ITAT Ahmedabad Deletes ₹5,49,120 Penalty Under Section 270A: Withdrawal of Political Donation Deduction Does Not Automatically Constitute Misreporting
Overview of the Case
The Ahmedabad Bench of the Income Tax Appellate Tribunal rendered a significant ruling in Brijesh Rameshbhai Bavarva Vs ITO (ITAT Ahmedabad), [I.T.A. No. 179/Ahd/2026], concerning Assessment Year 2019-20. The Tribunal, through an order dated 14 October 2026 passed by Judicial Member Rahul Chaudhary and Accountant Member Gangadhar Panda, set aside a penalty of ₹5,49,120 that had been levied under Section 270A of the Income Tax Act, 1961. The central finding was that the revenue authorities had failed to demonstrate, with the requisite statutory precision, that the assessee's conduct fell within any of the specific categories of misreporting enumerated under Section 270A(9) of the Act.
This decision reinforces the legal proposition that the mere withdrawal of a deduction during reassessment proceedings — and the consequent increase in assessed income — does not, standing alone, supply the ingredients necessary to sustain a penalty for misreporting of income attracting the higher rate of 200%.
Background: The Original Return and the Deduction Claimed
The assessee filed his original return of income on 09.07.2019, declaring a total income of ₹83,95,170/-. Included within that return was a claim for deduction of ₹8,00,000/- under Section 80GGC of the Income Tax Act, 1961, in respect of a donation made to Apna Desh Party, a registered unrecognised political party.
Subsequently, as part of a broader pattern of search and post-search investigations relating to certain registered unrecognised political parties, the Department gathered intelligence suggesting that Apna Desh Party was allegedly being used to facilitate bogus donation entries. The alleged arrangement, as reported by the Department, involved routing donations through the party and then returning the amounts in cash to donors after retaining a commission.
On the basis of this information, the Department initiated reassessment proceedings and issued a notice under Section 148 on 19.04.2023.
Reassessment and Voluntary Withdrawal of Deduction
In response to the notice issued under Section 148, the assessee filed a revised return on 18.01.2025, declaring income of ₹91,57,870/-. In this return, the assessee voluntarily withdrew the earlier Section 80GGC deduction of ₹8,00,000/- and also discharged the applicable tax and interest arising from the upward revision in income.
The Assessing Officer accepted the income as returned in the revised filing and did not make any further addition or variation to the returned income. However, having noted the difference between the income originally processed under Section 143(1) and the income declared in the return filed under Section 148, the Assessing Officer initiated penalty proceedings under Section 270A of the Income Tax Act, 1961.
Penalty Proceedings Before the Assessing Officer
Assessee's Submissions
During the course of penalty proceedings, the assessee placed the following contentions before the Assessing Officer:
- The deduction was withdrawn voluntarily and in good faith, with the primary intention of avoiding prolonged litigation.
- All applicable taxes and interest on the revised income had been duly paid.
- The Assessing Officer had not identified any specific clause of
Section 270A(9)under which the alleged misreporting was sought to be brought.