Appeal allowed as the appellant's misunderstanding regarding VRS taxable income negated penalty for underreporting.

ORDER

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 12.02.2025 for the Assessment Year 2020-21.

2. Brief facts of the case are, assessee had originally filed his return of income declaring total income of Rs.43,88,320/-. Subsequently, assessee filed revised return on 30.03.2021 declaring revised total income of Rs.31,26,700/-. The return of income was processed under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’). Subsequently, the case was selected for scrutiny through CASS for the reason that excess refund was sought declaring revised return of income. Accordingly, notices were issued and served on the assessee. During the course of assessment proceedings, the assessee failed to explain as to why income was reduced in revised return. The AO observed that the total taxable income shown in Annexure II of TDS return of employer in Form 24Q was more than the revised return of income filed by the assessee. Accordingly, the AO made an addition of Rs.12,61,420/- being difference between the total income as per original return of income and revised return. Simultaneously, the AO also initiated penalty u/s 270A of the Act for under-statement of income in consequence of mis-reporting and thereof. During penalty proceedings, AO was not satisfied with the explanation offered by the assessee and hence levied penalty u/s 270A @ 200% of Rs.12,61,420/-. Accordingly, assessee preferred an appeal before the ld. CIT (A) and raised several grounds of appeal and also submitted detailed submissions in reference to grounds of appeal before him as under :-

“Reply of Ground No.1. Conditions for grant of immunity

An application for immunity can be made subject to satisfaction of both the undermentioned conditions - the tax and interest, as demanded, as per the assessment or reassessment are paid; such payment is within the time specified in the notice of demand issued under section 156 of the Act;

the assessee does not. file any appeal against the order of assessment or reassessment. For the amount of tax and interest reference is made to the order of assessment or reassessment whereas when it comes to the period of payment the reference is to the notice of demand. The amount mentioned in the notice of demand will have to be paid as the word' such' is used before notice of demand whereas there is no mention of notice of demand in the earlier part of clause (a) of sub-section (1).

Section 270A A(3) and 270AA(4): The Assessing Officer shall, subject to fulfilment of the conditions specified in subsection (1) and after the expiry of the period of filing the appeal as specified in clause (b) of sub-section (2) of section 249, grant immunity from imposition of penally under section 270A and initiation of proceedings under section 276C or section 276CC, where the proceedings for penalty under section 270A has not been initiated under the circumstances referred to in sub-section (9) of the said section 270A (4) The Assessing Officer shall, within a period of one month from the end of the month in which the application under sub-section (1) is received, pass an order accepting or rejecting such application

On the facts and in the circumstances of the case, the Ld. AO has erred in invoking penalty for misreporting without appreciating that there is no misrepresentation and/or suppression of facts by the Appellant who had taken a consistent position, details of which have been explained to the l.d. AO and are also supported by several judicial precedence. That, on t