Manish Manohardas v. ITO (International Tax)

Case snapshot

Sections / provisions: 139(9); 270A; 274

Questions before the Court / Tribunal

• Section 270A penalty notice did not specify misreporting charge: The reported Tribunal order deletes a 200% section 270A penalty where the notices referred to under-reporting but the final penalty invoked misreporting as well, without a clear show-cause on the specific charge.

Material facts and background

Thereafter, the case of the Assessee was selected for

scrutiny assessment and consequently notice u/s 143(2) of the Act was issued to the Assessee, in response to which the Assessee furnished the

ITA No.4134/M/2023 Shri Manish Manohardas Asrani

relevant details as called for by the Assessing Officer (AO). Thereafter a draft assessment order dated 22.09.2021 u/s 143(C)(1) of the Act was passed. Though the Assessee was supposed to file his objection before the Dispute Resolution Panel (Ld. DRP) within 30 days from the receipt of the draft order, however, the Assessee by filing his submission on 12.10.2021 disputed the addition by the AO but did not attach any objection filed before the Ld. DRP. Therefore the AO by considering the fact that 30 days time has already been passed from the service of the draft order, therefore the submission made by the Assessee after passing the draft order cannot be considered and thus the draft order is finalized under the provisions of section 143(C)(3) of the Act.

On perusing the ITR filed by the Assessee, it was seen by the AO

that a sum of Rs.27,79,510/- has been offered by the Assessee to tax under the head “salaries” whereas as per ITR schedule TDS-details of the tax deducted at source from salary as per Form-16 issued by the Employer, the TDS of Rs.28,19,510/- was deduced from the total salary paid to the tune of Rs.91,13,252/- by the Employer namely WM Global Sourcing India Pvt. Ltd. as a result thereof the Assessee has claimed refund of Rs.21,92,090/-. Therefore the AO by considering the difference between the amounts of salary received and as per the Form 26AS vis-àvis salary offered in the ITR, vide notice dated 13.09.2021 u/s 142(1) of the Act, asked the Assessee to furnish the copy of Form No.16 issued by the Employer to ascertain total salary received during the Financial Year 2018-19. Secondly the copy of bank statement duly reflecting receipt of salary during Financial Year 2018-19.

The Assessee by filling its reply before the AO mainly claimed as

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

relevant details as called for by the Assessing Officer (AO). Thereafter a draft assessment order dated 22.09.2021 u/s 143(C)(1) of the Act was passed. Though the Assessee was supposed to file his objection before the Dispute Resolution Panel (Ld. DRP) within 30 days from the receipt of the draft order, however, the Assessee by filing his submission on 12.10.2021 disputed the addition by the AO but did not attach any objection filed before the Ld. DRP. Therefore the AO by considering the fact that 30 days time has already been passed from the service of the draft order, therefore the submission made by the Assessee after passing the draft order cannot be considered and thus the draft order is finalized under the provisions of section 143(C)(3) of the Act.

Associates case (supra) ultimately deleted the identical penalty as imposed u/s 270A(9) of the Act, by holding as under: “15. In the instant case, on perusal of the penalty notice placed on record dated 02/06/2021, it is evident that the Ld. AO had show caused the assessee as to why the assessee should not be imposed with penalty for 'under reporting of income'. The assessee had filed its submissions stating that he had not 'under reported its income' We are unable to comprehend ourselves to accept to the argument of the Ld. DR that assessee did not make any submissions with regard to 'mis reporting of income'. The assessee could be expected to give reply only in respect of show cause notice that is put to him. Why at all the assessee should infer/ assume/presume that the Ld. AO having recorded satisfaction in the quantum assessment order that offence of both 'under reporting' and 'mis reporting' is committed by the assessee and accordingly the penalty would be levied on the assessee for both in terms of section 270A(9) of the Act? 16. It is well settled that penalty proceedings and assessment proceedings are separate and distinct. Reliance in this regard is placed on the decision...

Court / Tribunal analysis and reasoning

Act, the Assessee vide letter dated 23.12.2021 mainly claimed that he has not received any show cause notice dated 11.11.2021 and therefore the compliance could not be done for the same.

“It is clear that had the case not been selected for scrutiny, the Assessee would not have filed the said subsequent return and the income to the extent of Rs.62,93,742/must have escaped the assessment leading to tax evasion for which the Assessee is entirely responsible. The Assessee in response to the defect notice u/s 139(9) of the Act dated 15.11.2019 issued by Central Processing Centre (CPC), again declared the same income as declared in the original return of income, instead of disclosing the actual amount of income received and therefore the contention/claim of the Assessee is not acceptable. 3.

in nature and therefore we are inclined to adjudicate the same before going into the merits of the case. The Assessee by way of additional grounds of appeal has raised two issues, first pertains to the jurisdiction of the AO, second pertains to the notice issued u/s 143(2) of the Act. The Ld. Sr. Advocate Dr. K. Shivaram at the outset claimed that in the instant case a notice dated 11.11.2021 u/s 274 r.w.s. 270A of the Act was issued for under reporting of income u/s 270A(a) with the aid of section 270(A)(e) of the Act, whereas penalty has been levied for misreporting of the income for which admittedly no notice was issued by the AO. The AO in the show cause notice, has also not specified any particular limb/charge and therefore in view of the decision in the case of Jaina Marketing & Associates vs. DCIT (2024) 162 taxmann.com 439 (Delhi-Trib.) passed by the Tribunal, the penalty is not sustainable. The Ld. Senior Counsel also argued on other aspects of the case. 6.

ingredients of sub section 9 of section 270A of the Act, were not specified while imposing the penalty. The Hon’ble High Court ultimately affirmed the deletion of the penalty imposed u/s 270A(9) of the Act, by holding as under: "6. Having perused the impugned order dated 09th 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 Respondents have failed to specify the limb "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated. 7. 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 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 Saltwater Studio LLP v. NFAC, Delhi vide order dated 22.5.2023 held as under:11. It has to be examined as to whether the action of the AO to have levied penalty under sub-section (9) of section 270A of the Act is legally valid or not. The AO in order to levy the penalty has given the reason for doing so as under:"The contention of the assessee to drop the penalty proceedings is rejected because the assessee has clearly misreported its income by an amount of Rs.3,94,996/- as per the provisions of the Section 270(A)(9) of the Act. And a misreported income leads to evasion of Tax. Hence, it is clearly established that the assessee has committed an intentionally fault under the provisions of the Section 270(A)(9) of the Act by under reporting its income in consequence of misreporting its income, to the tune of Rs.3,94,996/-. Therefore, I am satisfied that it is a fit case for levy of penalty u/s 270A of the Income Tax Act, 1961. The amount of penalty that is to be levied for the fault of under reporting income in consequence of misreporting income is determined under section 270A(8) of the Act, which is two hundred percent of the tax payable on under reported income in consequence...

the AO u/s 270A of the Act suffers from the vice of nonapplication of mind as well as violates principles of natural justice. And therefore, the penalty levied on addition of sustained quantum addition of Rs.67,970/- cannot survive. And therefore, it is directed to be deleted.” 7.2

Operative decision and relief

notice issued u/s 274 r.w.s 270A of the Act dated 11.11.2021 mentioned under reporting of the income. Subsequently during the penalty proceedings again issued the notice dated 20.12.2021 u/s 274 r.w.s 270A of the Act, without specifying any limb or sub clause of section 270A of the Act and ultimately vide order dated 22.02.2022 u/s 270A of the Act levied the penalty for misreporting of the income as well as underreporting of the income, as per provisions of section 270A(8) of the Act with the aid of section 270A(9)(e) of the Act. As the AO issued the vague notice without specifying any particular limb or sub clause for levying the proposed penalty. There is no whisper at all in the notice issued u/s 270A read with section 274 of the Act about “misreporting of income” whereas the penalty has been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200% in terms of section 270A(9) of the Act, for which show cause notice was never issued to the Assessee. And therefore in view of the judgment passed by the coordinate Bench of the Tribunal in the case of Jaina Marketing & Associates (supra), wherein the Co-ordinate Bench of the Tribunal not only analyzed the...

Authorities and precedents appearing in the judgment

• Associates vs. DCIT (2024) 162 taxmann.com 439 (Delhi-Trib.) passed by
• HQ) Pte Ltd. vs. ACIT
• Studio LLP v. NFAC
• Saltwater Studio LLP v. NFAC

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Section 270A penalty notice did not specify misreporting charge. The operative result is classified as Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Section 270A penalty notice did not specify misreporting charge. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Check the exact penalty charge in the show-cause notice, the assessment finding and the final penalty order; ambiguity or a changed statutory limb can be material.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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