Penalty U/S 270A Cannot Survive without Stating the Specific Limb of Misreporting: ITAT Mumbai
Hi-Tech Engineers v. ACIT, CC 5(1), Mumbai (ITA Nos. 3165 & 3166/Mum/2025)
Facts:
1. The AO disallowed purchases of the assessed aggregating to ₹70.93 lakh (AY 2019–20) under section 69C, treating them as bogus purchases from six parties based on information from the Investigation Wing.
2. On appeal, the CIT(A) restricted the disallowance to 5% of the purchases (₹1.99 lakh) on an estimated basis, noting that the assessee had completed government projects and payments were through banking channels; and there was no evidence suggested inflation of turnover.
3. The ITAT examined the legality of penalty under section 270A, especially the requirement to specify the limb of default.
ITAT Mumbai held as below:
1. Section 270A(2) of the Income Tax Act enumerates situations of under-reporting of income. Section 270A(9) lists situations amounting to misreporting of income.
2. Penalty at 200% is leviable only if the AO establishes that the under-reporting arises from specific cases of misreporting mentioned in clauses (a)–(g) of section 270A(9).
3. The AO failed to specify in the penalty notice or order the exact clause of section 270A(9) invoked, nor did he establish that the case fell within any of those categories.
4. Further, since the quantum addition was made on estimate basis, based on a presumption of grey market purchases, there was no conclusive finding of false claim or falsification of documents to justify misreporting.
5. The AO’s reliance solely on Investigation Wing information without independent inquiry further weakened the penalty. Therefore, the penalty proceedings suffered from vagueness, non-specification, and lack of legal foundation under section 270A.
6. In the facts of the present case, the penalty order dated 29/11/2023 levying penalty under section 270A cannot be sustained.
The copy of the order is as under:
