TaxTMI 
TaxTMI 
2026 (9) TMI 1800
X X X X Extracts X X X X
X X X X Extracts X X X X
....n nor in the notice issued under section 274 read with section 270A, nor even in the final penalty order, did the Assessing Officer specify which of the distinct circumstances enumerated in clauses (a) to (f) of section 270A(9) was attracted, or record any finding demonstrating how the omission of the impugned receipts constituted misreporting as statutorily understood. 2. The relevant facts, as emanating from the record, are that the assessee is an individual who had filed his original return of income on 23.12.2020 declaring total income of Rs.87,67,260, which included salary received from Larsen & Toubro Limited. Subsequently, information was received by the Department that, during the financial year relevant to the assessment year under consideration, the assessee had also received salary from Mahagun (India) Private Limited and interest from certain bank accounts and fixed deposits which had not been offered to tax in the original return. Proceedings under section 147 were accordingly initiated and notice under section 148 was issued on 29.03.2024. Admittedly, the assessee did not file a return of income in response to the said notice; however, during the course of the reas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ability of these receipts and expressed his willingness to discharge the corresponding tax and interest. It was also stated during the penalty proceedings that tax and interest aggregating to Rs.17,22,640 had been paid, subject to the rectification sought in respect of TDS and self-assessment tax credits. 5. While making the three additions, the Assessing Officer recorded an identical satisfaction in respect of each item, namely, that penalty proceedings under section 270A(9) were being initiated separately "for under-reporting of income which is in consequence of misreporting thereof." Thereafter, a notice dated 10.03.2025 was issued under section 274 read with section 270A stating that, during the course of proceedings for the assessment year 2020-21, it appeared that the assessee had "under-reported income which is in consequence of misreporting thereof as per details given in the assessment order," and the assessee was called upon to show cause why penalty under section 270A should not be imposed. Thus, the notice did indicate that the proposed action was for under-reporting alleged to have arisen in consequence of misreporting; however, it did not state whether the alleged ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proceedings, the income would have remained untaxed. The learned CIT(A) also observed that the assessment was framed ex parte under section 144. In this regard, it needs to be clarified that, though the assessment bears the statutory description of section 147 read with sections 144 and 144B on account of the assessee not having filed a return in response to section 148, the assessment order itself records and considers the replies dated 15.08.2024, 09.12.2024 and 20.02.2025. The explanation furnished by the assessee was, therefore, on record and was considered by the Assessing Officer. More importantly, the learned CIT(A), like the Assessing Officer, did not identify the applicable clause of section 270A(9) or explain how the material on record established its ingredients. The penalty was confirmed on the premise that omission of income from the return, followed by its detection in reassessment, was by itself sufficient to constitute misreporting. 8. We have heard the rival submissions and perused the assessment order, the notice issued under section 274 read with section 270A, the replies furnished by the assessee, the penalty order and the impugned appellate order. The issue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of misreporting are not interchangeable expressions. The former attracts penalty at 50%, whereas the latter attracts the far more stringent consequence of penalty at 200%. Every case of misreporting would necessarily involve under-reporting, but every difference between the returned and assessed income does not, by that reason alone, become misreporting. For the enhanced consequence under sub-section (8) to ensue, the Assessing Officer must identify the particular conduct of the assessee and establish that it falls within one or more of the exhaustively enumerated circumstances in clauses (a) to (f) of sub-section (9). Any other construction would substantially obliterate the distinction deliberately maintained by Parliament and would render almost every omission detected in assessment or reassessment liable to the enhanced penalty of 200%. 11. This distinction has been authoritatively explained by the Hon'ble Delhi High Court in GE Capital US Holding Inc. v. Deputy Commissioner of Income-tax [2024 SCC OnLine Del 4233], wherein it was held that under-reporting and misreporting are viewed by the statute as separate and distinct misdemeanours. Their Lordships observed that where t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....separate categories, each resting upon a distinct factual foundation. An assessee charged with misrepresentation or suppression of facts under clause (a) would have to meet a case materially different from one alleging failure to record a receipt in books under clause (e), recording of a false entry under clause (d), or claiming an expenditure without evidence under clause (c). A notice which merely repeats the expression employed in section 270A(8), without identifying the conduct alleged under sub-section (9), leaves the assessee to conjecture the precise accusation against him. The defect assumes still greater significance because the penalty is enhanced from 50% to 200%. 13. The omission is not confined to the notice. Neither the assessment order nor the final penalty order supplies the missing statutory and factual foundation. The penalty order reproduces section 270A(9) in its entirety but does not state which clause is attracted. Reproduction of the provision cannot take the place of a finding. The Assessing Officer's reasoning is confined to the fact that the income was absent from the original return, no return was furnished in response to section 148 and the income wou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich deals with failure to record a receipt in the books of account having a bearing on total income. There is no finding that the assessee maintained books of account in which the impugned salary, interest or rent was required to be, but was not, recorded. The omission of a receipt from the return of income is not, by itself, synonymous with failure to record it in books of account. More fundamentally, clause (e) was never invoked by the Assessing Officer. It would be impermissible at the appellate stage to reconstruct the penalty by supplying a statutory charge which the Assessing Officer himself neither formulated nor called upon the assessee to meet. 16. We are conscious that the assessee's acceptance of the income was not made before initiation of the reassessment proceedings and, therefore, the disclosure cannot be characterised as one made prior to detection. The failure to file a return in response to notice under section 148 is also a relevant circumstance and the explanation of inadvertence cannot be accepted merely because it has been asserted. Nevertheless, the weakness or inadequacy of an explanation cannot relieve the Assessing Officer of the statutory obligation to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....levy. Such conversion would amount to curing the absence of satisfaction and altering the foundation of the penalty proceedings after their conclusion. 19. The assessee's alternative request for waiver under section 273A does not call for adjudication in the present appeal, since the power to reduce or waive penalty under that provision is statutorily vested in the Principal Commissioner or Commissioner, subject to satisfaction of the prescribed conditions. Likewise, the grievance regarding non-grant of TDS credit may be pursued independently through appropriate rectification or other remedy available in law. The unclaimed TDS has been considered herein only as one of the surrounding circumstances bearing upon the explanation offered by the assessee and not as an independent ground for deleting the penalty. 20. In the ultimate analysis, the material on record establishes that the income assessed exceeded the income originally returned and thus discloses an omission of taxable receipts. The penalty under appeal, however, has not been imposed for ordinary under-reporting under section 270A(7), but at 200% on the footing that the under-reporting was in consequence of misreportin....