ORDER

PER MANISH AGARWAL, AM:

The present appeal is filed by assessee against the order dated 10.02.2026 passed by Ld. Commissioner of Income Tax (A), NFAC, Delhi [“Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of penalty order dated 10.07.2025 passed u/s 270A of the Act pertaining to Assessment Year 2023-24.

2. Brief facts of the case are that assessee is a company and filed its return of income on 23.09.2023, declaring loss of INR 1,52,97,649/-. The case of the assessee was selected for scrutiny. The AO observed that as per the ITR in Schedule BP-Ds assessee has disclosed total loss of Rs. 1,52,97,649/- after taking into account of disallowance made under various sections i.e. 36 & 43B of the Income Tax Act, 1961 and depreciation allowable as per Income Tax Act, 1961 of Rs. 10,20,083/. Thus, as per the AO the total loss from business comes to Rs.1,42,77,566/- and unabsorbed depreciation comes to Rs. 10,20,083/-. However, from the Schedule CFL (Details of losses to be carried forward to future years) and Schedule UD (Unabsorbed depreciation and allowance under section 35(4), it is observed that assessee has carried forward business loss of Rs.1,52,97,649/- and unabsorbed depreciation of Rs. 10,20,083/- for setting off in future years. Therefore, the AO restricted the business loss carried forward at Rs. 1,42,77,566/-. Further the AO has disallowed Rs. 5,01,734/- u/s 36(1)(va) of the Act being the delayed payment of employee’s contribution towards PF & ESI which was reported by the tax auditor and not disallowed in the return of income filed in the assessment passed u/s 143(3) r.w.s.144B of the Act dated 25.02.2025 and initiated the penalty proceedings u/s 270A for underreporting of income in consequence of misreporting if income. The AO thereafter, proceeded with pending penalty proceedings and imposed the penalty in terms of the order dated 10.07.2025 imposing the penalty of INR 10,63,566/- u/s 270A of the Act being 200% of the Tax sought to be evaded on under reporting of income of Rs. 15,21,817/-. Against the said order appeal was filed before the ld. CIT(A) who vide order dt. 10.02.2026 though has confirmed the levy of penalty however, change the charge from “Under reporting in consequence to misreporting of income’ as per section 270A(9) to “under reporting of Income U/s 270A(3) of the Act and reduced the penalty from 200% to 50% of under reported income.

3. Against the said order, assessee is in appeal before the Tribunal by taking following grounds of appeal:

1. “That learned CIT Appeals has erred in law and on facts in upholding any part of the penalty levied under section 270A of I T Act 1961 at 50 percent of tax on under reporting income, whereas the penalty proceedings were originally initiated and levied by the Assessing officer specifically under category of Under reporting consequent to Misreporting as per Sec 270(9)(a) attracting a mandatory penalty of 200percent and such classification cannot be legally recategorized OR reduced to mere under reporting without addressing that the penalty has not been initiated under reporting clause. The reclassification is perverse and beyond jurisdiction as it alters the foundational 2 basis of the penalty levied by AO order.

2. The learned authorities failed to appreciate that the penalty category cannot be legally transformed from its original classification of Under Reporting consequent to Misreporting to a penalty for mere Under reporting as these are distinct categories under the Income Tax Act with different legal implications and penalty rates.

3. The rejection of immunity application under Sec 270AA solely on the ground of misreporting is unsustainable as both issues (EPF Disallowance and loss carry forward) fall within the ambit of under reporting simpliciter and not misreporting, rendering the penalty initiation invalid ab initio. The learned Commissioner ought to have quashed the penalty in toto instead of partially reducing it as