In short
A penalty under section 270A cannot be sustained unless the notice under section 274 and the penalty order specify which limb is invoked — under-reporting, at 50 per cent under section 270A(7), or misreporting under one of the six clauses of section 270A(9), at 200 per cent under section 270A(8). The Income Tax Appellate Tribunal, Ranchi, applied that rule in Central Coalfields Ltd v ACIT/DCIT, Circle-1, Ranchi (ITA Nos. 370, 383 and 387/Ran/2025, dated 11 June 2026), deleting a ₹58.07 crore penalty for want of a specific finding, following the Delhi High Court in Schneider Electric South East Asia (HQ) Pte Ltd v ACIT and Prem Brothers Infrastructure LLP v National Faceless Assessment Centre. An officer who invokes both limbs together, without choosing, has not made a valid charge.
A penalty under section 270A is not one charge with one rate; it is two different charges — under-reporting at 50 per cent of tax, or misreporting at 200 per cent — and an assessing officer has to choose which one is being levied before the assessee has to answer for it. That question — does the notice have to say which — comes up in almost every penalty matter, and it has now been answered again, on a large figure, by the Income Tax Appellate Tribunal, Ranchi.
Key points
- A notice under section 274 read with section 270A that does not specify whether the charge is under-reporting or misreporting cannot support a penalty — following the Delhi High Court in Schneider Electric South East Asia (HQ) Pte Ltd v ACIT and Prem Brothers Infrastructure LLP v National Faceless Assessment Centre.
- Under-reporting attracts a 50 per cent penalty under section 270A(7); misreporting, confined to the six specific defaults listed in section 270A(9), attracts 200 per cent under section 270A(8) — the two are not interchangeable, and an assessing officer cannot invoke both together and leave the choice open.
- A reduction in the underlying quantum addition on appeal does not cure the defect — it goes to the validity of the charge itself, not to how much income is finally added.
- The point is not new law, but a large, recent application of it: the Ranchi Bench used it to delete a ₹58.07 crore penalty in Central Coalfields Ltd v ACIT/DCIT, Circle-1, Ranchi (ITA Nos. 370, 383 & 387/Ran/2025, 11 June 2026), and reached the same result across all three assessment years before it.
Does a section 270A notice have to specify the limb?
Yes. Section 270A(7) fixes a 50 per cent rate for plain under-reporting. Section 270A(8) — which applies “notwithstanding anything contained in sub-section (6) or sub-section (7)” — raises that to 200 per cent, but only where the under-reporting is “in consequence of” misreporting as defined in section 270A(9): misrepresentation or suppression of facts, failure to record investments, an unsubstantiated claim of expenditure, a false entry in the books, failure to record a receipt bearing on total income, or failure to report a transaction to which the transfer pricing provisions in Chapter X apply.
Because the two limbs carry different rates and different factual ingredients, they are treated as separate charges rather than one penalty with a variable rate. A show cause notice under section 274 that recites “under-reporting in consequence of misreporting” without saying which of the six clauses is relied on, or a penalty order that invokes both limbs together and leaves the choice open, has not made a valid charge — following the Delhi High Court’s decisions in Schneider Electric South East Asia (HQ) Pte Ltd v ACIT, International Taxation (W.P.(C) 5111/2022, decided 28 March 2022) and Prem Brothers Infrastructure LLP v National Faceless Assessment Centre (W.P.(C) 7092/2022, decided 31 May 2022).
What did the Ranchi Bench decide, and on what facts?
The Income Tax Appellate Tribunal, Ranchi (Shri George Mathan, Judicial Member, and Shri Ratnesh Nandan Sahay, Accountant Member; hearing 24 April 2026, order pronounced 11 June 2026), applied this rule in Central Coalfields Ltd v ACIT/DCIT, Circle-1, Ranchi (ITA Nos. 370, 383 & 387/Ran/2025). Central Coalfields Ltd, a subsidiary of Coal India Ltd, was assessed for AY 2018-19 to 2020-21 with a series of disallowances — repair expenses, CMPDIL charges, environmental and tree plantation expenses, siding maintenance charges, miscellaneous expenses and a stripping activity adjustment, together exceeding ₹170 crore for AY 2020-21 alone. The assessing officer issued a show cause notice under section 274 read with section 270A proposing penalty for under-reporting of income, and went on to impose ₹58,07,20,000 for that year — without, at any stage, identifying which clause of section 270A(9) would turn that into misreporting instead.
On first appeal, the Commissioner (Appeals) took different views in different years. For AY 2020-21, the penalty was confirmed, though at a reduced ₹40,58,53,594 after part of the underlying addition was itself deleted. For AY 2019-20, a broadly similar penalty was confirmed. For AY 2018-19, the Commissioner (Appeals) went the other way and deleted the penalty, recording that the assessing officer “has invoked both the limbs in a sweeping manner without specifying the exact charges” — which left the Revenue appealing that deletion to the Tribunal, while the assessee appealed the confirmations for the two later years.
The Tribunal did not need to examine the merits of each disallowance to dispose of the penalty appeals; the structure of section 270A did the work. Following its own reading of the two Delhi High Court decisions above, together with coordinate decisions of the Mumbai and Pune Benches, it held that where the specific limb has not been specified, “the penalties imposed deserve to be deleted.” It recorded that this was “not a fit case where penalty under section 270A … can be confirmed in absence of specific finding as to whether the penalty was imposed for under reporting or misreporting of income,” and directed that the penalty “imposed under section 270A read with section 274 is deleted.” On that basis the assessee’s appeals for AY 2020-21 and 2019-20 were allowed, and the Revenue’s appeal against the AY 2018-19 deletion was dismissed.
Does a reduced quantum addition cure a defective notice?
No. In Central Coalfields, the Commissioner (Appeals) had already given the assessee some relief on the underlying addition for AY 2020-21, which brought the confirmed penalty down from ₹58.07 crore to ₹40.59 crore. That reduction addressed the size of the addition; it did nothing about the separate defect in the notice. The Tribunal deleted the reduced penalty in full, on the same reasoning it applied to the untouched figure for AY 2019-20 — because a notice that does not specify the limb has not validly charged the assessee with either offence, whatever the eventual quantum turns out to be.
How should a pending section 270A matter be checked?
For any pending section 270A matter, the first document to read is not the penalty order but the section 274 notice that preceded it, and the language in the assessment order recommending penalty. Two questions decide whether this line of authority applies:
| Question | If the answer is no |
|---|---|
| Does the notice say, in terms, whether the charge is under-reporting or misreporting? | The notice is open to challenge on jurisdiction, following Schneider Electric and Prem Brothers Infrastructure |
| If misreporting is alleged, does the notice or order identify which of the six clauses of section 270A(9) is invoked? | A bare word “misreporting” without a clause is treated as no finding at all |
A defect of this kind is not a technicality to be waived because the addition itself is substantial or because the assessee ultimately lost some relief in quantum — Central Coalfields shows both a large figure and a partial quantum concession are beside the point once the charge itself was never properly framed. Where an appeal on the quantum addition is already pending, this is precisely the kind of jurisdictional point that can be taken up by way of an additional ground.
Order: Central Coalfields Ltd v ACIT/DCIT, Circle-1, Ranchi, ITA Nos. 370, 383 & 387/Ran/2025 (ITAT Ranchi), dated 11 June 2026 — PDF, Indian Kanoon. Statutory text: section 270A, section 270A(9), section 274 — Income-tax Act, 1961, as it stood on 9 September 2026, and preserved for a proceeding of this kind by s.536(2)(c) of the Income-tax Act, 2025. For the search-specific penalty scheme this provision does not touch, see s.271AAB; for raising a jurisdictional defect of this kind for the first time in a pending appeal, see s.250(5).
This note is general commentary on the law as at 09 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.