Section 270A Misreporting Penalty of ₹1.87 Lakh Deleted: ITAT Ahmedabad Rules Withdrawal of Section 80GGC Deduction Cannot Automatically Trigger 200% Penalty

Case Overview

Case Name: Bhavesh Rameshbhai Patel Vs Asst. Unit Income Tax Department (ITAT Ahmedabad)
Assessment Year: 2019-20
Penalty Deleted: ₹1,87,200 under Section 270A
Precedent Followed: Hiro Mulchand Tanwani Vs ITO, ITA No. 110/Ahd/2026, ITAT Ahmedabad, dated 15/05/2026

Background: What Led to the Penalty Dispute

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, in a significant ruling pronounced on 30.09.2026, deleted a penalty of ₹1,87,200 levied under Section 270A of the Income-tax Act, 1961 against the assessee, Bhavesh Rameshbhai Patel. The penalty had been imposed on the ground of under-reporting of income in consequence of misreporting, following the withdrawal of a Section 80GGC deduction during reassessment proceedings.

The ruling draws a firm line between the disallowance or withdrawal of a deduction on one hand, and misreporting of income as understood under Section 270A(9) on the other — making clear that the two are not interchangeable concepts, and that the Revenue cannot treat one as automatic proof of the other.

Facts of the Case

How the Reassessment Was Triggered

The assessee's case came under scrutiny after information was flagged through the High-Risk Management Strategy formulated by the Board. The data indicated that during Financial Year 2018-19, the assessee had made a donation of ₹3,00,000 to Rashtriya Samajawadi Party (Secular) and had claimed a corresponding deduction under Section 80GGC of the Income-tax Act, 1961.

Based on this information, the Assessing Officer reopened the assessment and issued a notice under Section 148 of the Act.

Assessee's Response and Completion of Reassessment

In response to the Section 148 notice, the assessee filed a return of income in which the earlier claim of ₹3,00,000 deduction under Section 80GGC was withdrawn. The Assessing Officer thereafter completed the reassessment vide order dated 11.08.2023, determining total income in accordance with the return filed in response to the reopening notice.

A demand of ₹1,42,866 was raised under Section 156 of the Act, which the assessee paid in two instalments:

The assessee did not pursue the Section 80GGC deduction in the reassessment. However, what followed — the imposition of a 200% penalty — became the central dispute before the Tribunal.

The Penalty Proceedings Under Section 270A

Initiation and Imposition of Penalty

After completing the reassessment, the Assessing Officer initiated separate penalty proceedings under Section 270A of the Act, characterising the case as one of "under-reporting of income in consequence of misreporting of income."

The assessee, in his submission before the Assessing Officer during penalty proceedings, acknowledged that owing to insufficient familiarity with income-tax assessment procedures, he had not been in a position to respond to the show-cause notice issued in the penalty proceedings.

On 22 March 2024, the Assessing Officer levied a penalty of ₹1,87,200, computed as 200% of ₹93,600 — the tax attributable to the disallowed deduction of ₹3,00,000 under Section 80GGC. The penalty was levied under Section 270A(2) read with the misreporting provisions.

CIT(A) Confirms the Penalty

The assessee challenged the penalty before the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi. The CIT(A), however, confirmed the penalty vide order dated 11.12.2025 under Section 250 of the Income-tax Act, 1961, holding that the assessee's case fell within the provisions of Section 270A(9).

Grounds of Appeal Before ITAT Ahmedabad

Aggrieved by the CIT(A)'s order, the assessee carried the matter to ITAT Ahmedabad. The following grounds were raised:

1. The CIT(A) erred in confirming the penalty of ₹1,87,200 on the ground of under-reporting of income in consequence of misreporting — the assessee had neither under-reported nor misreported any income, making the penalty entirely incorrect and illegal.

2. The CIT(A) erred in holding that the case was directly covered by Section 270A(9) — the assessee's case did not fall under any of clauses (a) to (f) of Section 270A(9), and accordingly the misreporting penalty was not attracted.