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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal o f the assessee is directed against the order dated 23.03.2026 of ld. CIT(A)/NFAC, Delhi passed u/s 250 of the Income Tax Act, 1961 (here inafter referred to as “the Act”) wherein the ld. CIT(A) has confir med the penalty of Rs.14 ,96,728/- imposed by the Assessing Officer u/s 270A of the Act for A.Y. 2018-19.
Brief facts as culled out from the orders of the authorities below are that the assessee is an individual and had no t filed her original re turn of income u/s 139 of the Act for A.Y. 2018-19. The case was subsequently reopene d u/s 148 of the Act on the basis of information regarding sale of an immo vable property for a consideration of Rs.95,95 ,000/- during FY 2017-18.In response to the reassessment proceedings, the assessee filed her return of inco me on 19.12.2022, declaring total income of Rs.38,92,835/-. The assessee also fur nished the computation of income wherein lo ng-term capital gain of Rs.36,98,952/-arising from sale of the property was disclosed. The assessee further furnished bank account details evidencing the sale consideration and details of TDS of Rs.95,950/-. Thereafter, the assessment proceeding was co mpleted u/s 147 r.w.s. 144B of the Act. The assessee had also paid self-assessment tax along with interest amounting to Rs.13,96,470 /- on 19.12.2022. The final assessed income was determined at Rs.38,92,835/-, with nil variation from the income declared in the return filed under section 148.Despite the above factual position, the AO initiated penalty proceedings u/s 270A o f the Act and treated the entire income of Rs.38,92,835/- as “misreporte d income” andcomputed tax on the alleged misreported income at Rs.7,48,364/- and levie d penalty at 200% thereof, amounting to Rs.14,96,728 /-.
Aggrieve d by the penalty order, the assessee filed appeal before the ld. CIT(A) who has confirmed the penalty of Rs.14 ,96,728/- observing that the assessee had failed to establish reasonable cause for exemptio n from levy of penalty and consequently, the appeal was dismissed.
Aggrieve d by the impugned order, the assesseefiled appeal before us and has raised the following grounds of appeal:
“1.That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Commissio ner of Income Tax (Appeals) confirming penalty le vied under section 270A o f the Income-tax Act, 1961 is ille gal, arbitrary, co ntrary to facts on record and liable to be quashed.
2.That the Ld. CI T(A) grossly erred both on facts and in law in confirming penalty of Rs. 14,96,728/- levied by the Assessing Office r unde r sectio n 270A(9) for “misreporting of income” despite the admitted and undisputed fact that the re assessment order passe d unde r section 147 accepte d the returned income in entirety without making any additio n, disallowance o r variation. The prese nt c ase at best co uld only fall within the ambit of alleged “under-repor ting” and not “misreporting”, and therefo re levy of penalty at enhanced rate o f 200% is wholly il legal and unsustainable.
3.That the Ld. AO erred in law in treating the case as one invo lving “misre po rting of income” within the meaning of section 270A(9) witho ut establishing fulfillment of any of the mandator y statuto ry conditions prescr ibe d the rein.
4.That the Ld. A O grossly erred in de liberately ignore d the true teno r, context and substance of the re ply filed and se lectively reproducing, disto rting and mischaracte rizing the re ply file d by the asse ssee against show cause notice issued unde r section 270A to portray the matter as a case of “misreporting”. This c learly makes the order liable to be quashe d on account o f viol atio n of principles of natural j ustice in as m uch as the assessee’s submissions were neither considere d nor adjudicated.
5.That the autho rities be low failed to apprec iate that the assessee had spe cifically sought immunity under section 270AA and had e xpressly relie d upo n statutory pro visions relating to immunity from penalty. And that the asse ssee had substantially complied with the substantive conditions of sectio n 270AA.
6.T hat the assessee could not effectively file Form No. 68 due to practical and procedural impossibility arising from peculiar facts o f the case inasmuc h as:
taxes and interest already stood discharged through self-assessment tax prio r to completion of reassessment;
no consequential effective demand was raise d in reassessment o rder relatable for Form No. 68 purposes; and Form No. 68 mandatorily requires payment date an d challan linkage cor responding to demand.
7.That the Ld. AO incorrectly reco rded i n pe nalty orde r that the assessee had no t filed re turn in respo nse to notice under section 148, whereas the reassessment o rder itself specifically records filing of retur n on 19.12.2022 declaring total income of Rs. 38,92,835/-.
8.That the Ld. CIT(A) failed to adjudicate the follo wing crucial grounds specifically raised by the assessee:
absence of additio ns in reassessment;
absence of ingredients o f section 270A(9);
contr adiction be tween reassessment orde r and penalty o rder;
imprope r invocatio n of “misrepo rting”;
distortion of assessee’s reply;
immunity under se ction 270AA; and impossibility regar ding Fo rm No. 68.”
We have heard the ld. AR and the ld. DR. The ld. AR, at the very outset, submitted that the assessee had duly disclosed the sale transaction and the resultantly long-ter m capital gain in the return filed in response to notice u/s 148 of the Act. It was further submitted that the returned income was accepted by the AO without making any addition or variation and, there fore, there was no case of misre porting of income u/s 270A(9) of the Act. Accordingly, the ld. AR pleaded for de letion of the penalty of Rs.14 ,96,728/- levied u/s 270A o f the Act.
The ld. DR, on the other hand, relied upon the orders of the authoritie s below and submitted that the assessee had failed to file her return of income u/s 139 of the Act and disclo sed the income only pursuant to notice u/s 148 of the Act. He further submitted that the penalty of Rs. 14,96,728/- levied u/s 270A of the Act was rightly sustained by the ld. CIT(A) and pleaded for dismissal of the appeal.
We have considered the rival submissions and examined the material on record. We have noticed that the assessee had not filed her return o f income u/s 139 of the Act. However, pursuant to notice u/s 148 of the Act, the assessee file d her retur n of income on 19.12.2022 declaring total income of Rs.38 ,92,835/-. It is submitted that the assessee also disclosed long-term capital gain of Rs.36,98,952/- arising from sale of the property and furnishe d the relevant bank statement and TDS details. We further note that the assessment was complete d u/s 147 r.w.s. 144B of the Act accepting the income r eturned by the assessee at Rs.38,92,835/- without making any addition or variation. The AO, however, treated the entire income of Rs.38 ,92,835/- as misreported income and levie d penalty u/s 270A at 200% , amounting to Rs.14,96,728/-. In our considered view, mere no n-filing of the or iginal return u/s 1 39 of the Act, by itself, cannot lead to the conclusion that the assessee had misreported her income within the meaning of section 270A(9) of the Act. We also find that the penalty order proceeds o n the premise that the assessee had not filed the return in response to no tice u/s 148, whereas the assessment order specifically records that the assessee filed the return o n 19.12 .2022 declaring total income of Rs.38 ,92,835/-. In view of the above facts, we are of the considered opinion that the Revenue has failed to establish the necessary statutory requirements for treating the case as one of misreporting of income u/s 270A(9) of the Act. We have further noticed that the asse ssee has made a request for grant of immunity u/s 270AA of the Act which was not considere d by the Assessing Officer as well as by the ld. CIT(A) while passing the impugned order. As per section 270AA(3) of the Act, the Assessing Officer shall grant immunity from impositio n of penalty u/s 270A where the proceedings for penalty u/s 270A has not been initiated under the circumstances referred to in sub-section (9) of the se ction 270A of the Act. The Assessing Officer thus faile d to consider the said request of the assessee which was legally and factually justified in the given facts and circumstances of the case. The levy of penalty at 200% of the tax payable on the alleged misre ported income is, therefore, not sustainable. Accordingly, we set aside the order of the ld. CIT(A) and dele te the pe nalty of Rs.14,96,728/-levie d u/s 270A of the Act. The grounds raised by the assessee are allowed.
In the re sult, the appeal of the assessee is allowed.