S.270A penalty quashed: no 270A(9) limb named, and 200% levied for mere under-reporting (ITAT Delhi)
The Tribunal found that the assessment order initiated penalty proceedings for misreporting of income, but the penalty order finally levied penalty for under-reporting of income.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Order: ITA No. 3064/DEL/2025 (ITAT Delhi), Assessment Year 2018-19, against the CIT(A) NFAC order dated 17.03.2025, pronounced 03.02.2026.
Facts
The Assessing Officer passed a penalty order dated 25.01.2022 under section 270A levying penalty at 200% of the tax payable on under-reported income, the assessee contending there is no provision for 200% on mere under-reporting since section 270A(7) caps that penalty at 50%.
The Revenue defended the order on the ground that section 270A(8) provides 200% where under-reporting is in consequence of misreporting.
Issue
Whether a section 270A penalty survives where neither the initiation nor the penalty order specifies which clause of section 270A(9) makes the case one of misreporting, and the 200% rate is applied to what is finally levied as under-reporting.
Holding
The Tribunal found that the assessment order initiated penalty proceedings for misreporting of income, but the penalty order finally levied penalty for under-reporting of income.
The Assessing Officer, neither at initiation nor anywhere in the penalty order, referred to any clause or limb of section 270A(9), which lists the categories of misreporting — misrepresentation or suppression of facts, unrecorded investments, unsubstantiated expenditure claims, false entries, unrecorded receipts, and unreported international or specified domestic transactions.
Following the Delhi High Court, which held that non-mentioning of the applicable limb makes the penalty order arbitrary and liable to be quashed, the Tribunal treated the ambiguity as fatal.
On rate, the Tribunal restated that section 270A(7) levies 50% for under-reporting while section 270A(8) levies 200% only for under-reporting in consequence of misreporting, and that specifying the section 270A(9) limb is mandatory to remove vagueness.
The penalty order was held unsustainable and quashed, the impugned order set aside, and the appeal allowed.
Why a client would care
A section 270A penalty notice and order should be checked for two things on arrival: which clause of section 270A(9) is invoked, and whether 200% is being charged for what is only under-reporting.
Questions clients ask
Q1. Penalty was initiated for misreporting but levied for under-reporting at 200%. What did the Tribunal hold?
It quashed the penalty: the order specified no clause of section 270A(9), and 200% applies only where under-reporting is in consequence of misreporting.
Q2. What is the rate for mere under-reporting?
50% under section 270A(7).
Q3. Is naming the section 270A(9) limb mandatory?
The Tribunal held it is, to remove vagueness, following the Delhi High Court.
Disclaimer
This note summarises a Tribunal order for general information. It is not professional advice and does not predict the outcome of any other case. Tax and company-law positions depend on facts and dates; take a written opinion before you act. Harun Raaj & Associates is a Chartered Accountants firm in Visakhapatnam.
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