Section 270A of the Income Tax Act, 1961, introduced by the Finance Act, 2016, marked a significant shift in the penalty regime by replacing the earlier Section 271(1)(c). It aims to penalize under-reporting and misreporting of income, with penalties ranging from 50% to 200% of the tax sought to be evaded. However, in recent years, a series of High Court judgments have provided substantial relief to taxpayers, emphasizing the need for procedural rigor, specificity of charges, and respect for natural justice.
The judiciary has consistently held that vague show-cause notices, absence of proper classification (under-reporting vs. misreporting), and bona fide disclosures or voluntary corrections cannot be the basis for penalty under Section 270A. Several High Courts—particularly Delhi, Rajasthan, Gujarat, and Kerala—have stepped in to protect honest taxpayers from arbitrary or mechanical imposition of penalties.
This article compiles and analyzes recent landmark High Court decisions where penalties under Section 270A were quashed, highlighting the judicial reasoning, factual background, and implications for future assessments.
Here are some recent High Court decisions where penalties under Section 270A were quashed:
🔹 1. Global Coal & Mining Pvt Ltd vs NFPC, Delhi HC (April 8, 2025)
- Facts: AO imposed ₹69.6 lakh penalty under Sec 270A, without specifying whether it related to under‑reporting or mis‑reporting, and did so generically.
- Held: Penalty was declared “illegal, bad in law and without jurisdiction,” as the AO failed to specify the relevant limb under Sec 270A(9), making the proceedings arbitrary.
🔹 2. Santosh Kumar Khandelwal vs ACIT, Orissa HC (Nov 25, 2024)
- Facts: Show‑cause notice lacked any satisfaction recorded about the type of reporting (under‑reporting or mis‑reporting).
- Held: Proceedings were quashed since the AO did not specify the charge or satisfy sub‑section (9). The HC relied on Schneider Electric precedent.
🔹 3. DCIT vs Chakrahar Contractors & Engineers, P&H HC (Dec 26, 2024)
- Facts: Taxpayer rectified an innocent mistake in income, and AO imposed penalty.
- Held: HC upheld deletion of penalty by Tribunal, holding that the correction was bona fide and did not constitute mis-reporting.
🔹 4. Melakandy Puthalath Farook vs ACIT, Madras HC (Nov 5, 2024)
- Facts: Penalty order mentioned “misreporting” but did not specify limb of Sec 270A(9) or satisfaction.
- Held: Quashed the penalty and directed grant of immunity under Sec 270AA, as proceedings were rendered arbitrary.
🔹 5. Sushil Rajendra Kothari vs ACIT, Bombay HC (Nov 21, 2024)
- Facts: SCN cited both under‑reporting and mis‑reporting without specifying limbs; no clear distinction or hearing specifics.
- Held: Vague show‑cause notice violated principles of natural justice; penalty quashed.
🔹 6. G R Infraprojects Ltd vs DCIT, Rajasthan HC (Jan 2024)
- Facts: Issue around education‑cess deduction wrongly claimed; immunity request under Sec 270AA not decided.
- Held: Voluntary withdrawal followed by no clarity on Sec 270A(9) led the HC to quash the penalty and demand notice; directed AO to grant immunity.
🔹 7. Dishman Carbogen Amcis Ltd vs NFAC (Gujarat HC, May 13, 2025)
- Facts: After NCLT-approved resolution plan under IBC (Sec 31), the tax department attempted to initiate Sec 270A proceedings against the corporate debtor.
- Held: HC held that once resolution is approved, all tax claims—including penalties—stand extinguished; penalty orders quashed.
📌 Common Themes & Legal Principles
| Core Issue | Judicial Outcome |
|---|---|
| Vague SCN/Notice | Invalidates proceedings if AO fails to specify limbs under Sec 270A(9): Global Coal, Santosh Khandelwal, Melakandy, Kothari |
| Bona fide corrections | Honest mistakes corrected voluntarily do not constitute mis-reporting: Chakrahar |
| Unsettled legal position | If deduction/claim is based on reasonable legal interpretation, no mis-reporting |
| Voluntary withdrawal + immunity request | If claim is retracted and immunity under 270AA is requested (esp. cess/immunity cases), penalties quashed: Infraprojects |
| IBC “clean slate” post resolution | After NCLT approval, penalties/claims extinguished: Dishman Carbogen |