TaxTMI 
TaxTMI 
2026 (5) TMI 846
X X X X Extracts X X X X
X X X X Extracts X X X X
....Appellant's case. 2. The penalty show cause notice issued under Section 270A of the Act is non est and bad in law on the facts and circumstances of the case. 3. The purported approval granted by the Additional/Joint Commissioner of Income Tax for passing the impugned penalty order under Section 270A of the Act is non est and bad in law on the facts and circumstances of the case. 4. The penalty order passed under Section 270A is non est and bad in law on the facts and circumstances of the case. 5. The appropriate procedure necessary for passing the impugned penalty order was not followed and consequently, the impugned order is vitiated on the facts and circumstances of the case. 6. The Appellant denies himself liable to a penalty of Rs. 51,20,500/- under Section 270A of the Act on the facts and circumstances of the case. 7. The Assessing Officer erred in law in not recording proper satisfaction for levy of penalty under Section 270A of the Act on the facts and circumstances of the case. 8. The Assessing officer erred in law and facts in holding that the Appellant has under reported income by suppressing facts within the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y further submissions on 04/09/2024. During the course of penalty proceedings, the assessee admitted to have received ESOP from his employer viz. Wipro Limited towards allotment of shares to the tune of Rs. 95,11,595/- & claimed exemption u/s 10(10CC) of the Act on the basis of Form 16 issued by his employer wherein the said amount of Rs. 82,05,931/- was stated to be exempt u/s 10 of the Act & no tax was deducted at source. It was also submitted that due to assessee's limited knowledge in taxation matters, complete reliance was placed upon the Form No.16 issued by the employer and the assessee in good faith & under an honest & bonafide belief claimed the exemption of Rs. 82,05,931/- u/s 10(10CC) of the Act while filing the return of Income and accordingly, the assessee had declared total income of Rs. 84,27,981/- & claimed refund of Rs. 28,69,290/-. The assessee was also granted refund of Rs. 29,98,410/- at the time of passing of intimation under Section 143(1) of the Act. The assessee further contended that after passing of the assessment order on 19.03.2024, the assessee returned back the refund amount of Rs. 29,98,410/- to the Income Tax Department vide challan No. 09647 dated 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment order u/s 143(3) i.e. the assessee has accepted its mis-reporting of income. (v) Mens rea -bad intention is not prerequisite for levy of penalty and ignorance of provisions of law is not an excuse. Further, the AO was of the opinion that as per the provisions of Section 270A(2)(a) of the Act, a person shall be considered to have misreported his income if "claim of expenditure not substantiated by any evidence, misrepresentation or suppression of facts, recording of any false entry in the books of account, failure to record any receipt in books of account having a bearing on total income and failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply." Thus, the AO held that the assessee has mis-reported its income for which the penalty proceedings under Section 270A of the Act were initiated. In view of the above discussion, the AO was satisfied that the assessee had under reported his income according to Section 270A(9)(a) of the Act for suppression of facts for the year under consideration and accordingly, levied the penalty of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....101 pages containing therein the various documents/records/order/notices in support of his case. Further, the assessee has also filed various case laws in support of his contentions. 7. Before us, the learned AR of the assessee vehemently submitted that the assessee had accepted the order of assessment and already paid the entire due taxes along with the interest thereon without preferring an appeal before the learned CIT (Appeals)/NFAC. Further, the AR of the assessee submitted that the show cause notice issued by the AO on 19.03.2024 was for alleging under-reporting of income whereas the penalty was ultimately levied on another limb i.e. under-reporting of income in consequence of misreporting thereof. It is also submitted that the impugned penalty proceedings were initiated without pointing out the applicable limb under Section 270A(2) of the Act as well as under Section 270A(9) of the Act. Lastly, the learned AR submitted that the present case falls under the exceptions provided under Section 270A(6)(a) of the act as the assessee had provided bona fide explanations and disclosed all the material facts to substantiate such explanations. 8. The learned DR on the other hand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the Form No.16 issued by the employer and the assessee in good faith & under an honest & bonafide belief claimed the exemption of Rs. 82,05,931/- u/s 10(10CC) of the Act while filing the return of Income. We are of the considered opinion that the contention of the assessee appears to be bonafide as we observed that the employer had in fact issued the salary certificate to the assessee in Form No. 16 mentioning Rs. 82,05,931/- as exemption u/s 10 of the Act. (Form 16 placed at pages 66-73 of the P.B.). Thus, when the employer itself is issuing the salary certificate by claiming the amount of Rs. 82,05,931/- as exempt u/s 10 of the Act & did not deduct TDS on the same, then obviously the employee on an honest & bonafide belief will deduce that his employer had actually paid the tax on such income on behalf of the employee. Therefore, we are of the considered opinion that the explanation offered by the assessee that he was completely unaware of the provisions of the Income Tax Act and there was no intention on his part to deprive the legitimate revenue of the Government is bonafide and the assessee had disclosed all the material facts to substantiate the explanation offered within ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n a case where no return of income has been furnished or where return has been furnished for the first time under section 148,- (A) the amount of income assessed, in the case of a company, firm or local authority; and (B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A); (ii) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order; Provided that where under-reported income arises out of determination of deemed total Income in accordance with the provisions of section 115JB or section 115JC, the amount of total under-reported income shall be determined in accordance with the following formula- (A- B) + (C- D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions); B= the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of which the assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered; (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; (c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance; (d) the amount of under-reported income represented by any addition made in conformity with the arm's length price determined by the Transfer Pricing Officer, where the assessee had maint....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were the total income; and Y= the amount of tax calculated on the total income determined under clause (a) of sub- section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order. (11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the basis of imposition of penalty in the case of the person for the same or any other assessment year. (12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the Assessing Officer, the Commissioner (Appeals), the Commissioner or the Principal Commissioner, as the case may be." 9.3 On plain reading of the same, we are of the opinion that when a notice u/s 270A of the Act is issued, the following step ladder should be followed by the AO while levying penalty u/s 270A of the Act- 1. Underreporting - First the onus is on the AO to establish whether any of the contingency spoken of in clauses (a) to (g) of Section 270A(2) in the case of the assessee are attracted or not. If Yes, under which clause (limb) the assessee has underreported the income? 2. Now ....