2025 (9) TMI 1679

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....he Act") for Assessment Year 2018-19. 2. Brief facts of the case are that assessee is a company and e-filed its return of income declaring total income of Rs. 85,03,260/-. The case was selected for limited scrutiny for examination of business expenses and after considering the submissions made by the assessee, a sum of Rs. 5,76,822/- was disallowed out of Sales Promotion Expenses and penalty proceedings u/s 270A of the Act were initiated for under reporting of income in consequence of misreporting. Thereafter, the AO has levied the penalty u/s 270A(9)(a) of the Act of Rs. 3,56,478/- being 200% of the tax payable on such income for under reporting of income for misrepresentation or suppression of facts. 3. Against the said penalty orde....

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....w cause notice issued for initiation of the penalty, it is seen that the AO has not specified in the show cause notice that under which sub-clause of sub-section 9 of section 270A he initiated the penalty proceedings. The said notice is reproduced as under: Notice for penalty under section 274 read with section 270A of Income-tax Act, 1961. Ms./Mr./M/s., Whereas in the course of proceedings before me for the Assessment Year 2018-19, it appears to me that you have under-reported income which is in consequence of misreporting thereof. 2. You are required to show cause why an order imposing penalty u/s 270A of Income-tax Act, 1961 should not be passed. 3. You are required to submit your reply online....

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...., the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting. 9. This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage/incentivize a taxpaye....