| Question And Answer | |
|---|---|
| Subject: | Penalty Proceeding u/s270A after assessment u/s 143(3). |
| Category: | Income-Tax |
| Querist: | Anupam Pal |
| Answered by: | Law Intern |
| Tags: | penalty |
| Date: | November 28, 2025 |
Assessee is a Company.
Initially Income returned furnishing LTCG- (3,01,10,469)
Later on return revised and LTCG furnished- (3,09,91,066)
Scrutiny assessment made and Income Computed-8,80,600 i,e difference amount of above 2 figures.
Details of Scrutiny assessment:
Assessees Submission- Sale of Property Rs. 7,07,72,924
Cost Price Rs. 3,40,56,800
Cost of Improvement Rs. 6,77,07,191
Indexed cost of Acq & Imprv. Rs. 10,17,63,991
Long Term Capital Loss Rs. 3,09,91,067
AO Reply – Cost of Improvements were disallowed citing non submission of proof of expenditure although proof submitted(except few).
Total Tax claimed in scrutiny assessment was Rs. 1,83,165 which was covered by TDS claim of Assessee thereby arriving at a refund of Rs. 70,175. There was no mention of Penalty proceedings u/s 270A in the Scrutiny assessment
On a latter date penalty proceeding initiated citing under reporting of income of Rs. 3,09,91,067 (Which is the Long Term Capital Loss itself) and huge penalty imposed through demand u/s 156.
Latest Situation of the Case: Appeal Filed.
What would be the future course of action and what are the supporting case laws that could be submitted in appeal
Please Help.
It appears the entire LTCG loss of Rs. 3,09,91,067 has been treated as “under-reported income”. This appears to be a miscomputation because under-reporting u/s 270A(2) is defined as the difference between assessed income and returned income and not the gross loss amount.
Moreover, LTCG computation involves factual verification of costs. A disallowances based on gaps in the proof does not automatically trigger penalties unless there’s evidence of misreporting (e.g., intent to deceive, falsified records).
In DCIT vs. Chakradhar Contractors (ITAT Pune, 26.12.2024), it was held that penalty cannot be levied if the SCN does not specify the exact “limb” of s. 270A invoked (under-reporting vs. misreporting). It was held that it is a fatal legal defect rendering proceedings invalid.
In IIFL Samasta Finance Ltd. vs. DCIT (ITAT Bangalore, 27.09.2024, ITA No. 1054/Bang/2024), it was held that penalty u/s 270A(8) cannot be levied in bona fide cases. It was emphasized that penalty quantum must align with actual tax evaded.
There are numerous other cases where it is held that no penalty can be levied merely because an addition/disallowance is made. S. 270A(11) bars automatic levy on factual disallowances.