SAKUNTHALA SYAMALA DEVI,CALIFORNIA, USA vs. INCOME TAX OFFICER, INT.TAX-WARD-2(2), CHENNAI

आयकरअपील�यअ�धकरण ’बी’ �यायपीठ,चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI �ी मनुकुमारिग�र, �ाियक सद� एवं �ी एस. आर. रघुनाथा लेखासद� BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRIS.R.RAGHUNATHA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No. 1786/Chny/2026 �नधा�रण वष�/Assessment Year: 2016-17 Sakunthala Syamala Devi, v. The ITO, 3981 Millbury, CT Dublin International Tax War-2(2) California, United States of Chennai-600006 America [PAN: GCCPS 7068 N] (अपीलाथ�\Appellant) (��यथ�\Respondent)

अपीलाथ� क ओर से/ Appellant by : Mr. K. Suresh Kumar Verma CA (Virtually) ��यथ� क ओर से /Respondent by : Mr. A.T. Krishnamoorthy, Addl. CIT सुनवाई क तार�ख/Date of Hearing : 06.08.2026 : 08.09.2026 घोषणा क तार�ख /Date of Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Chennai-16 [hereinafter referred to as “the Ld. CIT(A)”] dated 29.01.2026, confirming the penalty imposed u/s. 271(1)(c) of the Income Tax Act, 1961 (“the Act”) for the assessment year 2016-17.

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 2 :: 2. The brief facts of the case are that the assessment proceedings were reopened on the basis of information available with the Department that the assessee had sold an immovable property for a consideration of Rs.60,00,000/- during the relevant previous year and had not filed her return of income for the assessment year under consideration. Pursuant to notice issued u/s. 148 dated 01.04.2023, the assessee furnished her return of income declaring total income of Rs.68,20,490/-, which included long-term capital gain of Rs.65,99,852/- and income from other sources of Rs.12,20,639/-. 2.1 The assessment was thereafter completed on 27.02.2025 accepting the income returned by the assessee. No addition or disallowance was made by the Assessing Officer over and above the income declared by the assessee in response to notice u/s. 148. Simultaneously, penalty proceedings u/s. 271(1)(c) were initiated. 2.2 During the course of penalty proceedings, the assessee submitted that she was a non-resident and was under a bona fide impression that the TDS deducted in respect of the transaction was sufficient to discharge her tax liability. It was further submitted that, immediately upon receipt of notice u/s. 148, the assessee computed her tax liability and remitted the tax as self-assessment tax. The assessee also explained the circumstances relating to filing/e-verification of the return and

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 3 :: pleaded that there was neither any deliberate concealment nor furnishing of inaccurate particulars of income. 2.3 The Assessing Officer, however, was of the view that had notice u/s. 148 not been issued, the assessee would not have filed the return or paid the taxes. According to the Assessing Officer, the taxes were paid only after reopening of the assessment and, therefore, the case constituted concealment of income. Accordingly, penalty of Rs.12,89,893/- was imposed u/s. 271(1)(c) of the Act. 3. On appeal, the Ld. CIT(A) confirmed the penalty. Aggrieved, the assessee is in appeal before us. 4. Before us, the Ld. AR submitted that there was no concealment of income or furnishing of inaccurate particulars of income. It was submitted that the entire income was disclosed by the assessee in the return furnished pursuant to notice u/s. 148 and the assessment was completed accepting such returned income without making any addition. It was further submitted that TDS had already been deducted and, therefore, there was no attempt on the part of the assessee to suppress the transaction or evade payment of tax. The Ld. AR also submitted that the assessee was under a bona fide belief that, in view of the TDS already deducted, no further compliance was required. Reliance was placed, inter alia, upon the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd., 322 ITR 174 (SC), and the decision of the Ahmedabad Bench of the Tribunal in Vijaybhai

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 4 :: Dashrathbhai Patel v. ACIT, ITA No.2622/Ahd/2017 dated 25.02.2022. 5. Per contra, the Ld. DR supported the orders of the lower authorities and submitted that the assessee had admittedly failed to file the return within the prescribed time and had come forward with the disclosure only after issuance of notice u/s. 148. According to the Ld. DR, the subsequent payment of tax could not absolve the assessee from the consequences contemplated u/s. 271(1)(c) of the Act. 6. We have heard the rival submissions and perused the material available on record. The short issue before us is whether, in the facts and circumstances of the present case, the assessee's failure to furnish the return of income within the prescribed time would attract the deeming fiction contained in Explanation 3 to section 271(1)(c) of the Act. 7. We find that Explanation 3 to section 271(1)(c) is attracted where a person fails, without reasonable cause, to furnish a return of income within the prescribed period and, consequently, is deemed to have concealed the particulars of his income. Thus, the existence or otherwise of a reasonable cause for the failure to furnish the return assumes significance. 8. In the present case, admittedly, the assessee did not file her return within the prescribed time. However, it is equally undisputed that pursuant to notice u/s. 148, the assessee came forward and disclosed the income in her return. More importantly, the assessment was completed accepting the

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 5 :: returned income and no addition whatsoever was made by the Assessing Officer. 9. We also find that the explanation furnished by the assessee was that she was a non-resident and was under a bona fide belief that the TDS deducted in respect of the transaction was sufficient to discharge her tax liability. The assessee further demonstrated her conduct subsequent to receipt of notice u/s. 148 by computing and remitting the tax liability. There is nothing on record to suggest that the assessee furnished any false particulars or that any particulars disclosed in the return were found to be inaccurate. 10. The Ahmedabad Bench of the Tribunal in the case of Vijaybhai Dashrathbhai Patel v. ACIT (supra), while considering the scope of Explanation 3 to section 271(1)(c), held that where the assessee had a bona fide and reasonable belief for not filing the return and the Revenue was unable to establish that such failure was without reasonable cause, the deeming fiction under Explanation 3 could not be invoked. The Tribunal accordingly deleted the penalty. 11. The aforesaid principle is relevant to the present case. The Revenue has proceeded principally on the basis that, but for the notice u/s. 148, the assessee would not have filed the return. However, such circumstance by itself cannot conclusively establish that the assessee had no reasonable cause for the original failure to furnish the return. The bona

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 6 :: fide explanation furnished by the assessee has to be considered in the totality of the circumstances. 12. We further find considerable force in the submission of the assessee that the transaction had already suffered TDS and was consequently within the information available with the Department. The assessee, on being confronted with the escapement of income, did not dispute the transaction or furnish any incorrect particulars. Instead, she disclosed the income and paid the consequential tax. The assessment itself was completed without making any further addition. 13. It is also relevant that penalty proceedings are distinct from assessment proceedings. Mere acceptance of the returned income does not automatically lead to levy of penalty; the statutory conditions for imposing penalty must independently be satisfied. In the present case, the Revenue has not brought any material on record to establish deliberate concealment or furnishing of inaccurate particulars. The case is essentially one of failure to furnish the return within time, for which the assessee has furnished a bona fide explanation. 14. The Hon'ble Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd., 322 ITR 174 (SC), has held, in the context of section 271(1)(c), that making an incorrect claim does not by itself amount to furnishing inaccurate particulars of income. The underlying principle that penalty cannot be imposed merely as an automatic consequence of a tax liability

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 7 :: is applicable while examining the assessee's conduct in the present case. 15. Considering the totality of the facts, we are of the considered view that the assessee has furnished a plausible and bona fide explanation for her failure to file the return within the prescribed time and that the Revenue has not established that such failure was without reasonable cause so as to attract the deeming fiction under Explanation 3 to section 271(1)(c). 16. We therefore hold that the penalty levied u/s. 271(1)(c) of the Act is not sustainable. Accordingly, the penalty of Rs.12,89,893/- imposed by the Assessing Officer and confirmed by the Ld. CIT(A) is hereby deleted. 17. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the 08th day of September, 2026 in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER चे�नई/Chennai, +दनांक/Dated: 08th September 2026 Digitally signed SANDE SNDP, Sr. PS by SANDEEP KUMAR EP Date: 2026.09.11 KUMAR 12:57:00 +05'30'

ITA No. 1786/Chny/2026 (AY 2016-17) Sakunthala Syamala Devi Vs ITO, Int. Tax Ward-2(2) :: 8 :: आदेश क ��त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF