Penalty notice mismatch under section 270A vitiates proceedings when the charge at initiation differs from the final levy.

Penalty under section 270A requires a clear and consistent statutory charge, because under-reporting and misreporting carry different consequences. Where the notice alleges under-reporting in consequence of misreporting, but the final penalty is levied only for under-reporting at the applicable rate, the basis of initiation and the basis of levy do not match. The assessee is then not properly informed of the exact case to meet. On that reasoning, the penalty proceedings were treated as vitiated and the penalty order was quashed in favour of the assessee.

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Issues: Whether penalty proceedings under section 270A of the Income-tax Act, 1961 were vitiated where the notice alleged under-reporting of income in consequence of misreporting, but the penalty was ultimately levied only for under-reporting at 50%.

Analysis: Section 270A prescribes different consequences for under-reporting and misreporting of income, and the statutory scheme requires the assessee to be made aware of the specific charge on which penalty is proposed. In the present case, the notice under section 274 read with section 270A proceeded on the basis of under-reporting in consequence of misreporting, whereas the penalty was finally imposed only on the footing of under-reporting and at the rate applicable thereto. The basis of initiation and the basis of levy were therefore not the same, leaving the assessee unaware of the actual charge to meet.

Conclusion: The penalty proceedings under section 270A were held to be vitiated and the penalty order was quashed in favour of the assessee.

Final Conclusion: The appeal succeeded because the penalty was unsustainable for want of a consistent and definite charge under section 270A.

Ratio Decidendi: A penalty under section 270A cannot be sustained unless the assessee is clearly and consistently informed of the precise statutory charge on which the penalty is founded.

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