TaxTMI 
TaxTMI 
2026 (9) TMI 443
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....ce she was not made aware off the notices issued. She was only informed about the additional tax liability generating of Rs. 242589/- plus Interest amounting to Rs. 306821/- being total of Rs. 549410/- for A.Y 2020-21 which was paid by the assessee on 23.01.2025, as the said Tax plus Interest liability had risen out due to the accountant's mistake. 4. Your Honor here we would implore that Mrs. Tasneem Firoz Nalwalla has never intentionally under reported her income, she has been an ideal citizen of India living abroad who has tried to uphold her responsibility and filed all her Income Tax returns on time and with utmost diligence. We understand there has been a mistake and said was rectified by paying the tax liability with appropriate Interest. 5. Your Honor I do not agree with the Penalty levied of 200%. As the rule for Penalty under section 270A raised on the basis of under-reported as to be charged at 50% of the Tax liability that shall amount to Rs. 121295/- rather than misreporting as deemed by the AO by levying penalty of 200%. 6. Your honor I would like to rely on the judgment of ITA No.1779/Bang/2024 of Mr. Nateshan Sampath, Bangalore, where ....
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....es. Accordingly, as against the returned income of Rs.43,796/-, the Assessing Officer assessed the total income at Rs.14,46,321/- and initiated penalty proceedings under section 270A on the ground that the assessee had under-reported income in consequence of misreporting. 4. During the penalty proceedings, the Assessing Officer considered the replies furnished by the assessee but held that the assessee had not produced any material which could negate the finding regarding under-reporting of income in consequence of misreporting. The Assessing Officer observed that there was a clear difference between the income disclosed by the assessee in her return and the interest receipts established from third-party information. The Assessing Officer therefore treated the case as one of misreporting and levied penalty under section 270A at 200% of the tax payable on the under-reported income, amounting to Rs.4,85,178/-. 5. Aggrieved by the penalty order, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A) examined whether the omission of interest income constituted ordinary under-reporting attracting penalty at 50% or underreporting in consequence of misreporti....
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..../-, aggregating to Rs.5,49,410/-, on 23.01.2025. He submitted that the assessee accepted the tax consequence of the omission and discharged the tax together with applicable interest. The learned Counsel accordingly submitted that, at the highest, the case could be regarded as one of under-reporting attracting penalty at 50% under section 270A(7) and not as a case of misreporting attracting penalty at 200% under section 270A(8). 10. The learned Counsel also relied upon the decision of the Bangalore Bench of the Tribunal in Nateshan Sampath v. DCIT, ITA No. 1779/Bang/2024, order dated 22.01.2025. He submitted that penalty proceedings stand on a different footing from assessment proceedings and that the Assessing Officer cannot levy penalty mechanically merely because he has made an addition. According to the learned Counsel, the Revenue must establish that the facts of the case fall within the particular statutory limb of misreporting before it can levy penalty at 200%. He therefore prayed that the penalty may be restricted to 50% of the tax payable on the under-reported income. 11. The learned Departmental Representative, on the other hand, supported the orders of the authorit....
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....applicable to "misreporting". 15. In this regard, we find it necessary to consider the explanation furnished by the assessee in its entirety. The assessee was a Non-Resident during the relevant period and was residing outside India. She had entrusted her income-tax matters to an accountant. The assessee has explained that she had limited technological knowledge and remained unaware of the electronic notices issued by the Department. She has attributed the omission of the interest income and the noncompliance with the notices to the manner in which her tax affairs were being handled by the accountant. The assessee has further stated that she never intended to under-report her income. These circumstances, in our view, cannot altogether be ignored while determining whether the omission constituted ordinary under-reporting or the more serious default of misreporting contemplated under section 270A(9). 16. We are conscious that entrusting income-tax matters to an accountant does not absolve an assessee from the responsibility of correctly reporting taxable income. Similarly, the assessee's status as a Non-Resident, by itself, cannot provide immunity from the consequences presc....
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....ally from every instance of under-reporting. The Assessing Officer must independently establish the necessary factual foundation for invoking the more stringent provisions of section 270A(8) read with section 270A(9). 20. Considering the totality of the facts and circumstances, we are of the view that the assessee's failure to offer the interest income constitutes under-reporting of income and the assessee cannot escape the consequences prescribed under section 270A merely because she had entrusted her tax affairs to an accountant. At the same time, having regard to the fact that the assessee was a Non-Resident residing outside India during the relevant period, had entrusted her income-tax compliance to an accountant, had limited technological knowledge and subsequently discharged the entire tax liability together with applicable interest after becoming aware of the same, we are not persuaded that the material on record is sufficient to sustain the more stringent finding of misreporting attracting penalty at 200%. 21. In our considered view, the facts are more appropriately covered by the provisions relating to under-reporting of income under section 270A(7). The distinct....