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Judgment
PER NAVEEN CHANDRA [ACCOUNTANT MEMBER]:
The above-captioned appeal is preferred by the assessee against the order dated 05.02.2026, passed by the Learned Commissioner of Income Tax (Appeals)-24, New Delhi (hereinafter referred to as ‘ld. CIT(A)’) under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), arising out of the penalty order dated 25.08.2025 passed by Assessing Officer DCIT, Central Circle-8, New Delhi u/s 270A of Income Tax Act, 1961 for the A.Y 2023-24.
The grounds of appeal raised by the assessee which reads as under:
“1.The Ld. AO and Ld. CIT(A) both the officers have erred in not appreciating either the facts & circumstances of the case or the submissions of appellant and has further erred in passing respective orders which is not correct in law & on facts.
2.That the appellate order dated 05/02/2025 is not a speaking order which is bad in law.
3.That mere addition of income during the assessment proceedings does not necessitate the levy of penalty u/s 270A of the Act and the element of mens-rea is necessary for the imposition of penalty under the act. The Ld. CIT(A) has took no notice of the same and has erred in confirming penalty of Rs. 4,80,582/- which is non-est in law.
4.The Ld. AO and Ld. CIT(A) both the officers have erred in law that penalty cannot be imposed only on the ground that appeal has not been preferred against the assessment order.
5.The Ld. CIT(A) has omitted the fact that the penalty order was passed without giving sufficient opportunity of being heard.
6.The Ld. CIT(A) has erred in fact and circumstances of the case that the notice of penalty u/s 270A of the Act was issued for under reporting of income however penalty order u/s 270A of the Act was passed for under reporting and misreporting of income which is not as per the law.
7.The appellant craves leave to add, alter or amend any of the grounds before or at the time of hearing.”
Brief facts of the case are that the assessee has filed his original return of income for the A.Y 2023-24 declaring total income of Rs.83,810/- on 31.12.2023. A search and seizure operation was conducted on the ALM Group under section 132 of the Act on 03.01.2023 and the assessee was associated with the group covered under this search. Thereafter, the case of assessee was centralized in pursuance of order passed under section 127 of the Act dated 13.06.2023 by the PCIT, Dehradun. Consequently, the case of the assessee for the A.Y. 2023-24 was selected for scrutiny assessment u/s 143(3) of the Act and the same was completed by the Ld. AO by passing order u/s 143(3) dated 25/03/2025. The Ld. AO was made addition of Rs.13,12,997/- u/s 45 of the Act on account of Capital Gains. Subsequently penalty proceedings u/s 270A of the Act was initiated for under-reporting of income. Thereafter, the Ld. AO passed penalty order u/s 270A(8) of the Act vide penalty order dated 25.08.2025 and imposed the penalty of Rs.4,80,532/-.
Being aggrieved by the aforesaid penalty order supra, the assessee filed an appeal before Hon'ble Commissioner of Income Tax (Appeals), who dismissed the appeal vide order dated 05.02.2026.
Being aggrieved by the aforesaid appellate order dated 05.02.2026, the assessee is in appeal before us.
Before us, ld. Counsel for the assessee stated that this is the case of penalty under section 270A of the Act on account of capital gains computed by the Assessing Officer and the ld. CIT(A) has erred in fact and circumstances of the case that the notice of penalty under section 270A of the Act was issued for under reporting of income however penalty order under section 270A of the Act was passed for under reporting and misreporting of income which is not as per the law.
On the other hand ld. DR relied on the order of the AO and CIT(A).
We have heard the rival submissions and perused the material available on record. A careful perusal of the penalty order u/s 270A(8) shows that the AO has levied penalty solely on account of addition made in the assessment order of Rs. 13,12,997/- under Section 45 of the Income Tax Act, 1961. We find no discussion or mention of any reasons for levying of penalty u/s 270A(8). There is no whisper in the penalty order as to which clause of section 270A(9) of the Act is attracted to treat the addition as misreporting of income, 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 total income; and (f) failure to report any international transaction. The AO has simply invoked the provision of section 270(8) to levy penalty.
In such facts and circumstances, we follow the decision of the Hon'ble Delhi High Court in the case of Schneider Electric South East Asia (HQ) Pte. Ltd. ([2022] 443 ITR 186) which has held the penalty order arbitrary when limbs of section 270A(9) of the Act is not identified for levying penalty, as under:
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.
In the instant case, there is no whisper as to how the addition, during the assessment proceedings, has manifested itself as ‘misreporting of income’, rendering the penalty order manifestly arbitrary. We are of the considered view therefore, the penalty order u/s 270A(8) is unsustainable in the eyes of law and accordingly, the same is directed to be deleted.
In the result, appeal filed by the assessee in ITA No.3565/Del/2026 is allowed.