Penalty under section 270A fails where notice and order mismatch, and exemption claim is shown to be bona fide.

Penalty under section 270A was held unsustainable where the show-cause notice alleged only under-reporting, but the final penalty order proceeded on misreporting without clearly identifying the statutory limb invoked. The inconsistency between the notice and the order vitiated the penalty proceedings. The assessee's claim for exemption, based on the employer-issued Form 16 showing the amount as exempt and no tax deducted at source, was accepted as a bona fide explanation supported by disclosure of material facts within the statutory exception. On these facts, the penalty was deleted.

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Issues: Whether the penalty under section 270A of the Income-tax Act, 1961 was sustainable where the show-cause notice alleged only under-reporting but the penalty order was ultimately founded on under-reporting in consequence of misreporting, and whether the assessee's claim of exemption based on the employer-issued Form 16 was covered by the bona fide explanation exception.

Analysis: The penalty proceedings were held to be vitiated because the notice and the final order were inconsistent as to the exact limb of section 270A invoked. The notice referred to under-reporting, whereas the penalty order proceeded on misreporting, without clearly specifying the exact statutory limb from the relevant sub-sections. The decision further noted that the assessee had claimed the exemption on the basis of the employer's Form 16, where the amount was shown as exempt and no tax was deducted at source, supporting the explanation that the claim was made under a bona fide belief. On these facts, the explanation was treated as bona fide and as supported by disclosure of all material facts within the meaning of the statutory exception.

Conclusion: The penalty order was unsustainable and liable to be deleted.

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