ITAT Cancels Rs 9.27 Lakh Penalty, Directs Tax Department to Grant Immunity to Assessee
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench has given relief to Santhosh Sagar Reddy by allowing his appeal for the Assessment Year 2018-19 and directing the Assessing Officer to give him immunity from penalty proceedings under Section 270AA of the Income Tax Act.
The case related to a penalty of Rs 9.27 lakh under Section 270A of the Income Tax Act for alleged under-reporting of income on account of misreporting.
The assessee filed his income tax return declaring total income of Rs 11.50 lakh under the presumptive taxation scheme of Section 44ADA. The Income Tax Department found during scrutiny that he received Rs 30 lakh as remuneration from a partnership firm providing software services. The assessee had offered 50% of this amount as taxable income under Section 44ADA.
The Assessing Officer held that the remuneration was not admissible under the presumptive taxation provisions in the manner in which the assessee has claimed and added Rs. 15 lakhs to his taxable income. The assessee had paid the tax demand on the basis of the addition on 10.04.2021.
The assessee had also filed Form 68 under Section 270AA for seeking immunity from penalty. But the AO did not dispose of the immunity application and imposed penalty of Rs 9.27 lakh, which is 200% of the tax payable.
The assessee challenged the penalty before the Commissioner of Income Tax (Appeals), but the penalty was upheld. He then approached the ITAT Bangalore.
The Tribunal observed that the assessee had disclosed the entire Rs 30 lakh remuneration received from the partnership firm. According to the ITAT, the dispute was only about the incorrect claim of presumptive taxation under Section 44ADA and not about concealment or suppression of income.
The Tribunal held that there was no under-reporting of income on account of misreporting. It also observed that the assessee appeared to have acted under a bona fide belief that he was entitled to claim the benefit of Section 44ADA.
The ITAT also observed that there was no wilful concealment or suppression of facts on the part of the assessee. The Tribunal held that the assessee had also paid disputed tax and the conditions for seeking immunity under Section 270AA were also complied with. Hence, the penalty could not be sustained
Accordingly, the ITAT allowed the appeal and directed the Assessing Officer to grant immunity to the assessee in accordance with the Form 68 filed by him.
Case Citation: Santhosh Sagar Reddy Vs ITO (ITAT Bangalore); ITA No.2798/Bang/2025; 23/07/2026; 2018-19.
