS. Since no return was filed, notice under section 148 was issued, in response to which the assessee filed the return of income declaring total income of Rs.33,52,516/-. Thereafter, assessment was completed under section 143(3)/147 without making any addition or disallowance. Subsequently, the AO levied penalty of Rs.15,61,572/- under section 270A by treating the entire returned income as “misreported income”.
Upon appeal, the ld. CIT(A) upheld the penalty and dismissed the assessee’s appeal by observing that “the levy of penalty from the prism of provisions under the statute is valid, as per law and cannot be interfere with”. Aggrieved assessee is now in appeal before us.
At the outset, learned Counsel for the assessee stated that the assessee was earning salary income but had failed to file return of income. The income declared in the return filed under section 148 of the Act was accepted by the AO and no addition was made. The Learned Counsel also stated that since no addition has been made, the penalty has no legs to stand. Further ld. Counsel for the assessee relied upon the decision of ITAT in the case of Vandana Verma vs. DCIT [ITA No.582/Del/2026] for A.Y. 2016-17 in which the ITAT followed the decision of Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC).
Per contra, ld. DR relied on the order of the AO/CIT(A).
We have heard the rival submissions and perused the material available on record. We find that the assessee had earned salary income but did not file the return. Upon receipt of notice u/s 148, he filed the return declaring the salary income which was accepted by the ld. AO. It appears that the ld. AO levied penalty u/s 270A only on the ground that but for the notice u/s 148, the salary income of the assessee would have escaped taxation. We are of the view that for levying penalty u/s 270A of the Act, such reasoning is not justified. Such reasoning reflects the arbitrary approach adopted by the AO especially considering the fact that the entire salary income declared was subjected to TDS by the employer and the same was duly reflected in Form No.16 as well as Form No.26AS. In the instant case, we find that the income declared in the return of income filed under section 148 of the Act, has been entirely accepted by the Assessing Officer. Thus there was no loss to the exchequer. Moreover, we find that the ld. AO has failed to specify the limb of section 270A which is attracted for under-reporting of income or has satisfied the ingredients of misreporting his income under section 270(9). The Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte. Ltd. (2022) 443 ITR 186 (Delhi) has held as follows:
"6.Having perused the impugned order dated 09 March, 2022 to contend that the Petitioner is not entitled to the benefit of immunity 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.
8.This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting."
We therefore, following the same, hold that no penalty under section 270A of the Act is leviable on the assessee and the same is deleted. Appeal is allowed.
In the result, appeal filed by the assessee in ITA No. 3568/DEL/2026 is allowed.