TaxTMI 
TaxTMI 
2025 (3) TMI 1539
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....idential premises on 08.06.2018. Pursuant to which, assessment u/s. 153A r.w.s. 143(3) of the Act was completed for AYs 2017-18 on 26.02.2021 by making an addition of Rs. 29,30,000/-. Thereafter, the penalty proceedings u/s. 270A of the Act was initiated separately for AYs 2017-18 and penalty of 200% was levied and thereby penalty of Rs. 29,17,418/- was imposed for the relevant year. 3. Aggrieved by the penalty levied by the AO, the assessee preferred an appeal before the Ld. CIT (A) who was pleased to confirm it by passing the impugned order. 4. Aggrieved, the assessee is in appeal before this Tribunal and raised several grounds including the legal issue 5. The Ld.AR, assailing the action of Ld. CIT(A), submitted that Ld CIT (A) erred in confirming the penalty levied by the AO u/s. 270A of the Act for underreporting its income in consequence of misreporting of income, by levying, 200% of total tax. The first and foremost argument of Ld. AR is that no specific charge has been framed against the assessee in the show-cause notice dated 04.03.2021 for the relevant assessment year and therefore, in such an event, according to him, the consequent penalty imposed is ba....
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.... (9) of section 270A has been attracted for levying of the penalty under misreporting of income. According to the Ld.AR, in the present case, it can be seen that the notice issued (supra) before levying penalty u/s. 270A is vague, because of which the assessee was confused and couldn't comprehend as to what fault assessee committed to attract such a penalty. In other words, the assessee was in the dark and wondered as to what kind of violation/fault, assessee has committed which assessee needs to defend while answering the show cause notice issued by the AO. 8. We find force in the submissions of the assessee and note that the notice of penalty issued by the AO is vague and doesn't spell out the specific fault for which assessee has been called upon to defend the proposed penalty viz 'underreporting of income in consequence of misreporting of income' which falls under sub-section (9) of section 270A of the Act. For easy reference, we again reproduce the charge against the assessee as noted under;- "Whereas in the course of proceedings before me for the Assessment Year 2017-18, it appears to me Under-reporting of income inconsequence of and misreporting of income" 9. ....
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....er reporting of income and under reporting as a consequence of misreporting of income' would not have come to light. Therefore, the AO opined that it is a clear case of 'under reporting of income and under reporting as a consequence of misreporting of income' which attracts provisions of Sec. 270A(9) of the Act, and thus, levied penalty for both the assessment years for 'under reporting of income and under reporting as a consequence of misreporting of income'. 13. The fact with regard to seizure of huge unaccounted cash during the course of search on 6-12-1018 was not disputed. It is also an admitted fact that the assessee company has offered additional income of Rs. 16.39 Crs. & Rs. 23.62 Crs. towards disallowance of estimated marketing expenses @ 1/3rd of total expenses incurred under the head 'marketing expenses' for both the assessment years. The cash seized during the course of search was telescoped against additional income offered by the assessee towards estimated disallowance of marketing expenses. The assessee has filed return of income in response to notice u/s. 153A of the Act, for both the assessment years and offered additional income admitted during....
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....ds. Prior to insertion of Sec. 270A of the Act, a similar provision was existed in the statue by way of sec. 271(1)(c) of the Act, for concealment of particulars of income or furnishing of inaccurate particulars of income. Provisions of Sec. 271(1)(c) of the Act, was also having two limbs or two charges i.e. i) for concealment of particular of income and ii) furnishing of inaccurate particulars of income. If you go by provisions of Sec. 271(1)(c) of the Act & Sec. 270A of the Act, and wordings therein both provisions are similar and para materia to each other. Although, the term 'tax evasion' has been redefined by way of 'under reporting of income and under reporting as a consequence of misreporting of income' but it is synonymous to concealment of particular of income or furnishing of inaccurate particulars of income. Therefore, it is necessary to examine whether penalty proceedings u/s. 270A of the Act, is mandatory in nature and further, such penalty can be invoked without providing an opportunity to the assessee as required u/s. 274 of the Act. 15. The order imposing penalty u/s. 270A of the Act, is an appealable order u/s. 246A of the Act before the First Appellate Au....
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....ng of income' or 'misreporting of income'. In absence of proper notice, which is mandatory, the AO cannot impose penalty, because, it is a clear violation of principles of natural justice, because, issuing a vague notice without specifying the charge under which limb the proposed penalty proceedings is initiated, would vitiate the entire proceedings, because, the assessee was not given an opportunity to explain its case on specific charge. Therefore, in our considered view, penalty levied on the basis of invalid or vague notice is invalid and void ab initio. 17. The concepts of 'under reporting of income' and 'misreporting of income' are two different charges with very clear boundaries. As we have already discussed in earlier part of this order, sub-section 2 to 6 of sec Sec. 270A of the Act, deals with concept of 'under reporting of income' and for this, separate rate of penalty is provided. Sub-sec. 9 deals with concept of 'misreporting of income' and for this, separate rate of penalty is provided. Therefore, 'under reporting of income' and 'misreporting of income' shall not be used interchangeably nor are they synonymous, but each operates under strict definition and do....
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....rlier decision in the case of Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT, International Taxation in WP (C) No. 5111 of 2022 dated 28.03.2022, held that in view of vague notice without any whisper as to which limb of section 270A of the Act is attracted and how ingredients of sub-section 9 is specified, initiation of penalty u/s. 270A of the Act for 'misreporting of income' is not only erroneous, but also arbitrary and bereft of any reason and consequently, penalty order passed by the AO, cannot be sustained. The relevant findings of the Hon'ble Delhi High Court are as under: 6. This court in the case of Schneider Electric South East Asia (HQ) PTE Ltd. Vs. ACIT, International Taxation Circle 3(1)(2), New Delhi and Ors. W.P.(C) No. 5111/2022 vide judgment dated 28.03.2022 observed as under:- "6. Having perused the impugned order dated 9th March, 2022, this Court is of the view that the Respondents' action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Responden....
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....ssee has used the same details to arrive at different conclusions i.e. differing quantum of disallowances under Section 14A of the Act. This by no stretch of imagination can be held to be 'misreporting'. 8. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. W.P.(C) 9. Consequently, the impugned penalty order dated 28th March, 2022 passed by Respondent No. 1 under Section 270A of the Act is quashed and Respondent No. 1 is directed to grant immunity under Section 270AA of the Act to the Petitioner. 18. At this stage, it is relevant to consider the decision of Hon'ble Madras High Court in the case of Babuji Jacob v. ITO reported in [2021] 430 ITR 259 (Madras), where the Hon'ble High Court has dealt with the issue of show cause notice u/s. 274 r.w.s. 271(1)(c) of the Act, and after considering ....