Section 270A penalty fails when the quantum addition is deleted and assessed income matches returned income.

Penalty under section 270A was unsustainable where the reassessment addition forming its basis had been deleted in quantum proceedings and the assessed income stood aligned with the returned income. The underlying salary amount had already been disclosed and subjected to TDS, and the return filed in response to notice under section 148 was to receive credit for that TDS. Once the foundation addition was removed, the condition for under-reporting, namely assessed income exceeding returned income, was not met. As consequential proceedings, the penalty could not survive independently of the deleted substantive addition.

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Issues: Whether penalty under section 270A could survive after the quantum addition forming its basis had been deleted and the assessed income stood aligned with the returned income.

Analysis: The penalty was founded on the addition made in reassessment. The quantum appellate order had deleted the entire addition after accepting that the salary income was already disclosed and subjected to TDS, the amount of Rs. 2,08,700/- was not income, and the return filed in response to notice under section 148 had to be considered with due credit of TDS. Once the foundation addition disappeared, the basis for treating the case as one of under-reporting under section 270A also disappeared. Under-reporting arises only where assessed income exceeds returned income, and that condition was not satisfied after the quantum relief. Penalty proceedings being consequential in nature, they cannot stand independently when the substantive addition is deleted.

Conclusion: The penalty under section 270A was unsustainable and was deleted.

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