Non-Payment Of Tax Due To Uncertain Legal Position Existing At Time Of Filing Return Is Outside Scope Of 'Mis-Reporting': Delhi HC Deletes Penalty U/s 270A

The Delhi High Court quashed a show cause notice for penalty proceedings under Section 270A of the Income Tax Act due to vagueness and lack of specific charges of "misreporting" or "under-reporting." The court emphasized that a clear finding of misreporting or under-reporting is essential for such penalties.

The Division Bench, including Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, noted that the AO failed to specify the transgression in the show cause notice. The High Court also set aside an order rejecting the assessee's claim for immunity under Section 270AA, highlighting that the AO must ascertain if the provisions of Section 270A are attracted by either under-reporting or misreporting.

The assessee's petition was allowed, and the penalty proceedings were dropped.