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2026 Supreme(Online)(ITAT) 5104
INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
Manjunatha G., Accountant Member, Ravish Sood, Judicial Member
N.A.M. Expressway Limited – Appellant
Versus
Deputy Commissioner of Income Tax Circle-5(1) – Respondent
I.T.A.No.2044/Hyd/2025
For the Appellants/Petitioners: Shri. Salil Kapoor, Adv
For the Respondents: Ms. Aditi Goyal, Sr.AR
Inadvertent omission of audit-reported disallowance u/s 43B, despite full disclosure, is bonafide under S.270A(6), not misreporting attracting penalty u/s 270A(9).
Headnote:Under S.43B of the Income Tax Act, 1961, labour cess payment delayed beyond the due date for filing return u/s 139(1) is disallowable. Assessee filed return declaring nil income and loss of Rs.81,04,82,331/-, but overlooked tax audit-reported disallowance of Rs.40,76,414/- for labour cess, leading to AO's addition reducing loss to Rs.80,63,83,770/-. AO levied penalty u/s 270A(9) at 200% of tax on under-reported income deemed misreporting, upheld by CIT(A). Tribunal found assessee's explanation bonafide with full disclosure, addition tax-neutral, not attracting penalty. Key issues: Whether AO's show cause notice u/s 274 r.w.s. 270A specified satisfaction for misreporting u/s 270A(9); validity of immunity application u/s 270AA where penalty initiated u/s 270A(9); whether inadvertent omission despite audit report constitutes misreporting or falls under bonafide explanation u/s 270A(6). Tribunal held notice adequate with assessment order satisfaction; 270AA inapplicable to 270A(9) cases; distinguished GE Capital (2024) 468 ITR 746 (Del) as AO clearly indicated misreporting. Appeal allowed; penalty of Rs.25,19,222/- u/s 270A(9) deleted.
| Table of Content |
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| 1. ao disallowed labour cess u/s 43b, initiated penalty u/s 270a(9) for misreporting. (Para 3 , 4 , 5) |
| 2. cit(a) upheld penalty; assessee appealed to tribunal. (Para 6 , 7 , 8) |
| 3. assessee argued vague notice, invalid 270aa application, bonafide error u/s 270a(6). (Para 9 , 10 , 11) |
| 4. revenue defended ao's satisfaction and misreporting due to non-adjustment. (Para 12) |
| 5. penalty deleted as bonafide explanation, tax-neutral addition not misreporting. (Para 13 , 14 , 15 , 16) |
ORDER
PER MANJUNATHA G., A.M :
The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”], dated 26.09.2025, pertaining to the assessment year 2018-19.
3. The brief facts of the case are that the assessee filed its return of income for the A.Y.2018-19 on 22.09.2018, declaring income at Rs. Nil and claimed current year loss of Rs.81,04,82,331/-. The case was selected for scrutiny and assessment has been completed u/s 143(3) of the Income Tax Act, 1961 on 21.04.2021 and determined current year loss of Rs.80,63,83,770/-, by making additions towards disallowance of labour cess of Rs.40,76,414/- u/s 43B of the Act.
4. Subsequently, Penalty proceedings u/s 270A of the Act was initiated and show cause notice u/s 274 read with section 270A was issued and called upon the assessee to explain as to why penalty shall not be levied for under reporting of income, which is in consequence of misreporting thereof u/s 270A(9) of the Act. During the course of penalty proceedings, the AO noticed that the tax auditor has certified in the audit report in Form 3CD that labour cess amounts to Rs.40,76,414/- has not been paid on or before the due date provided for filing return of income u/s 139(1) of the Act, which attracts the provisions section 43B, however, the said amount was not included in the disallowances made by the assessee in the computation of total income. Thus, labour cess of Rs.40,76,414/- was disallowed and added back to the total income u/s 43B. Accordingly, a show cause notice, dated 06.09.2021 and 08.03.2022 was issued to the assessee to file its objection, if any for proposed penalty u/s 270A of the Act. In response, the assessee filed letter dated 28.05.2021 and submitted that by inadvertent error, the assessee failed to add disallowance reported by the tax auditor in respect of labour cess amounting to Rs.40,76,414/- u/s 43B, while computing income from business. The assessee further submitted that it had accepted the disallowance made by the AO, which resulted in reduction in the current year loss to that extent and the assessee has not preferred any further appeal. The assessee had also submitted that it has filed an application for immunity from imposition of penalty u/s 270A of the Act on 28.05.2021, within one month from the end of the month in which the order has been received by the assessee.
5. The AO after considering the relevant submissions of the assessee and also taking note of provisions of section 270A of the Act, observed that the application filed by the assessee for immunity from imposition of penalty u/s 270A of the Act is not maintainable, because the AO has initiated the penalty proceedings under sub section (9) of section 270A for under reporting of income, is in consequence of misreporting thereof and thus, the assessee is not entitled for immunity from penalty. The AO had also rejected the explanation of the assessee with regard to disallowance of labour cess u/s 43B of the Act and held that although the auditor has reported disallowance u/s 43B in respect of delayed payment of labour cess, but the assessee has not made any disallowance, while computing the income and thus, it is a fit case for levy of penalty for under reporting of income as a consequence of misreporting thereof, therefore, levied penalty of Rs.25,19,222/- being 200% of the amount of tax payable on under reported income, in consequence of mis
