Penalty under section 270A(9) quashed for failing to specify the exact misreporting limb and breaching natural justice.

Penalty under section 270A(9) was held unsustainable where the order did not specify which statutory limb, from clauses (a) to (f), was invoked for the higher levy. The tribunal noted that the order only alleged under-reporting in consequence of misreporting, without identifying the precise conduct or omission attracting the misreporting category. As penalty provisions must be strictly construed, the failure to state the applicable limb showed non-application of mind and breached natural justice. The penalty was therefore quashed in favour of the assessee.

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Issues: Whether penalty levied under section 270A(9) of the Income-tax Act, 1961 could be sustained when the penalty order did not specify the particular instance falling within clauses (a) to (f) of sub-section (9) and thereby offended principles of natural justice.

Analysis: The penalty order merely stated that the assessee had under-reported income in consequence of misreporting, but it did not identify the specific conduct or omission that brought the case within any of the enumerated instances under section 270A(9). Penalty provisions are to be strictly construed, and the absence of a clear reference to the precise statutory limb showed non-application of mind in fastening the higher penalty for misreporting.

Conclusion: The penalty order was vitiated for failure to specify the applicable limb under section 270A(9) and for breach of principles of natural justice. The penalty was quashed, in favour of the assessee.

Ratio Decidendi: Where a penalty provision prescribes distinct categories for a higher levy, the authority must clearly specify and apply the exact statutory limb invoked; failure to do so renders the penalty unsustainable.

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